Bloglikes - Taxes en-US Mon, 19 Apr 2021 06:13:05 +0000 Sat, 06 Apr 2013 00:00:00 +0000 FeedWriter Tax Gap likely $1 trillion, thanks largely to cryptocurrency Gap in the Zhongjianhe Bridge_Enshi-Hubei province-China_Photo by Xinhua via ECNS-CN1_2014 Rather than heavy equipment, the IRS needs legislative and fiscal help to close its $1 trillion Tax Gap.

If you've thought the $441 million figure that the Internal Revenue Service has for years cited as the Tax Gap is too low, you are not alone.

None other than the IRS commissioner agrees that there is more tax money that's owed than the agency has been able to collect.

A whole lot more.

At an April 13 hearing before the Senate Finance Committee, IRS Commissioner Charles Rettig estimated that the actual Tax Gap could be as much as $1 trillion.

That's 1 followed by 12 zeros: 1,000,000,000,000.

Rettig noted that his estimate is more than double the $441 million amount that the IRS calculated as the Tax Gap back in 2011 through 2013. Rettig also noted that a narrowly focused investigation found that the top 1 percent of income earners account for $175 billion of the annual tax gap.

The IRS will announce its updated, official Tax Gap amount next year, Rettig said. Until then, though, the commissioner's $1 trillion estimate gets this week's By the Numbers honor.

Counting up cryptocurrency: Why so much unpaid tax money? Aside from just years of uncollected but owed taxes adding up since the last estimate, the commish offered a couple more reasons as to why the Tax Gap has grown.

One is an area where the IRS has increased its focus, specifically cryptocurrency. "It [the earlier Tax Gap estimate] does not include any focus with respect to virtual currency, which I indicated now is about a $2 trillion market cap," said Rettig, referring to an earlier part of his testimony.

To remedy this new and challenging tax enforcement area, Rettig noted in his prepared remarks that, "The IRS has been working to ensure taxpayers with virtual currency transactions understand the tax laws governing virtual currency and meet their tax obligations. … We also have new compliance programs addressing virtual currency (non-filers and filers)."

This filing season, the IRS moved its question of taxpayers as to whether they had any virtual currency transactions to the front of Form 1040. Previously, this checkbox line was on the 1040's Schedule 1. But some people might not have used that form, thereby avoiding the self-reporting.

Other Tax Gap contributors, according to Rettig, include income from illegal activities, foreign source income, underreporting by passthrough businesses, unscrupulous tax practitioners, and IRS staffing issues.

Rettig said the agency has lost more than 17,000 enforcement agents since 2010. That has resulted in the examination rate for individual returns falling by about 45 percent, he said, and a 72 percent decrease in audits for businesses with assets equal to or exceeding $10 million.

"We do get outgunned," Rettig told the Senate tax-writing committee.

Biden budget bump would help: Congressional approval of President Joe Biden's fiscal year 2022 budget proposal could help.

The White House is recommending $13.2 billion overall for the IRS for the new federal spending year that starts Oct. 1. That's $1.2 billion, or 10.4 percent, more than the level of funding provided the tax agency for the 2021 fiscal year.

"In addition to increases for base IRS enforcement funding, the 2022 discretionary request provides an additional increase of $417 million in funding for tax enforcement as part of a multiyear tax initiative that will increase tax compliance and increase revenues," said Treasury Secretary Janet Yellen in comments on the Biden IRS request.

Rettig elaborated on how the IRS could put added funds to use.

A $1 billion appropriation solely for IRS enforcement would allow the agency to hire 4,875 new frontline enforcement personnel and their counterparts in the Taxpayer Advocate Service, the Independent Office of Appeals, and the Office of Chief Counsel, he said. Some of that $1 billion appropriation also would be used to improve technology and develop new enforcement tools to detect tax fraud and evasion.

That would be a boost to the IRS' Criminal Investigation Cyber Crimes Unit, which Rettig pointed out has been involved in new complex types of tax enforcement, including uncovering international money laundering operations involving the theft of virtual currencies and the seizure of terrorism financing sites maintained on behalf of al Qaeda, Hamas, and ISIS.

And, of course, there is illegal source income, which Rettig noted "is taxable and we do chase."

More crypto control: Rettig also noted that it will take more than money for the IRS to do a more effective job. In addition to added funding, Rettig also had some legislative requests that Congress could provide to help the IRS collect the taxes it is due.


The IRS would like to see stronger income information reporting requirements, particularly regarding cybercurrencies.

In addition to the virtual currencies that are becoming more accepted, Rettig said there is "replicating" of tax evasion with cryptocurrencies using nonfungible tokens (NFTs).

"So now we have these nonfungible tokens, which are essentially collectibles in the crypto world," Rettig told the Senate Finance Committee. "These are not visible items by design. The crypto world is not visible."

The IRS got some good news in this area during the hearing. Sen. Rob Portman (R-Ohio) said he is working on a bill that would require more reporting and disclosure around crypto transactions.

Tax preparer oversight permission: Rettig also said the agency would like Congress to strengthen the IRS' ability to regulate paid return preparers. While some states do regulate paid tax preparers, that's not an option at the federal level.

Added oversight of non-credentialed tax professionals, i.e., preparers who do not already meet existing professional accreditation rules, has long been an IRS goal. It's also one that, for the most part, was shot down by the courts.

Right now, the IRS requires tax preparers who are paid to complete and file tax returns to obtain an IRS-issued Preparer Tax Identification Number (PTIN). However, even with a PTIN, tax professionals have differing levels of skills, education and expertise.

The agency implemented an annual voluntary tax preparer certification program, which also was challenged but the courts let this one stand. This option generally is for return preparers who are not attorneys, certified public accountants (CPAs), or enrolled agents (EAs) and was designed to encourage education and filing season readiness.

But since the annual filing season program is voluntary, participating or not does not affect a tax preparer's ability to file returns. Tax preparers with active PTINs but no professional credentials, from the IRS or other organizations, still are authorized to prepare tax returns.

A new tax preparer regulation law, however, could give the IRS the oversight go-ahead it has long sought.

You also might find these items of interest:



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[Author: skbell1]

Sun, 18 Apr 2021 23:39:51 +0000 BlogLikes - Find Most Popular Blogs Audit Filing IRS Paying taxes Politics Tax crimes Tax Evasion Tax numbers Tax Preparers Taxes Cryptocurrency NFT Nonfungible Tokens Senate Finance Committee Tax Tax Gap Virtual Currency Skbell1
GASB report name changed due to offensive acronym Acronym spelled out in small wooden blocks_1000x480

While those who work in the tax world must be precise, taxes are full of a particular type of shortcut. I'm talking about those sometimes creative, other times eye-roll inducing abbreviations or acronyms for tax terms.

Tax terminology is full of them.

AGI, AMT, EIN, EITC, EFTPS, GAAP, FATCA, IRA, NOL, PTIN, and VAT just to name a few.

Good, bad and ugly acronyms: Tax bills themselves also usually are shortened, with the verbal results sometimes fine and even fun, most times meh and other time invariably ugh.

The historic 1986 tax reform bill got the basic moniker Tax Reform Act.

Its TRA acronym has always evoked, for me, the joy of that accomplishment. Yes, I was on Capitol Hill and working with a Representative who served on the Ways and Means Committee. So I tend to hear Gene Kelly's happy "Tra-la-la (This Time It's Really Love)" when I think of the tax TRA.

The latest COVID relief bill, the American Rescue Plan Act is ARPA, which I put in the middle meh category. Maybe tending toward the latter ugh acronym.

It's called what? Then there are some definite abbreviation uh-ohs, such as EGTRRA, or the Economic Growth and Tax Reconciliation Relief Act of 2001.

EGTRRA was the first of George W. Bush's tax cut bills. And although it's pronounced egg-truh (at least in my Texas drawl), I always hear egg tray.

It was followed two years later by the Jobs and Growth Tax Relief Reconciliation Act, or JGTRRA. Go ahead say that acronym. No wonder W's tax bills were collectively referred to as the Bush tax cuts.

Don't go there: Of course, being innocuous or even awful isn't so bad. But sometimes tax acronyms turn out to be truly terrible.

The Governmental Accounting Standards Board, or GASB (gas-bee), found that out the hard way with a recent exposure draft it released.

GASB originally titled the document the "Comprehensive Annual Financial Report." But when some involved in the formulation of the report pointed out that the title's acronym sounded like an offensive ethnic slur, GASB proposed changing it.

"When you pronounce the acronym, it is a highly offensive racial slur directed toward Black South Africans. As we and our stakeholders are part of a global community, we do not wish to be offensive to anyone, so we have undertaken the project to address this," GASB Chair Joel Black said in a media advisory.

So the final report, if approved, will be called the "Annual Comprehensive Financial Report."

While the financial report's original name and its offensive acronym would be eliminated, no other changes have been proposed to the structure or content of the document.

Acronym advice: Kudos to GASB for listening to those who pointed out the linguistic faux pas. That's why the exposure draft of the Annual Comprehensive Financial Report gets this weekend's Saturday Shout Out.

Of particular note is Appendix B, which discusses factors that the GASB board members considered in determining alternative report names and the possible acronyms fashioned from such names.

It's a good primer for others who are creating policy and law titles that could result in unforeseen acronym interpretations.

And if you have any other comments on the substance of GASB's Annual Comprehensive Financial Report, you can submit them (details on how to do so are in the draft) by July 9.

You also might find these items of interest:



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[Author: skbell1]

Sun, 18 Apr 2021 23:39:50 +0000 BlogLikes - Find Most Popular Blogs Glossary Politics Shout Out Taxes Acronym GASB Governmental Accounting Standards Board Tax Tax Glossary Tax Names Tax Terms Skbell1
The tax compliance burden has eased, but law changes could bump it back up Tax_Returns_dismayed-taxpayer

We made it through April 15, 2021. The problem, though, is that for most individual taxpayers and the tax pros who handle their filings, yesterday wasn't really Tax Day.

That's still more than a month away. Or, to be precise per [shameless plug] the clicking away countdown clock in the ol' blog's right column, 31 days and some odd hours away.

Those extra days and hours until the new 2021 Tax Day on May 17, regardless of how well-intentioned (but incomplete), also should be added to the overall compliance burden taxpayers face every tax season.

COVID tax complications: OK, maybe the actual time of the automatic extension for filing 2020 tax returns that the Internal Revenue Service granted this year won't count.

But the extra time this filing season means there likely will be some add-on to the time spent gathering necessary filing data, filling in 1040s or talking with tax preparers about them, and then sending last year's returns to the IRS.

Another month to do that also adds to angst that gets ramped up when the process is dragged out, like this (and last) year. Thanks, COVID-19.

And don't get me started on the new laws created, again many of them prompted by the persistent pandemic. Thanks, again, coronavirus.

Less time dealing with taxes: But still, things seem to be getting a bit less burdensome for taxpayers, according to one recent filing burden analysis.

The National Taxpayers Union Foundation's (NTUF) annual review of the complexity and cost of the federal tax code comes up with an estimated total cost, in terms of both time and dollars, of complying with the U.S. tax code.

The good news from the NTUF assessment is that for the third consecutive year since the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, Americans have spent less time complying with tax laws.

In a good way. Not by cheating!

However, says the NTUF, the bad news is that the saving of tax compliance time this year is due mainly to technical changes made by the IRS in its calculation of time burdens and expenses, not actually less complicated tax laws.

TCJA standard deduction change: The total number of hours spent complying with the code has now fallen in each year since 2017, when it reached its high of nearly 8.1 billion hours, according to the NTUF calculations.

This largely was due to the increase in the number of taxpayers who opted to use the standard tax deduction instead of itemizing their expenses.

The IRS previously estimated that 26 million fewer filers would use Schedule A because of the essentially doubled standard deduction amounts under the Republican tax reform law. That meant, naturally, much less time lost to paperwork on itemized deductions.

The TCJA also eliminated the Affordable Care Act's individual mandate effective in 2019. The IRS estimated that this reduced the compliance burden by 10 million hours.

For 2020, NTUF found a dramatic drop in taxpayers' compliance burden, freeing up 1.8 billion hours and $63 billion in costs compared to the prior year.

Still, billions of hours lost to taxes: But even with the IRS' technical adjustments that significantly reduced its overall 2020 compliance burden estimate, those 6.081 billion hours are a massive time sink that may be difficult to comprehend.

So NTUF Vice President of Research Demian Brady put it into a more accessible, pop culture perspective:

"It is difficult to fathom just how much time is consumed by the paperwork burden of federal taxes. 6.081 billion hours is equal to almost 694,000 years. In that time, the top ten longest-running scripted U.S. television shows (from The Simpsons to CSI: Crime Scene Investigation) plus every Meet the Press and every Sesame Street, could be binge-watched more than 525,000 times."

Going forward, I'll be thinking of my Netflix, Disney+ and Amazon Prime subscriptions, as well as plain old broadcast TV, differently from now on!

Dollars lost to tax considerations: Then there's the dollar cost of those hours spent on taxes instead of some other endeavor, either work or leisure related. NTUF says it is equivalent to $220 billion in labor.

Add to that the almost $84 billion in estimated out-of-pocket costs taxpayers spent on software, professional preparation services, or other filing expenses, and the total economic value of the compliance burden imposed by the tax code for 2020 can be calculated at around $304 billion.

Those billions, according to the NTUF —

  • Are equivalent to 1.4 percent of last year’s U.S. gross domestic product (GDP) or $21 trillion;
  • Exceed the Congressional Budget Office’s estimate of net interest payments on the federal debt for this fiscal year or $303 billion; and
  • Are nearly equal to the cost of the combined fiscal year 2020 regular budgets of the Departments of Education, Homeland Security, and Transportation or $306 billion.

Private sector comparisons show, says NTUF, that of the largest companies in the world by revenue that make Fortune magazines' annual list of the Global 500, only three businesses are worth more than the value of the compliance burden of the U.S. tax code. They are Walmart, with revenues of $524 billion; Royal Dutch Shell at $352 billion; and the Saudi Arabian government owned Aramco at $330 billion.

Tax transparency and stability would help: To pare these tax compliance costs further, NTUF says more transparency is necessary.

"Greater accountability and transparency are needed so that lawmakers have better information about how taxpayers interact with the tax system and can identify trends in problem areas that need to be addressed," says NTUF in its latest analysis.

Then there's the involvement of the House and Senate. And oh boy, those Representatives and Senators do love to put their fingers into the tax pie.  From 2000 through 2020, Congress enacted, on average, 420 changes to the tax code each year, as shown in the NTUF graph below.

Tax Code revisions 2000-2020_NTUF

In two decades of changing the tax code, the revisions ranged from a low of three in 2013 up to 797 in 2010. After two successive years that saw changes enacted higher than the annual average, 2020 included 314 tax changes.

And the American Recovery Plan Act (ARPA) enacted in March to provide, among other things, another round of COVID-19 relief payments, made 96 changes to tax law.

