taxgirl

2008 is a Record-Breaking Tax Year

Kelly — Fri, 12 Mar 2010 17:00:30 +0000

But not necessarily in a good way. The Tax Foundation is reporting that two records were set in 2008: the highest numbers of non-payers and the highest earning non-payers. According to data recently released from IRS, nearly one in three taxpayers paid no taxes or received every dollar back which was withheld. And before you start screaming about the poor not paying their fair share, note that the income level at which a typical family of four will owe no income taxes now exceeds $51,000.

Let that sink in for a minute. I’ll post some thoughts later this afternoon about how I think that will affect the nation’s tax picture going forward.Similar Posts:

Congress Considers Jobs & Tax Bill (Again)

Kelly — Fri, 12 Mar 2010 13:17:20 +0000

Watching Congress do anything this year is kind of like being forced to sit through “Waterworld”… You thought you knew what you were in for but at some point it’s just tiresome and long and halfway through, you have no idea what’s really going on. Although, for the sake of clarification, I am in no way comparing Sen. Harry Reid (D-NV) to Kevin Costner (you figure out who benefits in that one).

And here’s what I mean. The Senate was back to consider tax breaks and unemployment benefits – again. You may recall that hasn’t gone very well to date: unemployment benefits were noticeably absent in the efforts to pass a jobs bill. The specific bill under consideration was actually HR 4213, which had been introduced by Rep. Charles Rangel (D-NY) in the House last year; that version passed the next day, on December 10, 2009. The bill then went to the Senate Committee on Finance where it finally went to the Senate for a vote. And then the amendments began. I actually started to count them but got a headache and stopped (I know, sounds weak, but I have a terrible cold – that’s my excuse and I’m sticking to it). You can see a list of what happened to the bill here.

Finally, on Wednesday, the Senate approved a kitchen sink’s worth of measures, while leaving out any real mention of job creation (one of the most controversial features of the bill). Here’s what the Senate version of the bill, as passed, would do:

The bill would extend through the end of the year provisions that were expiring that would offer as many as 99 weeks of unemployment checks. State benefits last for 26 weeks – after that, those who are unemployed can apply for benefits from the feds for up to 73 weeks.
The bill also extended the 65% federal subsidy for COBRA health insurance through the end of the year.
The measure would also extend a number of expiring tax provisions. Those include education expenses for teachers; energy efficient tax credits; sales tax deductions; and research and development credit for businesses (Microsoft was pushing for this one).

The cost of the bill? About $140-150 billion – the price tag doesn’t include any version of the House’s $154 billion job creation bill. Between the expenses and the bickering, don’t expect it to pass “as is” in the House.Similar Posts:

Ask the taxgirl: Energy Efficient Appliances

Kelly — Wed, 10 Mar 2010 20:59:01 +0000

Taxpayer asks:

Can you get money back for purchasing a washer and dryer in 2009 that has the energy star on it. Thanks for the info!!!!

Taxgirl says:

Unfortunately, no. What you’re probably thinking about are Home Energy Efficiency Improvement Tax Credits. Those credits were for the installation of specific products like energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment for an existing residence (new homes don’t qualify). “Regular” appliances, even if they’re energy-efficient don’t apply. Trust me, I wish they did as those in my kitchen apparently had a recent suicide pact. You can find out more about how those HEEIT credits work at this prior post.

That said, in 2010, you might qualify for an energy efficient appliance rebate – these vary from state to state. My state of Pennsylvania wouldn’t cover a new refrigerator but Montana will; check out this map to see what your state covers.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

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Ask the taxgirl: Are Economic Recovery Payments Taxable?

Kelly — Wed, 10 Mar 2010 19:53:46 +0000

Taxpayer asks:

Hi Tax Girl.

I on social security and am using Turbotax to file my taxes. I have not as yet found out where to put the $500 received by my wife and myself from the federal government in June of 2009. Is this taxed?

Taxgirl says:

It sounds like you’re talking about the Economic Recovery Payment(ERP). You and your wife apparently each received a one time $250 payment from SSA as part of the stimulus package.

