Archives For tax breaks

If you’re headed back to school this fall, check to see if your state is highlighted in blue on the infographic below. If it is, you’re in luck! 17 states are participating in a state-wide sales tax holiday for certain back-to-school supplies (listed below) such as computers, textbooks and clothing.

Of course, if you live in Delaware, New Hampshire, Montana, Oregon or Alaska then you don’t pay sales tax anyways. Enjoy!

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Senate Finance Committee Chairman Max Baucus (D-Mont.) and the panel’s top Republican, Utah’s Orrin Hatch are attempting a ‘blank slate’ approach to the current U.S. tax code.

In turn, the Senators are wiping out all the tax provisions now in the code and are now putting the onus on their supporters to prove why the provisions should be left in the code. The have until July 26th left to make their point.

Baucus and most Democrats say the government needs new revenue. They say not all the money gained by scrapping tax breaks should go to lowering tax rates. Most Republicans, including Grover Norquist, president of Americans for Tax Reform, take the opposite view. Norquist, on Wednesday, threw his support behind the latest bid by Senate tax writers to overhaul the U.S. tax code.

“A revenue-neutral reform target is an absolutely essential precondition to any tax reform,” Norquist wrote. “Tax reform should not be a stalking horse for a net tax increase.” Norquist listed several other steps senators should take including eliminating taxes on capital gains and dividends

Politico has released what it thinks are some of the tax breaks currently in the tax code that could be purged and possible lobbyists’ responses to the suggested reform. Continue Reading…

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Every parent with a kid in or about to enroll in college knows that the cost of higher education keeps going, well, higher. That’s why so many take advantage of the many education tax breaks found in the Internal Revenue Code.

There are 529 plans and Coverdell savings accounts and the American Opportunity and Lifetime Learning tax credits and some deductions for tuition and fees and student loan interest that you don’t have to itemize to claim. And more. The IRS even offers online help in filling out student financial aid applications.

Of course all the tax breaks have eligibility requirements and rules on how you can and can’t combine them. But it’s definitely worth doing your educational tax benefits homework to see if you can get some help in paying those ever increasing school costs.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

The Internal Revenue Service catches a lot of flak, much of it deserved and all of it makes us feel better about ourselves.

But one thing the agency has done well is its website, especially when you consider that it must deal with rapidly changing technology under the constraints of federal budgetand contracting rules.

Now the IRS is upgrading its Web presence once again.

If you think the preview page, pictured below, looks familiar, you’re right. The new home page design has been up for months. But the changes there, says the IRS, will be extended throughout the entire site, today, on Thursday, Aug. 30.

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Click image to go to the preview page.

Check out the new site. As you can see from the column on the right in the snippet above, the IRS details its key upgrades, which include not only a new look but also some work under the website’s hood.

Here are some highlights:

  • The current IRS.gov navigation structure, and all the information on this site, will remain available. The “Information for…” menu, located at the top of every page, allows you to select your role (individual, business, non-profit, tax professional, retirement plan administrator, etc.) to navigate the new IRS.gov the same way you do now.
  • After thoroughly analyzing IRS.gov usage data, the agency identified the most visited pages and most used tools. As a result, the main navigation has been modified to be intent driven; that is, it will accommodate users’ primary needs, which are to get information about filing, payments, refunds, credits and forms.
  • The new Online Tools section provides home page access to a variety of tools designed to promote online interaction with the IRS. The list of tools will change regularly to coincide with filing and registration due dates, new program launches or system enhancements.

The IRS also says this is just the beginning.

The site’s search engine should evolve as the site is used more and more, says the IRS, and it will leverage new search capabilities to better tag and target content so that searches will be more relevant. In addition, related forms and publications will be featured in a separate section on the search results page.

The IRS promises that if you’ve bookmarked some of Web pages, your shortcut should still take you where you want to go. But just to be sure, check out your browser bookmarks today.

Labor Day tax break: Meanwhile, some other IRS online functions will be unavailable over the upcoming Labor Day weekend.

During the planned outage between noon Eastern Time Friday, Aug. 31, through noon ET Tuesday, Sept. 4, the IRS will replace and upgrade a computing center electrical plant.

That means that various e-services, including online applications for Employer Identification Numbers, will be unavailable during those hours.

In addition, the Modernized eFile (MeF) system will be unavailable beginning approximately 3 p.m. ET Friday, Aug. 31 until approximately noon ET Tuesday, Sept. 4.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

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Before the Senate left for its annual August recess, its members agreed to let both Democrats and Republicans present their tax cut bills. That was a marked change from the Senate’s usual tendency to hold legislation hostage to its 60-vote super majority procedural rule. If you like to keep score, the Democrat bill passed.

That was followed by a bipartisan vote in the Senate Finance Committee to move along a proposal to reinstate many tax breaks that had expired on Dec. 31, 2011. 

Now if we can just figure out exactly what prompted the Senate to finally start working together, we can bottle it and get rich and get our own tax breaks for horse dressage!

The tax provisions that the Senate committee approved are a collection of temporary tax breaks that are perpetually renewed, or extended. Because of that, they’re usually referred to as “extenders”.

Of course, the Finance Committee’s passing of The Family and Business Tax Cut Certainty Act of 2012 as this extenders bill is officially named, is just one small legislative step toward getting any of the tax breaks back on the books.