The NTUF, which is a nonpartisan but conservative-leaning Washington, D.C.-based tax policy think tank, also is concerned that any tax simplicity achieved in the 2017 reform act could be headed for reversal as the now Democratically-led Congress and White House look to roll back parts of the TCJA.

Better tax-writing process would help: I totally get what the group is saying here. I worked on Capitol Hill for a Ways and Means member and the committee itself.

Seeing how the process works (or doesn't) taught me that lawmakers need to test out any changes they propose personally, not just by handing off things to tax professionals.

If they actually realized the effects of their meddling, even the well-intentioned tax law changes, they'd take more time and get more input from the taxpaying public and especially the tax pros who are facing the increasing challenges of ever-changing tax law.

I know, like that's going to ever happen. But a tax geek can hope.

Until then, my best advice is to start your tax planning and preparation early. That goes double when you hire a tax preparer, since those folks have many, many more clients than just you.

And that means if you haven't begun work on your 2020 taxes, due in just about month, or touched base with your tax preparer, do that soon. Like now!

You don't want your own inaction to add to your tax compliance burden.

You also might find these items of interest:




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[Author: skbell1]

Sun, 18 Apr 2021 23:39:49 +0000 BlogLikes - Find Most Popular Blogs Coronavirus COVID-19 Filing Politics Tax help Tax planning Taxes Coronavirus COVID-19 National Taxpayers Union Foundation Stress Tax Taxes. Taxpayer Burden Skbell1
Senate Democrats will seek a 25% corporate tax rate despite Biden's call for 28%, report says President Joe Biden has proposed a 28% corporate tax rate that he said would pay for his $2 trillion infrastructure plan.

AP Photo/Susan Walsh

  • Senate Democrats will likely seek a 25% corporate tax rate, Axios reported.
  • It's lower than the 28% Biden sought to pay for his $2 trillion infrastructure bill.
  • The current corporate tax rate is 21% after Trump slashed it from 35% in 2017.
  • See more stories on Insider's business page.

Senate Democrats will likely seek a 25% corporate tax rate, people close to talks told Axios.

That's lower than the 28% rate President Joe Biden has proposed, which he said would pay for his .

The current corporate tax rate in the US is 21%.

Biden repeated his call for the 28% rate in a speech earlier this month while pitching the infrastructure plan, saying it would level the playing field after former president Donald Trump cut the corporate tax rate from 35% to 21% in 2017.

Read more: 9 hurdles facing Biden's $2.2 trillion infrastructure, jobs, and tax plan as Republicans pitch a less-pricey alternative

"I'm not trying to punish anybody, but damn it, maybe it's because I come from a middle-class neighborhood, I'm sick and tired of ordinary people being fleeced," Biden said.

He also criticized companies that pay little to nothing in federal taxes, citing a recent report that found 55 companies paid $0 in income taxes last year, including Nike and FedEx.

"It's just not fair. It's not fair to the rest of the American taxpayers. We're going to try to put an end to this," he said.

Biden added he would be "wide open" to negotiating a lower rate.

White House officials and business groups told Reuters earlier this month that Biden, lawmakers, and corporations could come to an agreement on the 25% rate.

By changing the rate from 21% to 25%, the US would raise $600 billion in 15 years, Axios reported.

However, it would not be enough to fund , which he said would be funded in 15 years by the 28% rate hike, in addition to a 21% global minimum corporate income tax and tax credits for companies that onshore jobs.

Read the original article on Business Insider

[Author: (Kelsey Vlamis)]

Sun, 18 Apr 2021 20:35:52 +0000 BlogLikes - Find Most Popular Blogs Politics Corporate Tax Rate Tax Taxes Congress Democrats White House
DOJ Sues Roger Stone Alleging Millions In Unpaid Taxes And Fees

The Justice Department on Friday sued Roger Stone alleging nearly $2 million in unpaid tax bills that date back more than a decade. The lawsuit is the latest legal battle for the longtime ally of former President Donald Trump who was convicted of obstructing Congress and pardoned by Trump late last year.

[Author: Zoë Richards]

Sat, 17 Apr 2021 19:10:12 +0000 BlogLikes - Find Most Popular Blogs News Justice Department Roger Stone Taxes Zoë Richards
Roger Stone sued by federal government for nearly $2 million in unpaid taxes and interest Roger Stone.

Joshua Roberts/Reuters

  • GOP strategist and Trump ally Roger Stone and his wife were sued by the federal government for $2 million in unpaid taxes.
  • The complaint accused the couple of using their company to avoid paying personal income tax.
  • Stone was indicted in 2019 on several charges connected to the Mueller investigation on Russian interference in the 2020 election. He was later pardoned by Trump.
  • See more stories on Insider's business page.

Former GOP strategist Roger Stone was sued Friday by the federal government for nearly $2 million in unpaid taxes, interest, and penalties.

The complaint was filed Friday against Stone and his wife Nydia Stone to collect unpaid federal income tax liabilities for nearly $1.6 million between the years 2007 through 2011, as well as more than $400,000 in 2018, according to court documents.

The suit, which is not an accusation of criminality, was filed in the US District Court for the Southern District of Florida.

Stone was indicted on several felonies in January 2019 - including making false statements to Congress, obstruction of justice, and witness tampering - in connection with the special counsel Robert Mueller's investigation on Russian interference in the 2016 election.

Former President Donald Trump commuted Stone's 40-month prison sentence in July last year, then later granted Stone a full pardon on the felony charges in December 2020.

According to the complaint, the Stones used a company they owned called Drake Ventures to pay their federal taxes. After Stone was indicted in January 2019, they opened a trust through the company to help them purchase their residence in Florida, which has no state income taxes.

"Although they used funds held in Drake Ventures accounts to pay some of their taxes, the Stones' use of Drake Ventures to hold their funds allowed them to shield their personal income from enforced collection and fund a lavish lifestyle despite owing nearly $2 million in unpaid taxes, interest, and penalties," the complaint read.

The Stones failed to pay their $20,000 monthly installment payment to the IRS in March 2019, according to the complaint, causing the agency to terminate its installment agreement, according to the lawsuit.

"The Stones intended to defraud the United States by maintaining their assets in Drake Ventures' accounts, which they completely controlled, and using these assets to purchase the Stone Residence in the name of the Bertran Trust," according to the complaint.

In a statement to CNN, Stone called the complaint "preposterous."

"They are well aware that my two-year struggle against the epically corrupt Mueller investigation has left my wife and I on the verge of bankruptcy," Stone said in the statement. "I have continued to eke out a living through my company Drake Ventures."

"To describe my current lifestyle as 'lavish' will be proved to be ridiculous in court. The political motivation of the DOJ Will be abundantly clear at trial," he continued.

Read the original article on Business Insider

[Author: (Lauren Frias)]

Fri, 16 Apr 2021 20:42:44 +0000 BlogLikes - Find Most Popular Blogs Politics Roger Stone Lawsuits Taxes Florida State income tax
Justice Dept. sues Roger Stone over unpaid taxes By Marshall Cohen | CNN

The Justice Department filed a civil lawsuit against former President Donald Trump’s ally Roger Stone on Friday, accusing him and his wife of owing nearly $2 million in unpaid taxes.

In a six-count civil complaint, investigators said Stone and his wife, Nydia Stone, owed about $1.5 million in unpaid taxes form 2007 and 2011, and an additional $407,000 from 2018.

“The Stones evaded and frustrated the (Internal Revenue Service’s) collection efforts” by repeatedly funneling money to a corporate entity they controlled called Drake Ventures, investigators wrote. Stone and his wife then used Drake Ventures account to “fund a lavish lifestyle despite owing nearly $2 million in unpaid taxes, interest and penalties,” they wrote.

According to the complaint, the Stones allegedly used the Drake Ventures account to pay for personal expenses like spa visits, haircuts, groceries, restaurants and dentist appointments.

“The governments statement is preposterous,” Stone said in a statement to CNN. “They are well aware that my two year struggle against the Epically corrupt Mueller investigation has left my wife and I on the verge of bankruptcy. I have continued to eke out a living through my company Drake Ventures. To describe my current lifestyle as ‘lavish’ will be proved to be ridiculous in court. The political motivation of the DOJ Will be abundantly clear at trial.”

The complaint is not an accusation of criminality. Separately, Stone was convicted of lying to Congress and witness tampering as part of the Russia probe, but he was pardoned last year.

Throughout that criminal case, Stone routinely solicited donations from supporters of Trump, telling them he was low on cash and needed help to pay his lawyers.

Stone has not yet responded to the civil complaint, which was filed in the Southern District of Florida, where Stone lives. In the complaint, the Justice Department asked the judge to order Stone and his wife to pay nearly $2 million in unpaid taxes, “plus interest … as allowed by law.”

Fri, 16 Apr 2021 20:24:58 +0000 BlogLikes - Find Most Popular Blogs National News News Politics Courts Crime Donald Trump Impeachment Taxes
Boozing, gambling, shopping boost California’s coffers during pandemic This may not come as a shock if you spent 2020 ordering from Amazon, guzzling wine and and haunting virtual casinos, but data now confirms it: Many Californians drank and bet and shopped their way through the pandemic.

An analysis of state tax collection data from the U.S. Census Bureau shows that, in California:

Amazon driver delivers. (AP Photo/Ted S. Warren)
  • Tax collections on booze sales leapt 15.5% in 2020 over 2019.
  • Gambling tax proceeds climbed 14%.
  • Sales taxes overall rose 3.9%.
  • And property taxes were up 2.9%.

But the overall picture for tax collection in the Golden State is grimmer than those numbers might suggest.

Overall, California’s tax collections fell more than the national average during the 2020 pandemic — down 8.6%, while the drop averaged just 2.5% nationwide.

Other big states fared better than California. In Florida, collections dropped 3.8%, while in Texas, they dropped 3.6%. In New York, they actually rose an eye-popping 8.6%.

Some of California’s issues can be chalked up to a big tourism sector paralyzed by pandemic — Disneyland, for example, has been closed for more than a year — but California’s lopsided dependence on income taxes to fill its coffers plays an outsize role as well.

Lopsided tax system

Total income taxes, the state’s greatest source of revenue, plunged more than 17% in 2020 from the year before. That breaks down like this:

  • Individual income tax collections, down 15.7%.
  • Corporate income tax collections, down 28.8%.

“I think some of the decline has to be attributed to companies and high net-worth individuals leaving the state,” said Conyers Davis, director of the USC Schwarzenegger Institute for State and Global Policy.

“California relies heavily on income tax but states like Texas and Florida have no state income taxes. California also has some of the highest housing costs in the country. In the era of remote work, it has never been easier for the wealthy to relocate and they are doing that. For a while, we were insulated from these departures, but I think we are beginning to feel the loss in the state’s coffers,” he said, adding that his analysis isn’t based so much on intimacy with tax policy as with general observation.

This hit to the collection basket isn’t causing the angst it otherwise might because the federal government’s American Rescue Plan includes $350 billion for state and local governments. About $26 billion of that will go to California’s state government, and another $16 billion will go to its local governments, greatly easing any shortfalls.

But the lopsided collection plate will remain after the federal aid is gone.


It didn’t used to be this way.

Back in 1950, California got 59.4% of revenue from sales and use taxes, and only 11.3% from personal income taxes.

That equation has flipped with dramatic flair. In recent years, income taxes have furnished more than 60% of state revenue, while sales and use taxes kicked in as little as 20%.

Problem is, income taxes are notoriously unpredictable, even though personal income itself is not.

That’s because of the different ways California taxes high-income earners on things like capital gains, interest, dividends and the like.

A chart from the Legislative Analyst’s Office and state controller illustrates the fairly even line representing personal income, and the jagged, saw-tooth line representing what the state collected in taxes on that income over 20 years.

“Designed during the Great Depression, California’s tax structure is outdated, unfair and unreliable,” Controller Betty Yee said in a 2016 report.

“It reflects economic patterns and demographics of the past. Newer economic sectors escape tax obligations because the structure was created for an industrial manufacturing base. Upper-income earners pay a substantially higher rate on personal income—a progressivity that, depending on the analysis, either helps counter growing income inequality, distributes the tax burden too unevenly, or produces unpredictability with episodic cuts to vital programs.”


Reformers have been urging reforms for decades.

Californians generally don’t pay taxes on services, such as vet visits, but they do pay taxes on the sale of tangible goods, such as leashes and collars.

In 2009, Gov. Arnold Schwarzenegger‘s Commission on the 21st Century Economy recommended a radical overhaul. “In the 1920s and 1930s, when the tax system’s foundation was being set in place, manufacturing and agriculture dominated the state and residents mostly bought and sold tangible goods,” its report said. “Over the past 70 years, the forces of globalization and technological progress have transformed California into a state of not one but many economies.”

It recommended a significant restructuring of the personal income tax and a new “business net receipts tax” that would broaden the base by levying a tax on all business activity — that is, services — and not just the exchange of tangible goods. The sales tax you’d pay at Target would essentially drop by nearly half; but you’d pay 4 percent more when taking your dog to the vet.

Those recommendations didn’t get far.

“Our broken tax system is a common conversation topic, yet comprehensive reform has been elusive and politically unpalatable,” Yee said in her report. “As the state official responsible for paying California’s bills each month, I know we can’t afford notto consider a better way to plan ahead …. The time for comprehensive tax reform is now. No more kicking the can down the road.”

From the Commission on the 21st Century Economy report, 2009]]>
Fri, 16 Apr 2021 17:57:05 +0000 BlogLikes - Find Most Popular Blogs News Coronavirus Government Irs Taxes Top Stories Breeze Top Stories IVDB Top Stories LADN Top Stories LBPT Top Stories OCR Top Stories PE Top Stories PSN Top Stories RDF Top Stories SGVT Top Stories Sun Top Stories WDN
Wow! IRS Comm'r Rettig Estimates Annual Tax Gap at $1 Trillion!

IRS Commissioner Charles Rettig
Today (April 13, 2021) the Senate Finance Committee held a hearing on The 2021 Filing Season and 21st Century IRS.  The sole witness was IRS Commissioner Charles Rettig. 

There are three takeaways I want to share:

1. The IRS is Overburdened! I encourage you to at least skim Commissioner Rettig's written testimony. He lays out numerous challenges that that IRS has faced for years and even more due to COVID-19 tax law changes. Consider the three rounds of Economic Impact Payments they had to issue while sheltering in place (each round went to about 160 million individuals), new tax forms for employers to get new refundable payroll tax credits, the need to issue guidance quickly because most changes were almost immediately effective, and the American Rescue Plan enacted March 11 included two changes to 2020 forms millions of which had already been filed!

The IRS is overburdened with a declining workforce due to lots of retirements and problems of funding cuts and dealing with decades old technology.  And the reality is that we all need more from them. We need more audits and we need more guidance. 

Congress needs to increase funding for the IRS - this will be significant revenue raiser (more on that in my #3 below).

2. The IRS and Some Lawmakers Want to Regulate Return Preparers - This is not new as the IRS implemented a system in 2010 that was then found beyond statutory authority. President Trump's budgets included the need to regulate return preparers. This topic seems to have bipartisan support. In response to a question from SFC member Senator Cardin, Commissioner Rettig said "we absolutely need the ability to regulate paid tax preparers" particularly those serving underserved taxpayers. He noted that paid preparers tend to make more mistakes with the EITC than occurs on self-prepared returns! He also noted that most preparers are "amazing" but there are some that the IRS needs to after in a more efficient manner that could occur with regulation. I assume he means through testing and annual continuing education in order to be allowed to obtain a PTIN.

3. Commissioner Rettig Estimates that Annual Tax Gap is About $1 Trillion Per Year! IRS data on its tax gap website is based on 2011 and way out of date. It estimates the net annual tax gap at about $381 billion. That is a lot of money (more than we brought in even from the pre-TCJA corporate income tax). When SFC Chairman Senator Wyden asked Comm'r Rettig what his personal opinion was on the actual size of the tax gap, the reply "it would not be outlandish that the annual tax gap could approach or possibly exceed $1 trillion per year".  WOW!!!

I say "wow" (and we all should) because our annual tax revenues collected are about $3.1 trillion. President Biden's American Jobs Plan is estimated to cost $2.7 trillion over 8 years (see Committee for a Responsible Federal Budget estimate). And many question how we'll pay for that plan. Let's collect even half of what is owed as represented by the tax gap and we can also pay down the federal debt! [hear Comm'r Rettig's tax gap estimate at about 43 minutes into the hearing video]

There are many things that can be done to reduce the tax gap. Here are a few of them:

  • Hire more revenue agents at the IRS.
  • Provide adequate training to those hired (like it was back in the 1980s when I worked there - months of training in the classroom and in the field provided by a well-prepared education office).
  • Expand information reporting and lower the filing thresholds. And, make it easy to file these forms using online portals. Also, provide an incentive for non-business payors (such as households) to file these forms.
  • Allow voluntary withholding on non-employee compensation and mandate it for non-filers.
  • Work with states to include tax education in high school so more people understand their taxes and the obligation to pay them.
  • Let's get 21st century technology and practices into the IRS! Too many aspects of the entire compliance process are still using 20th century technologies and thinking. This is something we all need to focus on, not just the IRS. I said this at a 2013 hearing of the Senate Small Business Committee - Filing should be as simple as ordering from Amazon!
What do you think?

[Author: Professor Nellen]

Thu, 15 Apr 2021 21:48:20 +0000 BlogLikes - Find Most Popular Blogs Taxes Congress Hearing Biden Wyden Irs Trump Sfc Senate Finance Committee EITC Cardin Rettig COMM Professor Nellen Simplification Tax Gap Return Preparer Nellen PTIN Committee for a Responsible Federal Budget Charles Rettig American Rescue Plan IRS Comm Rettig Estimates Annual Tax Gap 21st Century IRS Senate Small Business Committee Filing
Some returns & tax payments are still due by April 15 April 15 deadline or not

For the second consecutive year, millions of individual taxpayers aren't freaking out about their taxes as April 15 nears. That's because for the second consecutive year, the annual Tax Day has been postponed.

But still, some folks are crashing right about now to get their 2020 filings done.

That's because the Internal Revenue Service decision to move Tax Day 2021 from mid-April to May 17 applies only to individuals who must file income tax returns, aka the IRS' 1040 forms series.

And some of these still have an April 15 deadline if they must pay estimated taxes for the 2021 tax year.

What's due this week: In addition to those payers of estimated tax, April 15 also remains the due date for the following filers.

  • U.S. corporations must file Form 1120 for the calendar year and pay any tax due. To get an automatic three-month extension, file Form 7004 and deposit estimated tax.
  • Foreign corporations must file Form 1120-F to report income, gains, losses, deductions, credits, and to figure U.S. income tax liability. However, Form 1120-F due dates can vary depending on if the foreign corporation has a U.S. place of business and on the year-end of the foreign corporation.
  • Partnerships must file Form 8813 quarterly payment voucher and pay any tax due.
  • Estates and trusts that are calendar year entities must file Form 1041 and pay any tax due.
  • Tax-exempt organizations must file Forms 990-T (Section 401(a) or 408(a) trusts) or Form 1120-POL for tax years that ended on Dec. 31, 2020.
  • Exempt organizations also must deposit estimated tax for the first quarter of 2021 due on Unrelated Business Taxable Income for Tax-Exempt Organizations. Use Form 990-W to determine the amount of estimated tax payments required.

If any of these federal tax filings apply to you, get to work. The deadline still is Thursday, April 15.

Don't overlook state tax deadlines: Also check with your state tax department.

Most states have followed the IRS schedule change as far as the due date for 2020's personal income tax filings. But not all.

And some that have changed their state individual income tax filing deadlines have other rules for certain circumstances and filings.

What can wait until May 17: OK, you don't have to file your federal Form 1040 this week. What other federal tax situations also are pushed back a month?

Filings required by Monday, May 17, include the following —

  • Individual income tax return Form 1040 or 1040-SR. Any tax due in connection with these filings also must be paid by this deadline. You can get an extension until Oct. 15 to file your 1040 return by submitting Form 4868. You must, however, pay any 2020 tax due by May 17.
  • Schedule H filed by household employers who paid $2,200 or more to a household employee in 2020. Sent Schedule H with your Form 1040.
  • Form 1040NR or 1040NR-EZ used by non-resident alien taxpayers who received employee wages that were subject to income tax withholding. As with 1040 or 1040-SR, an automatic extension to file the form by mid-October can be obtained by submitting Form 4868. And as with 1040 or 1040-SR returns, any 2020 taxes owed must be paid with the 4868 extension filing.
  • Forms 990, 990-EZ, 990-PF, 990-N, 990-BL, 990-T (Trusts other than section 401(a) or 408(a) trusts), 4720, or 8868 for tax years ending Dec. 31, 2020.

Again, double check with your state tax office about May or other deadlines this filing season.

Then there are the June filers: Some taxpayers are on a totally different schedule. They are those residents in parts of Texas, Oklahoma and Louisiana that were hit by the surprisingly severe winter storm back in February.

Following the major disaster declarations for those areas, these taxpayers have until June 15 to file not only their 2020 tax returns, but also their first estimated tax payment for 2021.

Of course, on that June day, they'll also have to make their second 2021 1040-ES payment.

If you're among this group, mark your calendar.

2017 tax year last chance: This May 17 also is last day that 1.3 million people can claim their portion of more than $1.3 billion in taxes they overpaid during 2017 but never collected as tax refunds.

These individuals didn't file a 2017 tax return in 2018.

Law allows them three years to file and collect their un claimed refunds. The option expires once that Tax Day three years later — or May 17 this year for returns that should have been filed in 2018 — passes.

If you're one of those non-filers from 2018, you need to file your 2017 return and claim that refund by this May 17. If you don't, Uncle Sam gets to keep your unclaimed tax cash.

Paperwork side note and shameless plug: Since this post references so many tax forms that are due on April 15, May 17 or June 15, I'm adding it to the Tax Forms Fiesta! page. 

You also might find these items of interest:




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[Author: skbell1]

Thu, 15 Apr 2021 21:48:10 +0000 BlogLikes - Find Most Popular Blogs Taxes Louisiana Irs Internal Revenue Service Uncle Sam Texas Oklahoma FBAR
Free File can help those who don't usually file taxes get COVID payments and more COVID EIP3 check mockup_IRS

Since the American Rescue Plan Act (ARPA) was enacted on March 11, the Internal Revenue Service has distributed approximately 159 million COVID-19 economic impact payments (EIPs). Those deliveries come to more than $376 billion.

This third round of coronavirus pandemic payments, worth up to $1,400 per person, has been going out in batches. Recipients include taxpayers who've filed 2020 returns, Social Security recipients, and veterans and their families.

Still, there are some folks who aren't on the IRS' EIP delivery list. These are, for the most part, people who haven't file a tax return because they're not legally required to do so.

That, however, means the IRS doesn't know about them or where to send their EIP. The only way to get in the EIP line is to file a 2020 tax year Form 1040.

Advantages of filing a tax return: Your return filing also could reveal that in addition to qualifying for an EIP, you are eligible for other tax breaks.

Potential tax benefits include payments from the prior EIPs. If you didn't get the two disbursed last year, you can claim the amounts as the Recovery Rebate Tax Credit on your 2020 return.

You also might be eligible for the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC).

The filing also could pay off again this summer. If you're eligible for an advance payment of the 2021 Child Tax Credit, which was enhanced as part of the ARPA. The IRS is planning to start issuing these CTC payments of $300 a month in July.

File for free: And one of the easiest and cheapest ways to file is by using Free File.

The no-cost online tax preparation and e-filing option is available this filing season to anyone whose annual income is $72,000 or less. Nine tax software companies, including one that provides filing software in Spanish, are participating in Free File this year.

Free File taxpayer at lapt top

The IRS recommends looking for a Free File product that has a "no minimum income" option. And whatever Free File option you use, choosing direct deposit will get you your refund more quickly and also let the IRS use that bank information to deposit your EIP.

Among those who could find Free File useful are recent graduates now on their own, low- and moderate-income families and even those who are experiencing homelessness. As long as they have a computer or smart phone, Free File is accessible.

More personal, and still free, filing help: If you want a bit more personal help, look into a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) program.

These nationwide tax-filing assistance programs, staffed by IRS-trained volunteers, also offer free or low-cost filing and e-filing services. Due to continuing COVID-19 safety precautions, most VITA and TCE programs are operating on an appointment -only or virtual basis.

VITA and TCE tax help is available at more than 11,000 sites nationwide. To find one near you, visit or call toll-free (800) 906-9887.

U.S. armed service members also can get filing help through MilTax. This free tax filing help is available through the Department of Defense and is the military version of Free File.

File by May 17: The bottom line is that if you haven't filed, do so even if you're not required by law to send in a Form 1040.

You don't have to rush to finish it today. Most filers get until May 17 to send in federal filings. (Check with your state tax department, too. Most, but not all, are following the IRS delayed 2021 filing season schedule.)

But do file something this filing season. That way, you'll get you in the IRS' system and on its delivery list for a COVID-19 economic relief payment. And possibly more.

You also might find these items of interest:




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[Author: skbell1]

Thu, 15 Apr 2021 21:48:10 +0000 BlogLikes - Find Most Popular Blogs Taxes Department Of Defense Social Security Vita Irs Internal Revenue Service CTC Earned Income Tax Credit EITC Child Tax Credit CTC ARPA TCE Recovery Rebate Tax Credit
Bernie Madoff's tax legacy: Ponzi scheme loss deduction Bernie Madoff coming out of court 2009 Bernie Madoff leaving a court hearing in 2009.

Bernard "Bernie" Lawrence Madoff died on April 14 in a federal prison medical facility where he was being treated for terminal kidney disease. The 82-year-old had been in jail since 2009 for orchestrating the world's largest Ponzi scheme.

Madoff pleaded guilty on March 12, 2009, to 11 federal crimes, including operating the financial fraud that bilked as many as 37,000 people in 136 countries over two decades. He was sentenced three months later to the maximum 150 years behind bars and ordered to pay restitution of $170 billion.

At the time of Madoff's death, the victim fund created in the wake of his conviction has paid most of his victims, with most recovering 80 percent of their losses, according to former Securities and Exchange Commission Chairman Richard C. Breeden, special master of the fund.

That's an amazingly successful repayment amount for a Ponzi scheme. But then, Madoff's $60 billion fraud was spectacularly unique.

However, Ponzi schemes of lesser magnitude remain quite common. If you use the search tool on the Internal Revenue Service website, the term Ponzi scheme will provide 37 matching items, including several items on recent billion-dollar schemes that IRS Criminal Investigation agents helped end.

Old schemes without financial foundation: Named for Charles Ponzi, an Italian immigrant who carried out a notorious investment scam involving postal reply coupons in the 1920s, a Ponzi scheme is a financial scam where investors are promised unusually high or consistent returns.

While Ponzi popularized them, this financial fraud technique, like the con artists who run them, have been around for centuries.

They are built on false promises of the promoter who never actually makes any investments or earns any profits on the money he or she is given. Instead, the returns to investors are paid from the victims' own money or cash collected from subsequently conned investors.

Eventually, the Ponzi scheme breaks down because there's not enough money coming in from new investors to pay off all the promised returns to earlier investors.

Tax relief for Ponzi scheme losses: While most Ponzi scheme victims aren't likely to get the same level of government agency assistance that Madoff's did, there is some tax help for victims of such financial fraud are unable to recover their losses.

In fact, in the wake of the Madoff fraud, the IRS put in place special tax rules that make it easier for Ponzi scheme victims to deduct these losses. The IRS in 2009 issued two notices to help taxpayers who are victims:

  • Revenue Ruling 2009-9, which provides guidance on determining the amount and timing of losses from these schemes, which is difficult and dependent on the prospect of recovering the lost money (which may not become known for several years), and
  • Revenue Procedure 2009-20, which simplifies compliance for taxpayers by providing a safe-harbor means of determining the year in which the loss is deemed to occur and a simplified means of computing the amount of the loss.

Doug Shulman, who then was serving as IRS Commissioner, also that year testified before the Senate Finance Committee on the tax issues related to Ponzi schemes.

If you're not up to reading all that right now, here's basically what it covers.

Ponzi losses claimed as a theft loss: An investor taken in by a Ponzi scheme can deduct the lost funds as a theft loss instead of as a capital loss from an investment.

This is good news for investors because the capital losses excess deduction is limited to $3,000 per year. There is no such limit for theft losses.

The loss is claimed as an itemized deduction, but it's not subject to the 10 percent of adjusted gross income reduction or the $100 reduction that applies to many personal casualty and theft loss deductions.

The theft loss is deductible in the year the fraud is discovered, except to the extent the investor has a claim against the Ponzi schemer with a reasonable prospect of recovery.

In addition, as noted in the second 2009 IRS notice, the IRS created a special safe-harbor rule under which it automatically accepts Ponzi-type theft losses. The IRS deems the loss to be the result of theft under three conditions:

  1. The scheme promoter was charged under state or federal law with fraud, embezzlement, or a similar crime; or
  2. The promoter was the subject of a state or federal criminal complaint alleging commission of such a crime, and
  3. There either was some evidence of an admission of guilt by the promoter or a trustee was appointed to freeze the assets of the scheme.

The amount of the theft loss includes the investor's unrecovered investment.

Also, the IRS generally allows defrauded investors to claim a theft loss deduction for the net amount invested as well as for any so-called fictitious income that the Ponzi scheme promoter credited to the victims' account and which he/she reported as taxable income before discovering the investment was fraudulent.

Tax reform and losses: I already hear some readers saying, "Wait, what about tax reform's casualty and disaster loss deduction limits?"

You are correct. The Tax Cuts and Jobs Act (TCJA) of 2017 did away with most disaster losses. Now the general rule is that such losses only can be claimed on Schedule A if they are the result of a federally declared major natural disaster. That mean that most theft losses can't be claimed unless they were part of a theft connected with a major disaster.