Technically, tax legislation must originate in the House Ways and Means Committee. And then that more unruly legislative body has to approve it. So the possibility of Congressional gridlock over the extenders and other tax measures remains very real.

Still, any movement, however incremental, along with an even nominal indication that the two opposing parties are working together is good news.

The final Senate Finance vote was 19-to-5. Six of the Republicans on the committee joined the Democrats in voting for the bill. The five GOP members who opposed it are Jon Kyl of Arizona, John Cornyn of Texas, Michael B. Enzi of Wyoming, Tom Coburn of Oklahoma and Richard Burr of North Carolina.

Taxpayers affected by the expired laws and the tax professionals who advise them are understandably excited about this development. Finance Committee Chair Sen. Max Baucus (D-Mont.) acknowledged that collective tax sigh in a post-passage statement:

“People need certainty to plan their finances, and businesses need certainty to hire, invest and grow.  These tax cuts will reassure families, help spur job growth and boost the economy. No bill is perfect, but what’s important is this shows the American people that Congress can work together to get things done. This bipartisan work is just what all members of Congress will need to do with the fiscal cliff looming and tax reform on the horizon.”

Below are some highlights of individual tax breaks that Senate Finance wants to resurrect for the 2012 and 2013 tax years.

Alternative Minimum Tax (AMT) relief is provided largely via increased exemption amounts: $50,600 for individuals and $78,750 for married couples filing jointly in 2012; $51,150 for individuals and $79,850 for married filing jointly spouses in 2013. Nonrefundable personal credits against the AMT are allowed in both tax years.

The educators above-the-line $250 deduction for certain out-of-pocket classroom supplies would be back on the bottom of Forms 1040 and 1040A.

Another above-the-line deduction (officially known as adjustments to income) also would be saved. The higher education tuition and fees tax break worth up to $4,000 would be back in the tax code.

Private mortgage insurance (PMI) premiums can be deducted as itemized mortgage interest for tax years 2012 and 2013. The deduction is phased-out for taxpayers with adjusted gross income (AGI) of $100,000 and is not available to those making more than $110,000.

State and local sales taxes also will remain as Schedule A deductions for the next couple of filing seasons. This is welcome news for those who live in one of the seven no income tax states or who find that the sales tax write-off is worth more to them than the state and local income tax itemized deduction.

The option to roll over an IRA required minimum distribution (RMD) to charity got the Finance Committee OK. By doing this, the IRA owner/charity donor meets the RMD distribution rule, but avoids taking the taxable distribution.

Additional individual tax breaks, as well as those for businesses, are discussed in the Senate Finance Committee’s memo on The Family and Business Tax Cut Certainty Act.

A few tax breaks omitted: Around 20 expired tax provisions, however, would remain dead and buried if the Senate bill is eventually enacted.

Missing are the expensing of brownfields environmental remediation costs, tax breaks for Gulf Opportunity Zone investments (a post-Hurricane Katrina provision), ethanol tax credits and business deductions for charitable donations of book and computer inventories.

Sen. Orrin Hatch of Utah, the ranking Republican on the Senate Finance Committee, is among those happy about fewer extenders.

“The explosion of temporary tax provisions in recent years has been a very notable and problematic trend,” he said. “The number of temporary tax provisions has grown from 42 in 1998 to 154 in 2011. If you average that number out, you will find that, over that 13 year period, Congress was adding almost 9 extenders per year.”

Hatch added that instead of revisiting the same tax issues year after year, Congress needs to “break out of that rut.” 

Finally it seems that the two sides are working their way back to the middle and towards bipartisanship.

But.

How come there always has to be a but? 

Unfortunately things rarely work out as you imagine them and in this case it concerns one other important thing that is missing from the Senate Finance bill.

There’s no provision to pay for the $152 billion over 10 years that it will cost to put the extenders back in the Internal Revenue Code.

Good luck with that and let us know how it goes.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

The London 2012 Olympic Games begin next week and many sponsored companies are quick to add the ubiquitous Olympic logo to their advertisements. In addition, Olympic Park is serving as a tax haven for the entire duration of the games because of special tax rules included as part of the original bid in London. As a result, sponsors are not required to pay taxes on earnings from the Games. However, two companies – Coca-Cola and McDonalds – have stated they are intending to pay corporate and income taxes for the all of the Olympic Games.

The Revenues and Customs of England said the tax breaks are available to all foreign nationals and include corporations, athletes, judges, journalists, and any international workers for the Games. The relief is not available for U.K. based companies though. As a result of such a large-scale tax break for all these companies, the U.K. has the potential to lose a significant amount of money from the Games. One organization known as “38 Degrees” has collected more than 150,000 signatures to urge sponsors to reconsider their tax break.

The cost of McDonalds declining the break is extremely minimal – only  0.1% of its annual sales in the U.K. Coca-Cola and McDonalds are 2 of 11 international companies who pay nearly $1 billion to sponsor the Winter and Summer Olympics over the four-year cycle.

“Coca-Cola has never intended to, and will not be making, any corporate or income tax exemption claim with respect to any activity concerning our involvement with the London 2012 Olympic and Paralympic Games,” the corporation said.

In even more recent news, General Electric and Visa also declined the tax-relief offered by the Summer Games. The goodwill and public relations that will come from declining the tax relief will most likely outweigh the benefits of not paying taxes for revenues derived from the Games.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.