And Ponzi schemes, although they sometimes rack up loss numbers for their victims that rival hurricanes or tornadoes or other destructive powers of Mother Nature, definitely don't fall into that typical disaster losses categories.

But the TCJA did retain in Schedule A's Other Itemized Deductions section — this is the one just under the revised casualty and theft loss section — the option to count Ponzi scheme losses, along with, among a few other items, gambling losses. Yeah, I know, a probably inadvertent (but ironic) acknowledgment that financial investments are just another type of betting.

In Schedule A's instructions for Other Itemized Deductions, it notes that they include casualty and theft losses of income-producing property listed on Form 4684, — the Casualties and Thefts form, which now joins the Tax Forms Fiesta! page) — lines 32 and 38b, or Form 4797, line 18a.

Form 4684 Casualty and Theft losses IRS form

And Form 4684's instructions detail the steps Ponzi scheme victims should take in detailing their losses to such fraudulent investments.

Personal vs. for profit: The reason the Ponzi scheme escaped the TCJA changes? The casualty and theft losses limited (at least through 2025) by the Republican tax code overhaul are personal losses under Internal Revenue Code (IRC) Section 165(h).

By the tax definition of personal, these losses are not incurred in connection with a trade or business or a transaction entered for profit.

But Rev. Rul. 2009-9 issued after the Madoff scheme provides that Ponzi scheme losses are considered losses arising from transactions entered for profit under IRC Section 165(c)(2) and are not subject to the limitations under Section 165(h).

So if you find you've been taken to the cleaners by a Ponzi schemer and can't recover any of your investments, Uncle Sam might be able to help. But here's hoping you don't ever have to rely on such relief.

You also might find these items of interest:




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[Author: skbell1]

Thu, 15 Apr 2021 21:48:10 +0000 BlogLikes - Find Most Popular Blogs Taxes Sam Irs Securities And Exchange Commission Madoff Ponzi Senate Finance Committee Internal Revenue Service Bernie Madoff IRS Criminal Investigation Doug Shulman TCJA Charles Ponzi Bernard Bernie Lawrence Madoff Richard C Breeden Bernie Madoff Madoffs
Biden budget would beef up IRS tax enforcement Treasury Secretary Janet Yellen at her desk_Facebook photo-cropped U.S. Treasury Secretary Janet Yellen elaborated on the Biden Administration's fiscal year 2022 budget request for the IRS. (U.S. Treasury photo via Facebook)

The White House last week kicked off the fiscal year 2022 budget process by sending a to the House Appropriations Committee chairman and issuing a press release on President Joe Biden's funding priorities.

The official 2022 discretionary budget request that also got attention during the presidential campaign, such as education, medical research, housing, and civil rights.

In addition to the information issued by 1600 Pennsylvania Avenue, Treasury Secretary Janet Yellen also elaborated a bit on the areas under her department.

Overall + enforcement $ bumps for IRS: Yellen said the Biden Administration's formal FY22 budget also will seek money to help support a fair and equitable tax system. That's political speak for beefing up the Internal Revenue Service so that it can do its job better, including auditing all who aren't paying what they should.

To do that, Biden's first budget for the coming fiscal year, which begins Oct. 1, will include $13.2 billion overall for the IRS, said Yellen. That's $1.2 billion, or 10.4 percent, more than the level of funding provided the tax agency for the 2021 fiscal year.

"In addition to increases for base IRS enforcement funding, the 2022 discretionary request provides an additional increase of $417 million in funding for tax enforcement as part of a multiyear tax initiative that will increase tax compliance and increase revenues," noted Yellen.

"With this funding, the IRS will increase oversight of high-income and corporate tax returns to ensure compliance," she added.

Altogether, the 2022 discretionary request will increase IRS resources for tax enforcement by $900 million.

The Biden Administration's proposed new money for IRS enforcement actions is welcome. But for this weekend's By the Numbers honors, I'm going with the overall IRS budget request of $13.2 billion, since the agency has been historically undercut financially by Congress.

We'll see if the slim majorities in the House and Senate can push the Biden request through.

If that happens, then we'll see how quickly the IRS can ramp up its lagging enforcement, aka audit, efforts.

More money for taxpayer service, too: The new money should help enforcement, but Yellen also underscored the agency's other job of customer, i.e., taxpayer, service.

Yellen said other requested FY22 funds should help the IRS provide new and improved online tools for taxpayers to communicate with the IRS easily and quickly, and improve telephone and in-person taxpayer customer service, including outreach and assistance to underserved communities.

Here's hoping the IRS does indeed get more money in the coming fiscal year and that it puts it to good use toward all its responsibilities.

You also might find these items of interest:




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[Author: skbell1]

Thu, 15 Apr 2021 21:48:09 +0000 BlogLikes - Find Most Popular Blogs Taxes Congress Senate Joe Biden House Janet Yellen Biden Irs Trump Yellen U S Treasury Internal Revenue Service House Appropriations Committee Biden Administration IRS U S Treasury Facebook The White House Pennsylvania Avenue Treasury
IRS chief likely to be questioned (again) about different tax filing deadlines IRS Commissioner Charles Rettig_WM Oversight Subc testimony 031821 It's likely to be déjà vu all over again for IRS Commissioner Charles Rettig, testifying here in March before a House tax panel, when he goes before the Senate Finance Committee on Tuesday, April 13.

Not to get your tax deadline hopes up too much, but Internal Revenue Service Commissioner Chuck Rettig is testifying tomorrow, April 13, before the Senate Finance Committee (SFC).

The The last time he talked to lawmakers, it was in March to Representatives on the Ways and Means (W&M) Oversight Subcommittee. It was then that Rettig put the kibosh on the possibility that the IRS would extend the impending April 15 estimated tax deadline until May 17, aligning it with this year's postponed main Tax Day.

Maybe, just maybe, Rettig will make a more welcome surprise announcement tomorrow. He could say, just two days away from the April 15 due date for the first estimated tax payment for 2021, that the IRS has decided to give 1040-ES filers another month, too.

But probably not.

Not giving in: Even though the IRS has been getting pressure for week from taxpayers, tax preparers, tax professionals' organizations and lawmakers, the agency has been holding firm to the estimated tax system's regular due dates.

In fact, just last week (on April 8), the agency issued a statement reminding everyone of that the estimated tax first quarter deadline is still April 15.

Still, we are talking taxes and sudden changes are not unheard of here. So it's not surprising that more than a few tax folks are, with apologies to Dusty Springfield, wishin' and hopin' and thinkin' and prayin' for a 1040-ES delay.

But again, I personally am not getting my hopes up for a delay here.

2021 filing season, 21st century outlook: Neither Senate Finance Chairman Sen. Ron Wyden (D-Oregon) nor the committee's Ranking Minority member Sen. Mike Crapo (R-Idaho) have released their opening statements for tomorrow's hearing, which begins livestreaming at 10 a.m. Eastern Time.

Rettig's prepared testimony also hasn't been posted at the SFC website.

UPDATE, April 13, 2021: The SFC leaders' written statements and Rettig's testimony are available for download PDFs. Click the names to do that: Wyden, Crapo and Rettig. Watch the tape of the hearing here. Note that it starts a little after the 20-minute mark. The question and answer segment begins at the 40-minute mark.

I suspect, however, the hearing, which is officially titled "The 2021 Filing Season and 21st Century IRS," largely will be a replay of the House W&M subcommittee's inquiries last month.

At that March 18 session, Representatives questioned Rettig about such IRS issues at the agency's backlog of unprocessed tax returns received during the pandemic-impacted 2020 tax year to its juggling of regular tax tasks and issuance of multiple rounds or COVID-19 economic impact payments to its enforcement activities.

It also was then that Rettig raised almost every eyebrow in the tax community when he justified maintaining the April 15 estimated tax deadline because, in his words:

"There's a large contingent of wealthy individuals in this country who do not make their estimated payments and who essentially take the money they should be paying in quarterly estimated payments to the government and take the arbitrage, invest it, and we’re not going to give them a break of interest and penalties to do so."

I'm sure he'll be asked about that characterization.

Legislation lagging: Aside from some pointed questions, however, I don't expect much actual action regarding the looming estimated tax (and more) deadline.

A bill was introduced on April 8 in the House by Rep. Lloyd Smucker (R-Pennsylvania) to make 2021's first estimated tax deadline May 17.

However, that bill (H.R. 2437) has not moved an iota since its introduction. It's highly unlikely that the House and Senate could complete action on it in just two days.

The best hope (that word again) right now, per a conversation on #TaxTwitter, would be for the bill to pass after April 15 but be tweaked to make all 2020 tax return overpayments timely payments (retroactively) for the first estimate tax payment period.

Another suggestion is that the bill mandate that future April 15 Form 1040 filing deadline postponements also apply to all other tax filings due on that day.

I'll let you know what, if anything, the SFC members and Rettig have to say about the April 15/May 17 mismatched due dates in a future post.

I'm hoping (yet again) it will be good news. But the tax skeptic in me is not holding my breath.

You also might find these items of interest:




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[Author: skbell1]

Thu, 15 Apr 2021 21:48:09 +0000 BlogLikes - Find Most Popular Blogs Taxes Oregon Senate Pennsylvania Idaho House Irs Sfc Senate Finance Committee Internal Revenue Service Dusty Springfield Rettig Senate Finance Sen Mike Crapo Charles Rettig Chuck Rettig Senate Finance Committee SFC Rep Lloyd Smucker Wyden Crapo
What To Do if Your CPA Makes a Mistake CPA Makes A Mistake

Many can do their own taxes, but others need a professional to wade through their finances to do it right. Imagine paying money to have your taxes done by a certified public accountant (CPA) and finding out they made a mistake. If this happens to you, you need to know what you can do if your CPA makes a mistake.

What Is A CPA?

First, let’s define a certified public accountant. Anyone who provides accounting services such as financial planning, tax preparation, or financial statement preparation can be called an accountant whether they have a degree or not. By contrast, a CPA has earned the designation through a combination of education, experience an licensing. They have to pass an accreditation exam as well as do yearly continuing education.

What If Your CPA Makes A Mistake?

If you’ve hired a CPA to do your taxes, here are a few actions you can take both to prevent a mistake and if a mistake occurs.

Pay A Flat Fee

Some CPAs will charge a percentage of your refund to prepare your taxes. This may encourage shady methods to increase your refund that may not be valid.

Look Over Return

Before filing your taxes, look it over carefully. If there are things you don’t understand, ask for an explanation. A nonsensical answer may raise a red flag.

Get A Guarantee

CPAs will commonly advertise they will fix any mistakes for free. Normally all that is needed to to file an amended return with corrections. Upstanding CPAs may offer to pay penalties and fees occurred if they do make a mistake.


If you’re just not getting the response and help you need from your CPA, you can always officially complain to the American Institute of Certified Public Accountants (AICPA).

Legal Action

If a mistake results in you owning the IRS a substantial amount and your CPA refuses to pay the court system can be used to resolve your dispute as a last resort.

How about you, Clever Friends, did you know what to do if your CPA makes a mistake?

Read More

Check out additional articles on Clever Dude:

The post What To Do if Your CPA Makes a Mistake appeared first on Clever Dude Personal Finance & Money.

Mon, 12 Apr 2021 21:46:41 +0000 BlogLikes - Find Most Popular Blogs Taxes Marketing Irs
Top GOP senator says it's 'an impossible sell' for Republicans to strike a deal on an infrastructure package that rolls back Trump tax cuts Sen. Roger Wicker

Tom Williams/Pool via AP

  • Sen. Roger Wicker downplayed the odds of an infrastructure deal that included rolling back Trump's tax cuts.
  • He called it 'an impossible sell' among Republicans on Monday.
  • Wicker met with Biden to discuss his jobs plan along with other Republicans and Democrats.
  • See more stories on Insider's business page.

Sen. Roger Wicker of Kansas, the ranking Republican on the Senate Commerce Committee, downplayed the prospect of a bipartisan deal on President Joe Biden's infrastructure plan that included rolling back the 2017 Trump tax cuts.

"It would be an almost impossible sell from the president to come to a bipartisan agreement that included the undoing of that signature [law]," Wicker said. "And I did tell him that."

He described the 2017 tax cuts as "one of my signature achievements in my entire career" and said he supports keeping the corporate tax rate at 21%. The law slashed it to that level from 35%, and Biden wants to lift it to 28% to generate federal dollars for his infrastructure plan.

The remarks came after a bipartisan meeting between the White House and a centrist group of eight lawmakers, which Wicker called "a good meeting." Biden administration officials said it was part of an effort to shore up support for their infrastructure plan.

"He looks forward to hearing their ideas, and his objective is to find a way forward where we can modernize our nation's infrastructure so we can compete with China," Psaki said hours before the meeting. The White House also released an 'infrastructure report card' on Monday that hit a majority of states with Cs and Ds.

The Biden infrastructure plan includes major funding to repair roads and bridges and set up clean energy incentives. It also contains federal dollars for in-home elder care, public transit, broadband, and schools, among others.

Republicans are lining up in opposition to the Biden infrastructure plan. They argue its tax hikes on multinational corporations would hurt job growth and their global competitiveness at a vulnerable period in the economic recovery.

Senate Majority Leader Mitch McConnell slammed the size and scope of the Democratic plan on Monday.

He said during a floor speech that Democrats were "embarking on an Orwellian campaign to convince everybody that any government policy whatsoever can be labeled 'infrastructure.' Liberals just have to believe in it hard enough."

Still, some Democrats are seeking changes to the plan. Sen. Joe Manchin of West Virginia says he is opposed to a 28% corporate tax rate and favors 25% instead.

Read the original article on Business Insider

[Author: (Joseph Zeballos-Roig)]

Mon, 12 Apr 2021 20:33:34 +0000 BlogLikes - Find Most Popular Blogs Politics Jobs Taxes Republicans Congress Senate White House China West Virginia Trends Joe Biden Economy Policy Infrastructure Democrats Gop Mitch McConnell Kansas Biden Stimulus Trump Roger Wicker Joe Manchin Senate Commerce Committee Wicker Sen Roger Wicker Psaki Trump Tax Cuts Tax Cuts and Jobs Act Joseph Zeballos Roig AP Sen Roger Wicker Trump Tax Law Roger Wicker Tom Williams
A majority of CEOs say Biden's proposed corporate tax hike could undo the economic gains from Trump's cuts Uncle Sam. Ben Sklar / Stringer/Getty Images

Ben Sklar / Stringer/Getty Images

  • A majority of US CEOs are saying Biden's corporate tax increase would negatively affect business.
  • Wage growth, hiring, and research and development spending would slow as a result, the CEOs said.
  • Biden proposed upping the corporate tax rate to 28% from 21%, but has since said he may compromise.
  • See more stories on Insider's business page.

American business leaders are warning a corporate tax rate hike by President Joe Biden could make it harder to hire workers and increase their wages.

In a survey of 178 CEOs conducted by the Business Round Table published Monday, a majority of respondents said the increase - from 21% to 28% - put forward by the White House in March would hinder economic expansion, research and development spending, wage growth, and hiring.

The results showed:

  • 98% of CEOs said the increase would have a "moderate" to "very" significant adverse impact on competitiveness;
  • 75% said it would negatively affect spending on research and development;
  • 71% said it would negatively affect their ability to hire; and
  • about 66% said it would slow US wage growth.

"As we look toward recovering from the COVID-19 pandemic, keeping competitive tax policies in place is needed to help reinvigorate the U.S. economy and lead to more opportunity for Americans," Gregory J. Hayes, chief executive of Raytheon and chair of the Business Roundtable Tax and Fiscal Policy Committee, said in a release.

Read more: The post-COVID productivity boom is going to let us dump the unproductive parts of virtual working and keep the good parts

Biden's revealed his last month, which included spending on upgrading roads, bridges, and affordable housing, paid for in part by the corporate tax increase. The president has since said he may agree to , instead of the originally proposed 28%.

Amazon CEO Jeff Bezos has been on of the few to say his firm supports the tax increase, calling the move "a bold investment in American infrastructure."

But in the Business Round Table survey, Hayes said the lower corporate tax rate from before the pandemic "drove economic growth, creating 6 million jobs, pushing the unemployment rate to a 50-year low and increasing middle class wages."

In 2017 under the Trump administration, the government lowered the corporate tax rate to 21% with the Tax Cuts and Jobs Act. But it may not have turned out to be the economic "rocket fuel" he had promised.

The Tax Policy Center, an independent research group created by the Urban Institute and Brookings Institution, actually found "little economic benefit" from the 2017 law, saying it largely benefited corporations and created only modest wage growth.

Biden decried the former president's tax cuts, saying he's "sick and tired of ordinary people being fleeced."

But according to the Tax Foundation, an independent tax policy nonprofit, Biden's tax plan would cut economic output by 1.47% over the long-term, causing a 1% lower wage rate and 518,000 fewer full-time jobs.

"The proposed tax increases on job creators would slow America's recovery and hurt workers," Joshua Bolten, president and CEO of the Business Roundtable, said.

The heavily pro-corporate interest Business Roundtable was formed in 1972 and represents nearly every sector of the American economy. Its membership rolls currently include 3M, American Airlines, Amazon, and Coca-Cola, and more.

Read the original article on Business Insider

[Author: (Natasha Dailey)]

Mon, 12 Apr 2021 11:43:34 +0000 BlogLikes - Find Most Popular Blogs Amazon Politics Taxes News Corporate America White House US America Trends Joe Biden Economy Jeff Bezos Biden Coca Cola Brookings Institution Trump Urban Institute Raytheon Hayes Tax Foundation Tax Policy Center Business Roundtable Gregory J Hayes Joshua Bolten Biden tax plan Natasha Dailey Ben Sklar Stringer Getty Business Round Table Sam Ben Sklar Stringer Getty 3M American Airlines Amazon
IRS is adjusting returns with unemployment, but it might be worth amending anyway Doing and redoing taxes Sometimes it's worth the extra time and effort to file an amended tax return.

In its regular email to tax professionals last week, the Internal Revenue Service remined them that their clients who filed 2020 returns before the American Rescue Plan Act (ARPA) excluded a portion of unemployment from tax don't need to file amended returns.

The IRS says it will recalculate the tax liability of these filers, taking into account the tax they paid on $10,200 per person in unemployment benefits before ARPA's March 11 enactment date.

If the early-filing taxpayers are due a refund, the IRS will automatically send them the amounts. The unemployment-related refunds are expected to start going out in May.

But in some cases, qualifying taxpayers might want to get proactive despite the IRS' pledge to take care of things.

That's the advice of some tax pros in Andrew Keshner's recent MarketWatch article, "Expecting another refund after the IRS calculates the $10,200 unemployment tax break? Why you might want to do more than just wait."

"Though the IRS said it would automatically adjust returns based on the exclusion, it said it would not tweak the returns to apply for new tax credits if the underlying return didn’t already seek those credits," writes Keshner in the piece, which get this weekend's Saturday Shout Out.

Claiming newly eligible credits: If your new lower income with the $10,200 excluded unemployment income means you're then eligible for other tax breaks, notable the Earned Income Tax Credit (EITC), then you will need to amend your 2020 filing.

Keshner also looks at other unemployment related amended return factors to consider, such as the cost of filing a 1040-X, as well as potential timing considerations.

If you're one of the folks who filed early and paid tax on all your 2020 unemployment benefits, check out the article. Even when you do get a revised tax bill or refund, it could be worthwhile to amend your 2020 return to get even more tax breaks.

And if you've yet to file, make sure that you don't miss any tax breaks available due to your new adjusted gross income without the added $10,200.

You also might find these items of interest:




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[Author: skbell1]

Sat, 10 Apr 2021 21:52:41 +0000 BlogLikes - Find Most Popular Blogs Taxes Irs Marketwatch Internal Revenue Service EITC ARPA Andrew Keshner Keshner
Webinar on Court Jurisprudence in Tax Litigation The webinar focused on exemplary tax disputes and tax disputes resolved by the Grand Chamber of the Supreme Court.
Among the important judgments rendered by the Grand Chamber in 2020, it is necessary to note the following three:
- The resolution of 7 April 2020 in case No 910/4590/19 initiated by LLC "Askop-Ukraine" => administrative courts have jurisdiction over the cases involving the recovery under section 625 of the Civil Code of Ukraine of annual 3% interest and inflation charges in case of the failure of the state authorities to provide VAT refund on a timely manner; 
- The resolution of 1 July 2020 in case No 804/4602/16 initiated by LLC “Salamandra Insurance Company” => the failure of a bank to remit a tax liability to the state revenues based on the payment instruction of a taxpayer exempts the taxpayer from penalties and daily default interest, but does not exempt him from paying to the state revenues the tax liability itself; and 
- The resolution of 18 November 2020 in case No 813/5892/15 brought by LLC “Yablunevyi Dar” => orders on appointing tax inspections issued by the tax authorities based on court orders in criminal cases cannot be challenged in any type of court proceedings in Ukraine.

[Author: (Unknown)]

Sat, 10 Apr 2021 08:29:00 +0000 BlogLikes - Find Most Popular Blogs Taxes Ukraine LLC Tax Disputes Tax litigation Grand Chamber of the Supreme Court Business Consulting Academy Salamandra Insurance Company
FBAR filing deadline is April 15. Or Oct. 15 FBAR foreign financial account reporting FinCEN

If it feels like you just filed required federal forms about your overseas financial holdings, you're probably right.

Last year, as we all were working to adjust to the myriad tax (and life) changes precipitated by the COVID-19 pandemic, lots of tax deadlines got pushed back. Some way back.

One of those was the filing extension for Form 114, Report of Foreign Bank and Financial Accounts, usually referred to as FBAR. Some individuals didn't have to submit this document until Dec. 31, 2020.

Now FBAR filers are facing a new deadline. Next week. On Thursday, April 15.

That's right. The May 17 automatic filing extension granted for federal tax returns and a few other tax responsibilities does not apply to FBAR.

However, if you dig a little deeper into the process, you'll discover that there's also an automatic extension until Oct. 15 for filers who can't meet next week's April 15 deadline.

Why the IRS April 15 notice? It's no secret that a popular way to avoid U.S. taxes is to stash money in an account (or two or …) abroad.

Uncle Sam tracks this taxable money held in foreign accounts through the efforts of two agencies, the Internal Revenue Service and its sister agency within the U.S. Treasury, the Financial Crimes Enforcement Network, usually referred to as FinCEN.

It's also no secret that the IRS would like to get all relevant tax material, foreign or otherwise, in and input into its systems as soon as possible. So it's no surprise, even though FBAR doesn't strictly fall under IRS jurisdiction, that it today issued an announcement that the FBAR deadline for 2021 is April 15.

But this filing, Form 114, is submitted to FinCEN, not (as just noted) the IRS. And FinCEN says in its publication on that there's an automatic six-month extension for the filing.

Specifically, when the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the annual due date for filing FBARs to April 15, it also mandated the extension period.

So per that law, FinCEN grants filers failing to meet the FBAR annual April deadline an automatic extension to Oct. 15. Note that it's automatic. That means you don't have to file anything else to get the added six months.

Who has to file a FBAR? Even if you can't meet the April 15 deadline and will file by mid-October, you still should be aware of the FBAR requirements.

FinCEN has been collecting FBAR data per the Bank Secrecy Act since 1970. There are two key components, the individuals who must report and the amount of money that triggers the reports.

The law says a U.S. person must file a FBAR if —

  1. They have financial interest in, signature authority or other authority over one or more accounts, such as bank accounts, brokerage accounts and mutual funds, in a foreign country, and
  2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

The FBAR definition of person also is broader than what we tend to find in a standard dictionary. Under the law, a U.S. person is a citizen or resident of the United States or any domestic legal entity such as a partnership, corporation, limited liability company, estate or trust.

As for what constitutes a foreign country, the law says that's any area outside the United States, Indian lands as defined in the Indian Gaming Regulatory Act, and the following U.S. territories and possessions:

  • Northern Mariana Islands,
  • District of Columbia,
  • American Samoa,
  • Guam,
  • Puerto Rico,
  • United States Virgin Islands, and
  • Trust Territories of the Pacific Islands.

How much money counts? Now about FBAR's financial trigger. Again, there are two key words/phrases mentioned earlier, aggregate and any time during the calendar year.

This is a cumulative balance, meaning if you have two foreign financial accounts with a combined balance exceeding $10,000 at any one time in the tax year, both accounts would have to be reported.

Then the IRS and FinCEN also bring another consideration into play, maximum value. Uncle Sam wants this amount, too.

The maximum value of an account is a reasonable approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year. "Periodic account statements may be relied on to determine the maximum value of the account," according to FinCEN, "provided that the statements fairly reflect the maximum account value during the calendar year."

If you have/had a financial interest in more than one account, each account must be valued separately.

When recording the maximum value of accounts, record all amounts as U.S. dollars rounded up to the next whole dollar, regardless of the cents. For example, $15,265.25 in an account at its highest point would be recorded as $15,266.

If an account is in non-U.S. currency, convert the maximum account value into dollars. You can use the Treasury's Financial Management Service rate for the last day of the calendar year.

What records are needed? You also must keep You must keep records for each account you must report on an FBAR that establish. The information required includes:

  • Name on the account, 
  • Account number,
  • Name and address of the foreign bank, 
  • Type of account, and 
  • Maximum value during the year. 

The law doesn’t specify the type of document to keep with this information. It can be bank statements or even a copy of the FBAR you filed. Just make sure your documentation has all the necessary data.

You must hang onto these records for five years from the due date of the FBAR.

How do I file FBAR? FBAR filing, or specifically FinCEN Form 114, is not filed with the IRS. It's filed directly with FinCEN.

It also must be filed electronically at FinCEN's BSA (Bank Secrecy Act) E-Filing System website. Below is the page you'll see when you head there.

FinCEN FBAR e-filing screen

And even though it's not an IRS form and it's only filed electronically, FBAR reporting earns a spot on the Tax Forms Fiesta! page.

What if you don't report an account? Even though FinCEN offers a filing due date cushion, it eventually wants your foreign account information.

If you fail to provide it, you'll pay.

If you are required to file an FBAR and don't do so, you could face a civil penalty of up to $10,000. The penalty could be waived if you can show reasonable cause for missing the filing.

But if you willfully fail to report an account or don't provide required account identifying information, the penalty price goes up. You could be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation.

Wait. Isn't there another foreign account filing? Some folks right about now are wondering about another foreign financial holdings tax requirement. That's the Foreign Account Tax Compliance Act or FATCA.

FATCA requires certain U.S. taxpayers holding financial assets outside the United States to report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets.

Depending on your foreign holdings and amounts, you might need to file per FATCA, FBAR or both.

FATCA's Form 8938, when required, is sent along with your annual income tax return. And since this year, that deadline isn't until May 17, I'll blog about FATCA requirements in a future post.

Isn't it always fun to have something to look forward to, especially when it's a relatively arcane tax topic?

You also might find these items of interest:




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[Author: skbell1]

Fri, 09 Apr 2021 21:46:18 +0000 BlogLikes - Find Most Popular Blogs Taxes United States Sam Irs Internal Revenue Service Uncle Sam Pacific Islands FinCEN FBAR Surface Transportation Foreign Bank FinCEN FBAR Treasury s Financial Management Service
Hawai'i is the lone holdout in making May 17 Tax Day 2021 Updated Wednesday, April 7, 2021


Just days after the Internal Revenue Service's March 17 announcement that it was moving the 2021 tax filing deadline from April 15 to May 17, most states that collect some type of personal income tax followed the federal tax agency's lead.

The IRS decided that filers could use more time to file and pay their 2020 taxes since we're all still dealing to some degree with the lingering effects of the COVID-19 pandemic.

That "we" includes the IRS, which faces a backlog of 2019 returns (and 2020 filings, too, since the tax season opened in mid-February), as well as the added task of issuing a third coronavirus economic impact payment to millions of Americans.

State tax calendars affected, too: When the IRS made the May 17 Tax Day change, that meant that tax officials and/or lawmakers in 42 total jurisdictions when you count the District of Columbia had some decisions of their own to make.

Most reacted quickly, agreeing within days to allow a similar extension until May 17 for the filing and payment of state taxes this year.

But most isn't all. Eight states were a bit more reticent. Those who took longer to act are Arizona, Arkansas, Hawaii, Idaho, Indiana, Iowa, Mississippi and Ohio.

Here's where those early hold-out states stand today (updated Wednesday, April 7, 2021).

But here's also a spoiler. Hawai'i looks to be the only state that won't go along with the IRS move of Tax Day 2021 to May 17.

Arizona — A state representative plans to add language moving the Grand Canyon State's 2021 tax deadline to May 17 to an unrelated bill. That might not be necessary if the Gov. Doug Ducey issues an executive order moving the deadline this year like he did in 2020 when the IRS pushed Tax Day to July 15. The governor's office said he is reviewing such a move.

ARIZONA UPDATE April 7, 2021: The Arizona Department of Revenue has moved the deadline for filing and paying state individual income taxes from April 15 to May 17, 2021. Additionally, the deadline for first quarter tax year 2021 individual estimated tax payments remains April 15, 2021. 

Arkansas — The Natural State's Gov. Asa Hutchinson has since extended the normal April 15 deadline for his residents to file their individual income taxes on May 17 to coincide with the extension of the federal filing deadline.

Hawai'i — Officials of our 50th state are holding firm to their April tax filing and payment due date. That's April 20 in the Aloha State. However, the Hawai'i Department of Taxation notes that the state's taxpayers are granted an automatic six-month extension (until Oct. 20) if they are due a refund or if they pay their properly estimated tax amount owed by April 20.

Aloha beach-2

IdahoHouse Bill 347 was introduced in the Idaho legislature to push the Gem State's income tax filing deadline from April 15 to May 17. However, it adjourned without taking action on the bill. It's unclear whether it will get attention when lawmakers return to Boise on April 6.

Indiana — Gov. Eric Holcomb has signed an executive order shifting Hoosiers' income tax filing and payment deadline to May 17, instead of April 15.

Iowa — The annual filing deadline for Hawkeye State taxpayers is April 30. However, it's looking more likely that Iowa officials will move that date this year to May 17.

IOWA UPDATE March 30, 2021: The Iowa Department of Revenue has extended the filing and payment deadline to June 1, 2021, for 2020 individual income tax returns and first quarter estimated income tax payments for individuals from the April 30, 2021 statutory deadline.

Mississippi — Magnolia State taxpayers now are on the same filing and payment schedule for their state returns as Uncle Sam. The Mississippi Department of Revenue now follows the federal extension for 2020 tax returns, with the forms and payments all due May 17. And like the IRS shift, the month-long extension does not apply to quarterly state estimated payments. They still are due on April 15.

Ohio — It took a week, but the Buckeye State came around. The Ohio Department of Taxation announced on March 24 that it would follow the IRS and extend its deadline to file and pay Ohio individual income and school district income taxes for tax year 2020 until May 17.

Same day, but still some differences: While most states have conformed to the IRS May 17 personal income tax filing deadline, a few made some calendar and/or specific tax due tweaks.

Maryland, for example, pushed its filing deadline to July 15, 2021. I appreciate that my old stomping grounds are going for the full-year between filings.

May 17 also is the new filing deadline in Alabama, North Carolina and Virginia. Those states, however, will tack on interest to any individual income tax that's not paid by April 15.

Other delays due to storms: Another IRS action was the motivation for some states to change their tax filing due date.

After residents of Oklahoma, Louisiana and Texas endured February's historic and deadly winter storm, the IRS granted most taxpayers in those states until June 15 to file their federal returns.

Working off that major disaster driven date, Sooner State officials said that Oklahoma taxpayers now have until June 15 to pay their 2020 individual and business income taxes. The extension also applies to payment of first quarter 2021 estimated income tax amounts.

The Pelican State took similar action, extending Louisiana's state tax deadline to June 15. This new due date is for individual income, corporation income and franchise, fiduciary income, partnership and partnership composite tax returns and payments with original or extended due dates on or after Feb. 11 and before June 14.

Even the Lone Star State, which has no individual income tax, also made a change. Texas Comptroller Glenn Hegar announced an automatic extension of the due date for 2021 franchise tax reports from May 15 to June 15.

State tax deadline changes: The take-away here is double check with your state tax department as to what it expects this filing season and when it requires you to submit it.

You can find links to state tax departments in the ol' blog's state tax directory.

You also can check out the special online tracking of state tax due dates in 2021 provided by the American Institute of Certified Public Accountants (AICPA); the accounting and business consulting firm Wipfli LLP; the National Taxpayers Union Foundation (NTUF); and Intuit's TurboTax blog.

States without individual taxes: Since I know you're curious, and maybe a little jealous, the seven states that don't have individual income taxes are my native and current home of Texas, along with Alaska, Florida, Nevada, South Dakota, Washington and Wyoming.

New Hampshire and Tennessee collect tax only on certain investment income and this filing season is the last that Volunteer State residents have to worry about that. Tennessee's Hall Income Tax, which since 1929 had been collected on interest from bonds and notes and dividends from stock, was phased out effective Jan. 1, 2021.

We've got numbers, lots of numbers:  And since it's Sunday, that means it's By the Numbers day here on the ol' blog.

There are lots of options. All these states offer various tax deadlines, both original and new. And, of course, there's the new federal tax deadline 2020 of May 17.

But I'm going with a different tally this weekend.

With Tennessee in 2021 joining the no-state-tax ranks, that puts that number at eight. That's also how many states with income taxes that didn't immediately follow the IRS deadline move and change their fling deadlines to May 17.

So eight earns this week's By the Numbers honors.

You also might find these items of interest:


Coronavirus Caveat & More Information

In 2021, we're still dealing with extraordinary circumstances,

both in our daily lives and when it comes to our taxes.

The COVID-19 pandemic and efforts to reduce its transmission

and protect ourselves and our families means that,

for the most part, we're focusing on just getting through these trying days.

But life as we knew it before the coronavirus will return,

along with our mundane tax matters.

Here's hoping that happens soon!

In the meantime, you can find more on the virus and its effects on our taxes

by clicking Coronavirus (COVID-19) and Taxes .




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[Author: skbell1]

Fri, 09 Apr 2021 09:47:12 +0000 BlogLikes - Find Most Popular Blogs Texas Taxes Mississippi Maryland Congress Virginia Indiana Idaho Arkansas Tennessee Iowa Arizona Ohio Louisiana Oklahoma District Of Columbia Sam PPP Intuit Irs Hawai Don Lone Star State Boise Internal Revenue Service Hoosiers Magnolia State Asa Hutchinson Doug Ducey Volunteer State Grand Canyon State Hawkeye State Turbotax Pelican State Buckeye State Department of Taxation Glenn Hegar Iowa Department of Revenue Wipfli LLP Eric Holcomb Oklahoma Louisiana Alaska Florida Nevada South Dakota Washington Mississippi Department of Revenue Arizona Department of Revenue Wyoming New Hampshire Alabama North Carolina COVID Aloha State However National Taxpayers Union Foundation NTUF
Household help could mean more tax work for employers Woman-cleaning-counter_pexels-rodnae-productions-5591908 Photo: RODNAE Productions via Pexels

April 7 is National No Housework Day. I didn't realize that until #TaxTwitter pal Joe Kristan noted it at the end of his Eide Bailly LLP tax roundup blog post today.

In my defense, I overlooked No Housework Day because that's basically every day for me. Oh, I do some household chores, but grudgingly. And I'm lucky. The hubby is a more diligent cleaner than I.

That means we don't (so far) have a paid housekeeper. But some folks do. And depending on the arrangement, those who hire household help have some tax tasks to deal with every year.

Not just maids: The first thing to note is that the folks who come to dust, vacuum and otherwise clean your various residential rooms are just one type of household help as far as the Internal Revenue Service is concerned.

The IRS says that for tax purposes, household employees include housekeepers, maids, babysitters, gardeners and others who work in or around your private residence as your employee. A fuller list is found in IRS Publication 926, aka the Household Employer's Tax Guide.  

The key phrase here is "as your employee."

Your tax requirements as the hirer of household help depends on whether the assistance is provided by an independent contractor or as your employee. The short answer to this distinction is that workers, household and otherwise, are your employees if you can control not only the work they do, but also how they do it.

My earlier post on this topic elaborates on the IRS rules about distinguishing between an employee and contractor.

If you are indeed the boss of your household worker, then get ready for those aforementioned added tax duties.

FICA requirements: The Federal Insurance Contributions Act, or FICA, requires that both employers and employees pay Social Security and Medicare taxes.

The FICA tax total is 15.3 percent of wages, split evenly between the boss and worker. But the employer generally is required to withhold the employee's share of FICA tax from the worker's wages.

When it comes to household workers, if you pay cash wages (IRS speak for payments made by check, money order, etc.) of $2,300 or more for 2021 (this threshold is subject to annual inflation adjustments) to any one household employee, you generally must withhold 6.2 percent for Social Security and 1.45 percent for Medicare (for a total of 7.65 percent) from all cash wages you pay to that employee.

Or, if you're a generous employer, you can pay your household help's FICA taxes yourself.

Remember, though, that you also must pay your 7.65 percent share as employer for that worker's FICA taxes.

Additional FICA considerations: If you pay your employee's share of Social Security and Medicare taxes from your own funds, that's a nice way to give your worker some added cash flow flexibility.

However, those amounts count as the employee's wages for the worker's income tax purposes. You might want to make that clear to your employee so that he or she isn't surprised at his/her taxable wages at tax return filing time.

For your employer purposes, however, the FICA amounts you cover for your worker do not count as wages when it comes to paying federal unemployment tax. More on this tax in a minute.

Also, don't withhold or pay Social Security and Medicare taxes from wages you pay to the following family members:

  • Your spouse,
  • Your child who is under age 21, or
  • Your parent, unless an exception is met.

You also don't have to withhold FICA for an employee who is younger than 18 at any time during the year, unless household work is that young person's principal occupation. If the employee is a student, providing household work isn't considered to be his or her principal occupation.

Federal income tax withholding: While FICA withholding is required in most household help situations, you as the employer are not required to withhold federal income tax from wages you pay to a household employee.

However, if your employee asks you to withhold federal income tax and you agree, there is tax paperwork.

You must get a completed Form W-4, Employee's Withholding Certificate (which now, by virtue of this mention, is added to Tax Forms Fiesta! blog page) from your household worker.

W-4 form 2020 finalized 122019_W4

IRS Publication 15-T, Federal Income Tax Withholding Methods has the applicable tax withholding tables, which are updated each year.

Form W-2, Wage and Tax Statement: If you must withhold and pay Social Security and Medicare taxes, or if you withhold federal income tax, for your household employees, then you'll also have to complete a Form W-2, Wage and Tax Statement (already on the ol' blog's forms page), for that worker.

And you'll have to let the Social Security Administration know by sending in Form W-3, Transmittal of Wage and Tax Statement. IRS Publication 926 has more information on when and where to furnish and file these forms in its "What Forms Must You File?" section.

W-3 form

Note, too, that if you're filling out a W-2 for a worker (or more), you'll need your own employer identification number (EIN), as well as your employees' Social Security numbers. If you don't already have an EIN, the quickest way to get one is by using the IRS online EIN application.

Federal Unemployment Tax Act (FUTA): Remember that reference earlier to unemployment tax? Here's the promised (threatened) additional info.

If you paid a household employee wages totaling more than $1,000 in any calendar quarter during the calendar year or the prior year, you generally must pay federal unemployment tax (FUTA) tax on the first $7,000 of earnings.

Again, payments to family members get different treatment. Don't count wages paid to your spouse, your child who is under the age of 21, or your parent. Also, don't consider the amounts you pay to these individuals as wages subject to FUTA tax.

Generally, you also can take a credit against your FUTA tax liability for amounts you paid into state unemployment funds.

Schedule H, Household Employment Taxes: When tax return filing time arrives, you'll also have to submit another form is you paid a household worker wages subject to FICA or FUTA taxes or if you withhold federal income tax from that employee's earnings.

Schedule H, Household Employment Taxes (yes, a new Tax Forms Fiesta! document), is filed along with your individual income tax return.

Schedule H Form 1040 attachment

If you're not required to file a return, you must still file Schedule H separately to report household employment taxes.

Nanny tax matters: Although this post is about household help in general, it often is referred to as the nanny tax since so many working couples or single parents find that they need the added child care assistance.

Nanny taxes get a lot of attention when they trip of folks who are appointed to high-level government jobs. It's amazing how often this happens, especially to presidential cabinet nominees.

But hiring a nanny also can provide a couple of tax breaks, according to Guy Maddalone, founder and CEO of GTM Payroll Services.

Payments to a nanny can count toward the Child and Dependent Care Tax Credit, which was enhanced as part of COVID-19 pandemic relief measures included in the recently enacted American Rescue Plan Act (ARPA). The credit now is up to $8,000 for eligible families with one child and as much as $16,000 for two or more children.

Or, notes Maddalone in a recent article in for Accounting Today, if you have a workplace dependent care flexible spending account (FSA), your nanny's wages are a reimbursable expense from that account.

Get help for your household help tax tasks: OK, you're glad you have household help, but the tax implications are creating a whole new set of problems.

In that case, consider hiring a firm like Maddalone's that provides payroll, tax, insurance and compliance services for families with household employees. Or hire a tax professional with experience in this specialized tax area.

As you've already figured out by hiring household help, it's worthwhile, both from peace of mind and financial perspectives, to get professional assistance.

You also might find these items of interest:




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[Author: skbell1]

Fri, 09 Apr 2021 09:47:12 +0000 BlogLikes - Find Most Popular Blogs Taxes Social Security Medicare Social Security Administration Irs Don Internal Revenue Service Labor Department EIN Joe Kristan FUTA Eide Bailly LLP Transmittal of Wage and Tax Statement IRS Guy Maddalone GTM Payroll Services Payments Maddalone
IRS not budging: April 15 is the deadline for 2021's first estimated tax payment UPDATE, Thursday, April 8, 2021, 8:10 p.m. CST: Rep. Lloyd Smucker (R-Pennsylvania) plans to introduce a bill that would postpone the due date for first-quarter 2021 estimated tax payments to May 17, 2021. Thanks to the San Diego CPA firm GPW for the tip via Twitter, along with the observation that if Smucker's bill does pass, it likely will be very close to the filing wire.


The Internal Revenue Service has dashed hopes that it would true-up 2021's annual tax filing deadline and the year's first estimated tax payment.

Many in the tax community had been hoping (and lobbying and complaining and …) that this year's automatically extended May 17 due date for 2020 tax returns and payments would be applied to 2021 estimated taxes, too.

But no. The IRS reiterated in its announcement today (April 8) that the first 1040-ES payment is due next week:

"The Internal Revenue Service today reminded self-employed individuals, retirees, investors, businesses, corporations and others who pay their taxes quarterly that the payment for the first quarter of 2021 is due Thursday, April 15, 2021."

Conflicting deadline issues: Some who aren't familiar with estimated taxes might be asking what's the big deal with the different deadlines?

I'll let some working tax pros explain.

During a March 18 hearing of the House Ways & Means' Oversight Subcommittee, IRS Commissioner Chuck Rettig, who was practicing tax attorney before taking the IRS top post, offered one reason why he's opposed to extending the filing deadline.

IRS website noting April 15 2021 still estimated tax 1Q due date

"There's a large contingent of wealthy individuals in this country who do not make their estimated payments and who essentially take the money they should be paying in quarterly estimated payments to the government and take the arbitrage, invest it, and we’re not going to give them a break of interest and penalties to do so," Rettig said.

However, as many have pointed out, there are plenty of definitely not wealthy people who pay estimated taxes, too.

National Conference of CPA (Certified Public Accountant) Practitioners tax chair Stephen Mankowski made that point, reports Accounting Today, during a recent virtual meeting with government officials on a number of tax season-related topics.

"It's not only the rich that have to do estimates. Over the last five years there have been a lot more self-employed persons. They're required to file quarterly estimates, and are not in any sense wealthy. They're just doing what they have to do to get by," said Mankowski.

1040 needed to figure 1040-ES:  There's also the matter of needing to complete your current taxes to come up with a good estimated of what your upcoming estimated tax amount will be.

"This means that those with estimated tax really need to complete their return by April 15," added Mankowski.

Then there are taxpayers who usually apply any prior year's tax overpayments toward their first estimated tax bill. That works when the due dates are the same.

But this year, if you're a filer who knows you're getting a refund that could cover all or part of the first quarter estimated amount, it will be too late if you don't file your return until May 17.

I know, I know, who delays filing if they're getting a tax refund? More than you'd suspect. I've even done it. And it's not uncommon to wait if you're in the habit of using such overpayments to pay upcoming taxes instead of getting it back as spending money.

Now, however, these folks (or their tax preparers) some decisions to make. CPA Ed Zollars looks at the various payment permutations and problems in such conflicting deadline situations in a recent post at his Current Federal Tax Developments blog.

1040ES instructions re penaltiesThe bottom line for many is that they'll have to come up with their 2021 first quarter payment next week and deal with cash-flow problems until they get their 2020 return when they eventually file by mid-May. Or they'll just pay the first estimated tax amount late and face a penalty.

As for that penalty, Joe Kristan, a CPA with Eide Bailly, notes that, "Normally the 'penalty' for being a month late with an estimated tax payment - interest at a 3% annual rate for one month - makes spending any professional time to avoid it not worth it. That doesn't make the IRS Commissioner's purposeful mismatch of the estimated tax date and filing date any less unwise."

Paying as you earn: IRS wisdom aside (insert your oxymoron jokes here), the federal tax collector is not wavering on the fast-approaching April 15 1040-ES deadline.

"Income taxes are pay-as-you-go. This means, by law, taxes must be paid as income is earned or received during the year," notes the agency. For most folks, that's accomplished via tax withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation.

But for folks who freelance, either as their permanent income source, or intermittently via assorted gig jobs to supplement their bank balance, must make timely payments on that money by making estimated tax payments.

Estimated tax payments also are required of those who get investment income, such as interest, dividends and capital gains, as well as form recipients of alimony and rental income.

And if you didn't opt to have taxes withheld from your unemployment, you should count those taxable jobless benefits toward income for which you should pay estimated tax.

When to pay: My estimated tax primer has details on this tax responsibility. I'll let you check it out at your leisure.

But I do want to again put up the payment schedule.

Payment # Due Date* For income received in 1 April 15 Jan. 1 through March 31 2 June 15 April 1 through May 31 3 Sept. 15 June 1 through Aug. 31 4 Jan. 15 of the next year Sept. 1 through Dec. 31 *If the 15th is on weekend or federal holiday, the estimated payment is due the next business day.


June disaster due dates: Deadlines also are changed at the discretion of the IRS when taxpayers are affected by major disasters.

That's the case for some taxpayers in Texas, Oklahoma and Louisiana who are in designated major disaster areas after the mid-February winter storm that immobile zed those areas. These taxpayers have until June 15 to file both their 2020 tax return and first estimated tax payment. Their second, regularly schedule 1040-ES payment also is due that day.

E qual payments preferred:  Whatever your estimated tax due date, the IRS prefers that you guesstimate how much money you'll have for the year that's subject to estimated tax and then divide that amount by four and send those equal amounts on all four 1040-ES due dates.

You can pay them via a variety of electronic tax options. If you're old fashioned, you can snail mail a paper check or money order, along with the appropriate 1040-ES voucher. The one for 2021's first installment due next week is shown below.

1040-ES payment voucher 1 for 2021

Sorry about the hassle of having two filing deadlines that are connected but separate this year. Blame the COVID-19 pandemic. Blame the IRS. Blame Congress for not putting enough pressure on the tax agency.

But just make your payment.

You also might find these items of interest:




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[Author: skbell1]

Fri, 09 Apr 2021 09:47:12 +0000 BlogLikes - Find Most Popular Blogs Taxes Pennsylvania Social Security San Diego Louisiana Irs Internal Revenue Service Smucker The IRS Texas Oklahoma Rettig GPW Joe Kristan Eide Bailly Chuck Rettig Ed Zollars Rep Lloyd Smucker House Ways Means Oversight Subcommittee IRS Stephen Mankowski Mankowski IRS Blame Congress
2020 2021 2022 ACA Health Insurance Premium Tax Credit Percentages If you buy health insurance from or a state-run ACA exchange, up through the year 2020, whether you qualify for a premium tax credit is determined by your income relative to the Federal Poverty Level (FPL). You didn’t qualify for a premium tax credit if your income was above 400% of FPL. That was a hard cutoff. See Stay Off the ACA Premium Subsidy Cliff.

The American Rescue Plan Act of 2021 (also known as President Biden’s $1.9 trillion stimulus package) removed the hard cutoff at 400% of FPL in 2021 and 2022. Now, how much credit you qualify for is determined by a sliding scale. The government says based on your income, you are supposed to pay this percentage of your income toward a second lowest-cost Silver plan in your area. After you pay that amount, the government will take care of the rest. If you pick a less expensive policy than the second lowest-cost Silver plan, you keep 100% of the savings. If you pick a more expensive policy than the second lowest-cost Silver plan, you pay 100% of the difference.

That sliding scale is called the Applicable Percentage Table. The American Rescue Plan Act of 2021 lowered the numbers significantly in 2021 and 2022 from previous years. For example, in 2020, people with income between 250% and 300% of the Federal Poverty Level were expected to pay between 8.29% and 9.78% of their income toward a second lowest-cost Silver plan in their area. It changed it to a sliding scale between 4% and 6% in 2021 and 2022.

Here are the numbers for different income levels in 2020, 2021, and 2022:

Income 2020 2021 and 2022 < 133% FPL 2.06% 0% < 150% FPL 3.09% – 4.12% 0% < 200% FPL 4.12% – 6.49% 0% – 2% < 250% FPL 6.49% – 8.29% 2% – 4% < 300% FPL 8.29% – 9.78% 4% – 6% <= 400% FPL 9.78% 6% – 8.5% > 400% FPL not eligible 8.5%

Source: IRS Rev. Proc. 2019-29, American Rescue Plan Act of 2021

As you see from the table above, the changes between 2020 and 2021 are quite substantial. The percentage of income the government expects you to pay toward a second lowest-cost Silver plan depends on your income relative to the Federal Poverty Level. To calculate where your income falls relative to the Federal Poverty Line, please see Federal Poverty Levels (FPL) For Affordable Care Act (ACA).

If your income is low, they expect you to pay a low percentage of your low income. As your income goes higher, they expect you to pay a higher percentage of your higher income. The higher percentage applies not just to the additional income but to your entire income. A higher income times a higher percentage is much more than a lower income times a lower percentage. For example, a household of two in the lower 48 states is expected to pay 3.28% of their income when their 2021 income is $40,000. If they increase their income to $50,000, they are expected to pay 5.60% of their income. The increase of their expected contribution toward ACA health insurance, and the corresponding decrease in their premium tax credit will be:

$50,000 * 5.60% – $40,000 * 3.28% = $1,488

This represents 15% of the $10,000 increase in their income. For a married couple, the effect of paying 15% of the additional income toward ACA health insurance is greater than the effect of paying 12% toward federal income tax. It makes the effective marginal tax rate on the additional $10,000 income 27%, not 12%. Normally it’s a good idea to consider Roth conversion or harvesting tax gains in the 12% tax bracket, but those moves become much less attractive when you receive a premium subsidy for the ACA health insurance. For a helpful tool that can calculate this effect, please see Tax Calculator With ACA Health Insurance Subsidy.

The post 2020 2021 2022 ACA Health Insurance Premium Tax Credit Percentages appeared first on The Finance Buff.

Thu, 08 Apr 2021 09:50:36 +0000 BlogLikes - Find Most Popular Blogs Taxes Marketing Conversion Tax credits Silver Biden ACA FPL Tax planning Capital Gains Federal Poverty Level IRS Rev Proc Federal Poverty Level FPL
Amazon’s Bezos supports infrastructure bill, corporate tax hike By Matt Day and Spencer Soper | Bloomberg’s Chief Executive Officer Jeff Bezos said he supported investing in U.S. infrastructure and a hike in the corporate tax rate to help pay for it.

Weighing in as lawmakers debate the Biden administration’s $2.25 trillion infrastructure plan, the Amazon founder said his company backs “making bold investments in American infrastructure,” but stopped short of endorsing the president’s proposal.

“We recognize this investment will require concessions from all sides — both on the specifics of what’s included as well as how it gets paid for (we’re supportive of a rise in the corporate tax rate),” Bezos said in a brief statement posted to Amazon’s corporate blog site. “We look forward to Congress and the Administration coming together to find the right, balanced solution that maintains or enhances U.S. competitiveness.”

Amazon traditionally shuns hot-button political issues that aren’t directly tied to its business to avoid alienating customers. But the company has been caught up in the debate about infrastructure and how to pay for it. Just last week, Biden cited Amazon as an example of a company that didn’t pay any federal income tax, drawing a contrast with individuals unable to cut their tax bills to zero.

Jay Carney, a Biden staffer during the Obama administration who today leads Amazon’s lobbying and communications teams, addressed the critique on Twitter, saying Amazon had reduced its tax burden with credits meant to incentivize spending on research and development.

Amazon historically has low profit margins, in part because it reinvests most revenue back into the company. This reduces the burden of corporate taxes based on profit, makes Amazon eligible for R&D tax credits and means a hike in such taxes would be less of a blow than to higher-profit corporations.

Still, technology companies like Amazon will likely pay more under the Biden plan.

Infrastructure investments would also help Amazon efficiently move goods around the country. Bezos has acknowledged in the past that the very existence of his company was predicated on massive public investments in the internet and the U.S. Postal Service.

Amazon has also received attention from the White House recently thanks to a closely watched union drive at a warehouse in Bessemer, Alabama. The administration released a video in which Biden said he supported the rights of workers to organize and encouraged employers to refrain from illegal interference in workplace campaigns, without mentioning Amazon by name. Related Articles

Wed, 07 Apr 2021 14:27:34 +0000 BlogLikes - Find Most Popular Blogs Amazon Twitter Business Taxes Obama Congress White House Sport Joe Biden Soccer Jeff Bezos Biden Southern California Forbes Bezos Jay Carney Elon Musk Jeff Bezos Spencer Soper Matt Day Bessemer Alabama Bloomberg Amazon U S Postal Service Amazon
The Traps You’ll Want to Avoid Falling Into with Your Personal Finances [[ This is a content summary only. Visit my website for full links, other content, and more! ]]]]> Wed, 07 Apr 2021 09:55:01 +0000 BlogLikes - Find Most Popular Blogs Money Taxes Parenting Money Management Money Tips 1.3 million people must file 2017 returns by May 17, 2021, or lose their part of $1.3 billion in tax refunds forever Uncle Sam shuffling money-no border

May 17 is the deadline this year to file your 2020 tax return and pay any tax you owe.

It's also the last day that 1.3 million people can claim their portion of more than $1.3 billion in taxes they overpaid during 2017 but never collected as tax refunds.

If you're one of those non-filers, you need to file that 2017 return and claim your refund by May 17. Federal law says that if a taxpayer doesn't file an old return within three years of its original due date — and that was April 15, 2018 for those 2017 tax returns — then Uncle Sam gets to keep the money. Forever.

And yes, even though May 17 is more than three years from the original old return's due date, it applies in these non-filing cases. The law says the three-year claiming deadline is the year's tax due date — May 17 this year — not strictly three calendar years.

$865 median unclaimed tax amounts: Meeting next month's old return filing deadline could produce a nice chunk of tax refund change.

The Internal Revenue Service says that the median unclaimed 2017 tax refund amount is $865.

Your languishing unclaimed amount, however, might be more, since that's just the midpoint for the potential old refunds. So half of the waiting refunds are less and, fingers crossed, half of them are more than $865.

Why people don't file: These old, unclaimed tax refunds are not a new occurrence.

Every year, the IRS announces that three years earlier, millions of folks didn't file tax returns that could net them billions in refunds and therefore didn't get that tax cash they were due back then.

There are many reasons for such oversights.

Sometimes people get busy and simply don't get around to sending their returns to the IRS.

Some don't realize they need to file at all. That's often the case with students and increasingly, gig workers. In both of these cases, these folks aren't in the main, traditional job earning pools, so filing is not necessarily routine for them.

Others know they are due a refund, but for some crazy reason (yes, I am judging!) think the amount is too small to mess with filing a 1040. If that's you, we need to talk.

And some people don't even know they might be due a refund. That's why even if you aren't legally required to do so, it's sometimes a good idea to file a tax return anyway.

Whatever the reason you didn't file your 2017 tax return back in 2018, the IRS wants you to come and get your cash.

That encouragement comes not just from me, but also the IRS' head honcho.

"The IRS wants to help taxpayers who are due refunds but haven't filed their 2017 tax returns yet," said IRS Commissioner Chuck Rettig. "Time is quickly running out for these taxpayers. There's only a three-year window to claim these refunds, and the window closes on May 17. We want to help people get these refunds, but they will need to quickly file a 2017 tax return."

Now or never: Although I (and Commissioner Rettig) mentioned it earlier, it's worth repeating. You only have three years to claim an old tax refund.

2017 unfiled returns refund claims may 17 2021_irs graphic

The countdown timer runs from tax due date to tax due date. So the three-year window to claim 2017 refunds due in 2018 closes in 2021.

And, again, the official Tax Day is the marker.

That means that since Tax Day 2021 was pushed to May 17, mainly for COVID-19 reasons (just like last year), it's the deadline to file that return you should have submitted back in 2018.

Don't miss it this time. It is your last chance to get that old refund.

What forms, how to file them: OK. You double checked your tax records and discovered you didn't file back in 2018. And it looks like you missed out on some cash.

But just how do you get that old refund?

Unfortunately, it's going to take a little bit of work. And you'll have to fill out that old form by hand instead of using tax prep software. Yep, that's right. Snail mail is required. There's no e-filing of old forms.

Start by getting tax year 2017 forms. They're available at's online forms and instructions page. Once there, click on the Find prior years forms, instructions & publications link.

Remember, since we're going back in tax time, you'll have a choice of 1040s. Changes under the Tax Cuts and Jobs Act (TCJA), which happened to become law in late 2017, prompted the IRS to go to just one Form 1040 and three schedules. But before that law's provisions kicked in the next tax year, you could file one of three 1040 versions: the long 1040, the slightly shorter 1040-A and, as its name indicated, the easiest 1040-EZ.

Generally, you should choose the simplest tax form for your filing situation. This pre-TCJA chapter from my tax book has details on why you might choose one 1040 form over the other two.

Once you decide which Form 1040 one to use, download it or call toll-free 1-800-TAX-FORM (1-800-829-3676).

In addition to the proper 2017 tax year forms to file, you'll also need your old tax documents. This includes things like your W-2, 1098, 1099 or 5498 forms. If you don't have copies in your personal files, the IRS recommends you first try to get copies from your employer, bank or other payer.

If you can't get those informational documents from those sources, you can order a free wage and income transcript by using the IRS' online Get Transcript tool.

Alternatively, you can file Form 4506-T to request a wage and income transcript. A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return.

Other non-filing years matter:  While you're at it, you also might want to look at other tax years when you didn't file.

The IRS notes that if you're claiming your 2017 tax refund, that amount may be held if you also missed filing returns for 2018 and 2019.

Also be aware of any other amounts you currently owe the IRS, other federal programs or state agencies. Your old 2017 tax refund may be used to offset currently unpaid child support or past due federal debts, such as student loans.

But look on the bright side. If you're due a refund from 2017, the IRS also might be holding onto unclaimed refunds for you for 2018 and 2019 tax years, too. You don't have to wait until the last minute three years down the road to claim them.

Don't forget about the EITC:  In finally filing your 2017 return, make sure you get the most of any possible refund. That means double-checking your eligibility that tax year to claim the Earned Income Tax Credit (EITC).

Family eligible for EITC

This tax credit — which reduces any taxes you owe dollar-for-dollar and is refundable, meaning you'll get money back even if you don't owe taxes — is available to lower- and middle-income taxpayers. However, the IRS says that every year millions of taxpayers overlook this valuable tax break.

For the 2017 tax year, the EITC was worth a maximum $6,318. Even if you don't qualify for that amount, it still could be worth claiming as long as your 2017 income met the EITC earnings thresholds. That tax year they were:

  • $48,340 ($53,930 if married filing jointly) for those with three or more qualifying children;
  • $45,007 ($50,597 if married filing jointly) for people with two qualifying children;
  • $39,617 ($45,207 if married filing jointly) for those with one qualifying child; and
  • $15,010 ($20,600 if married filing jointly) for people without qualifying children.

If your income and family circumstances back in 2017 allow you to claim the EITC on your late-filed return now, be sure to download IRS material related to the credit back then, too.

Don't forget state taxes:  Most U.S. taxpayers live in states that also collect income taxes.

That means chances are good that a large percentage of folks who didn't file a federal return in 2017 also overlooked their state returns that year, since state and federal filings typically are connected.

Check with your state tax department about what you need to do about any old unfiled tax return at that level. It might could get you even more refund money.

Checking with your state tax office also is important this year since many have, like the IRS, changed their return filing deadlines this year.

Why to file now:  Right about now, having read this far and still frustrated by this partially extended 2021 tax season, you're probably asking whether it's worth your time and effort to also mess with a three-year-old tax return.

My personal answer is yes, it's always worth getting some unexpected money. It's doubly worth it to keep it from simply reverting back to Uncle Sam.

And the unclaimed amounts could be especially welcome if you've lost income due to your job's closure during the COVID-19 pandemic.

More on those 2017 refund amounts:  As noted earlier, the median return from the $1.3 billion waiting in the U.S. Treasury is $865. That means that half of the old unclaimed refunds are less than $865 and half are more.

In some cases, the refund amounts are much more.

Fittingly the median potential refund for residents of Kansas, which sits approximately in the middle of the United States, is $865.

But 23 other jurisdictions (22 states and Washington, D.C.) have a median mark topping $865. They are:

$960 in Alaska

$924 in New Jersey

$928 in Connecticut

$956 in New York

$878 in the District of Columbia

$958 North Dakota

$870 in Florida

$869 Oklahoma

$913 in Hawaii

$931 in Pennsylvania

$901 in Illinois

$921 in Rhode Island

$894 in Indiana

$912 in South Dakota

$922 in Iowa

$904 in Texas

$875 in Kentucky

$928 in Washington

$872 in Maryland

$921 in West Virginia

$978 in Massachusetts

$944 in Wyoming

$968 in New Hampshire


Even the smallest median refund amount, $727 in Idaho, is nothing to sneeze at.

You can see exactly where your state stands in the ol' blog's special web page showing the state-by-state breakout of 2017 tax year unclaimed refunds.

No penalties for refund claims:  Finally, if you're concerned about facing IRS wrath for not filing back in 2017, don't worry.

There's no penalty for filing late when you're getting a refund of overpaid taxes.

Annual unclaimed refund issue:  As I mentioned earlier, unclaimed tax refunds are common. I've been writing about this tax phenomenon as long as I've been blogging.

You can see what the numbers were in prior years in my previous posts on nonfilers due refunds —

You also might find these refund-related posts of interest:




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[Author: skbell1]

Tue, 06 Apr 2021 21:46:33 +0000 BlogLikes - Find Most Popular Blogs Florida Texas Taxes Maryland Washington Kentucky Massachusetts West Virginia Indiana Pennsylvania United States Wyoming North Dakota New Hampshire Idaho South Dakota Alaska Hawaii Iowa Connecticut New Jersey Kansas Ira District Of Columbia Illinois Sam Rhode Island Irs Don U S Treasury Internal Revenue Service Uncle Sam EITC Earned Income Tax Credit EITC The IRS Rettig Chuck Rettig Time New York 878 Oklahoma 913
Labor Department joins IRS in offering online resources for unemployment fraud victims Unemployment-benefits-application_696x464

While the Internal Revenue Service is working on recalculating taxes paid on unemployment benefits by early filers, other taxpayers are dealing with potential tax bills on money they didn't get.

They are victims of unemployment insurance fraud. And their numbers increased last year as millions of people filed for the jobless assistance in the wake of the COVID-19 pandemic.

To help people dealing with unemployment identity theft, the Department of Labor (DoL) has launched a new website.

Alerted by mail: Many don't learn that unemployment benefits have been fraudulently collected in their names until they receive something in the mail.

The usual indicators, notes the DoL, are:

  • Mail from a government agency about an unemployment claim or payment and you did not recently file for unemployment benefits. This includes unexpected payments or debit cards and could be from any state.
  • A 1099-G tax form reflecting unemployment benefits you weren't expecting. Box 1 on this form may show unemployment benefits you did not receive or an amount that exceeds your records for the unemployment benefits you did receive. The form itself may be from a state in which you do not live or did not file for benefits.
  • A notice from your employer while you're still working, indicating that your company received a request for information about an unemployment claim in your name.

When you do discover someone is using your identity to illegally collect unemployment, the next step is to report it.

Report unemployment identity theft: As soon as you discovered someone has impersonated you to get unemployment benefits, report it to your state office. The unemployment fraud DoL website has a directory you can use to find the correct office.

Read your state's specific guidance for reporting unemployment identity theft carefully. Some states may refer to unemployment as "reemployment assistance" and identity theft as "imposter fraud."

Your state officials also might require additional documentation, such as a police report you filed or a sworn affidavit, before it will open an investigation. Each state has different requirements and a different process for investigating identity theft.

Note that when you report the unemployment ID theft, you may not receive an immediate confirmation from the state. Be patient.

And don't fall for fake websites that offer to help resolve unemployment issues. The Department of Justice recently warned that fraudsters are creating websites mimicking unemployment benefit websites, including state workforce agency (SWA) websites, in order to steal personal information that can be used to commit identity theft.

Don't wait to file your taxes: If you received a 1099-G tax form for benefits you didn't receive, the state will need to issue you a corrected version. It also will update the tax record with the IRS on your behalf.

However, both the DoL and IRS say do not wait to receive a corrected 1099-G to file your taxes. The investigation could take a while and if you wait, the delay could cause you to miss tax deadlines, even ones that have been pushed from April 15 to May 17 or later.

If you did get some unemployment, but not the wrong amount shown on the tax form, when you file your taxes only include the out-of-work assistance amount that you actually received. Note, too, that the recently enacted American Rescue Plan Act (ARPA) excludes up to $10,200 in unemployment benefits from federal tax.

If you filed your federal return before the March 11 ARPA enactment date and reported and paid tax on all your unemployment, don't submit an amended return. The IRS is working on recalculating the proper tax amount and will automatically issue applicable refunds.

File additional ID theft reports: In addition to contacting your state's labor (and if needed, tax) officials, U.S. Labor Department says to also report unemployment identity theft that occurred during the COVID-19 pandemic to the U.S. Department of Justice's National Center for Disaster Fraud.

The National Center for Disaster Fraud helps law enforcement stop future unemployment identity theft. Reports to the Center also will be shared with the Labor Department's Office of Inspector General, which is the primary agency responsible for investigating unemployment fraud.

Credit reporting agencies phone numbersCheck your credit report: As with all types of identity theft, check your credit report for suspicious activity or unauthorized lines of credit opened.

Federal law allows you to request one free credit report per year * from each of the three — Equifax, Experian and TransUnion — credit bureaus. You can do this by going to one website,, or by calling toll-free (877) 322-8228. To verify your identity, you'll need to provide your name, address, Social Security number and date of birth.

*The increase in coronavirus financial and identity theft scams during the pandemic has underscored the need to also keep an eye on your financial health. Accessing your credit information is a key way to do this. So, until further notice, Equifax, Experian and TransUnion are offering free weekly credit reports.

Get an IP PIN: The IRS also has its own Identity Theft and Unemployment Benefits web page, which notes another step that victims of an unemployment benefits identity theft might want to take. Consider opting into the IRS Identity Protection PIN, or IP PIN, program.

A six-digit IP PIN used on your tax return helps the IRS know that the 1040 is being filed by you, the legitimate taxpayer, and not an identity thief.

The IP PIN program is voluntary and available to any taxpayer who can verify his or her identity. You can obtain the added security measure at the IRS' Get an IP PIN site.

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[Author: skbell1]

Mon, 05 Apr 2021 21:46:38 +0000 BlogLikes - Find Most Popular Blogs Taxes Department Of Justice Irs Center Don Internal Revenue Service Labor Department Swa Equifax U S Labor Department TransUnion Department of Labor DOL ARPA Equifax Experian IRS Identity Protection PIN Labor Department s Office of Inspector General
55 big, profitable U.S. companies paid no tax in 2020 Archer-Daniels-Midland Archer Daniels Midland is one of the major corporations cited in a new report of companies that paid no taxes in 2020.

The Biden Administration's infrastructure plan has ramped up the perennial tax debate between Democrats and Republicans.

The White House wants to increase tax collections on companies to pay for the proposal, dubbed The American Jobs Plan. And that approach is getting some support from a recent Institute on Taxation and Economic Policy (ITEP) report.

The Washington, D.C. nonprofit found that 55 of the largest U.S. companies paid nothing in federal income taxes last year.

The $0 tax payments to Uncle Sam came even though the businesses, as a group, reported almost $40.5 billion in pretax profits, according to the liberal-leaning organization.

That zero taxes finding also is this weekend's By the Numbers selection.

Decades of no tax bills: That big business finds ways to greatly reduce or even eliminate their tax liabilities is not new.

In its latest report, ITEP notes that —

   "For decades, the biggest and most profitable U.S. corporations have found ways to shelter their profits from federal income taxation. ITEP reports have documented such tax avoidance since the early years of the [Ronald] Reagan administration’s misguided tax-cutting experiment. A widely cited ITEP analysis of an eight-year period (2008 through 2015) confirmed that federal tax avoidance remained rampant before the TCJA [Tax Cuts and Jobs Act, the Republican tax-reform law enacted in 2017]."

And despite the GOP's promise that the TCJA would end many loopholes, ITEP says that "it is crystal clear that the TCJA failed to address loopholes that enable tax dodging — and may have made it worse."

Democrats now in control of the House and Senate also bear some blame, says ITEP.

The Coronavirus Aid, Relief and Economic Security (CARES) Act that became law in March 2020 was created as a way to help individuals and business dealing with the financial challenges posed by the COVID-19 pandemic. One of the law's side effects, though, was continuing or expanding earlier business tax breaks.

Current corporate tax winners: ITEP analyzed the latest annual financial reports filed by the largest publicly traded U.S.-based corporations. The companies represent various industries and collectively enjoyed almost $40.5 billion in U.S. pretax income in 2020, according to their fiscal filings.

Using the statutory federal tax rate for corporate profits set by the TCJA at 21 percent, these 55 corporations would have paid a collective total of $8.5 billion for the year.

However, says ITEP, last year they received corporate tax breaks and tax rebates totaling $12 billion.

The various tax breaks utilized by the companies include, but are not limited to, executive stock options; the research and experimentation (R&E) tax credit (also sometime referred to as the research and development, or R&D, credit); renewable energy savings; and accelerated depreciation.

The tax winners cited by ITEP include:

  • Archer Daniels Midland — The food conglomerate enjoyed $438 million of U.S. pretax income last year and received a federal tax rebate of $164 million.
  • FedEx — The delivery giant zeroed out its federal income tax on $1.2 billion of U.S. pretax income in 2020 and received a rebate of $230 million.
  • Nike — The shoe manufacturer didn’t pay a dime of federal income tax on almost $2.9 billion of U.S. pretax income last year, instead enjoying a $109 million tax rebate.
  • Dish Network — The cable TV provider paid no federal income taxes on $2.5 billion of U.S. income in 2020.
  • Salesforce — The software company avoided all federal income taxes on $2.6 billion of U.S. income.

You can check out the full list of companies and their tax savings in the ITEP report.

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[Author: skbell1]

Sun, 04 Apr 2021 21:47:16 +0000 BlogLikes - Find Most Popular Blogs Amazon Taxes Washington Senate White House Nike Gop House Philadelphia Sam Archer Daniels Midland Ronald -RSB- Reagan Institute on Taxation and Economic Policy ITEP ITEP TCJA The Biden Administration
NY legalizes marijuana use; taxes, regs in the works Marijuana-cannabis-money_GreenerCulture

New York last week became the latest state to legalize recreational marijuana. New Yorkers now can possess up to 3 ounces of cannabis for recreational use.

But don't expect to pick up some of that legal weed any time soon. While using marijuana is legal for adults age 21 or older, the process of approving dispensaries and establishing precise regulations and tax rules for cannabis distribution will take a while.

17 cannabis OK locales: Still, the Empire State's move is a big one. New York is the 17th jurisdiction to join the legal cannabis club. The toking fraternity includes 16 states and the District of Columbia.

Eleven more states are working on legalizing marijuana within their borders.

So today's Saturday Shout Outs go to two Big Apple news outlets covering the city's latest cultural change.

The New York Post looks at 8 things that New Yorkers can expect now that weed is legal.

The New York Times elaborates on what to know now that New York has legalized marijuana.

Both articles, of course, mention New York's upcoming marijuana taxes, at least in passing.

Comparing cannabis tax rules: For more on cannabis taxation, which often is a major (albeit often iffy) argument for legalizing the herb, a third Saturday Shout Out today goes to the Tax Foundation.

"The unique legal framework under which marijuana use and sales operate — that of differing state and federal legality — means that every state market is essentially a siloed market," writes Ulrik Boesen, Senior Policy Analyst, Excise Taxes, for the Washington, D.C.-based tax policy think tank.

"Marijuana products cannot cross state borders, so the entire process (seed to smoke, so to speak) must occur within state borders. This unusual situation, along with the novelty of legalization, has resulted in a wide variety of tax designs," note Boesen.

And as a bonus, the Tax Foundation's analysis of states' marijuana taxes features one of its always informative maps, reproduced below.


Since I likely will be well into my dotage before Texas gets around to legalizing weed, my relaxation aid of choice this weekend (and beyond) will remain beer, which is a whole other type of taxation.

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[Author: skbell1]

Sat, 03 Apr 2021 21:57:29 +0000 BlogLikes - Find Most Popular Blogs New York Post New York Texas Taxes Washington New York Times Tax Foundation Boesen Ulrik Boesen District of Columbia Eleven