That $250 is not taxable and need not be reported unless (and this is a big unless) you are also working and wish to claim the Making Work Pay Credit. In that case, you’d have to reduce the Making Work Pay Credit by any ERP amounts received – you’d do that on a Schedule M.

But if you’re not attempting to claim the Making Work Pay Credit, then you don’t need to claim the payment on your return.

In either event, it’s not taxable.

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Pennsylvania Plans Tax Amnesty Program

Kelly — Wed, 10 Mar 2010 03:22:07 +0000

Hot on the heels of the success of New Jersey’s tax amnesty program, Pennsylvania has decided to give it a whirl.

The amnesty program will kick off April 26 and run 54 days, ending on June 10, 2010. During that time, taxpayers have the opportunity to come clean and pay up. In return, all penalties and half the interest will be waived for businesses and people who pay up. This is a little bit different from Pennsylvania’s last stab at amnesty, fourteen years ago, when penalties were waived but interest was payable in full.

The program is bigger than individual income tax. It also includes: Agriculture Cooperative Tax; Bank and Trust Company Shares Tax; Capital Stock or Foreign Franchise Tax; Cigarette Tax; Corporate Net Income Tax; Electric Cooperative Tax; Employer Withholding Tax; Fuel Use Tax, except taxes, interest and penalties collected under the International Fuel Tax Agreement owed to other states or provinces are not eligible for the Amnesty Program; Gross Premiums Tax; Hotel Occupancy Tax, including Local Hotel Occupancy Tax for Philadelphia and Allegheny County; International Fuel Tax Agreement (IFTA); Inheritance and Estate Tax; Interstate Bus Compact Tax; Liquid Fuels Tax; Loans Tax; Marine Underwriting Profits Tax; Malt Beverage Tax; Motor Carriers Road Tax; Motor Vehicle Carriers Gross Receipts Tax; Mutual Thrift Institutions Tax; Oil Company Franchise Tax; Parimutuel Wagering and Admissions Tax; Personal Income Tax; Public Utility Realty Tax; Realty Transfer Tax; Sales and Use Tax, including Local Sales and Use Tax for Philadelphia and Allegheny County; Surplus Lines Tax; Unauthorized Insurance Tax; and Gross Receipts Tax.

Are you thinking what I’m thinking?? We have a boatload of taxes in Pennsylvania.

To ~~force~~ encourage compliance in the program, a 5% non-participation penalty will be imposed on all un-paid tax, penalty and interest not paid in full during the amnesty period. Those folks who are in appeals or under payment plans will be exempt from the “extra” penalty.

And getting your affairs sorted out isn’t a done deal after this year: taxpayers who become delinquent again within a couple of years will likely have to repay the previously forgiven penalty and interest. It’s the Commonwealth’s way of reminding you to stay compliant.

For what I’m sure are obvious reasons, you can’t participate if you’ve been charged with a tax crime or named as a defendant in a criminal tax investigation. And if you opt in this time, you’re barred from future amnesty plans.

(If you’re dying to read all of the additional details, you can read the text of the statute here.)

Although there was initial opposition to the program when it was first contemplated, a huge hole in the budget helped smooth things over. The program is expected to raise an additional $190 million. A nice chunk of change, though nowhere near the $745 million that NJ raked in.

As you may know from the blog, I’m a big fan of regulated and thoughtful amnesty programs. In some cases, penalties may sometimes be more than the actual tax due in the first place – not even counting interest. Many taxpayers get overwhelmed and even though they may want to set things right, they just don’t know where to start. Amnesty programs can be an easy, non-threatening way to start fresh. A limited, monitored and infrequent amnesty program means that taxpayers pay what they owe (remember, taxpayers still have to pay their taxes) and the taxman gets his money so that we don’t have to raise taxes to make up shortfalls in the budget. It’s a win-win.

I understand the argument against it, though I don’t buy it. I don’t think it actually encourages people to cheat. Trust me, I’ve met a lot of unabashed tax cheats in my line of work – and the people who want to game the system are going to, one way or the other. But the vast majority of people who get into tax trouble and walk through my door don’t want to cheat. They want to make it right and move on. That’s where amnesty works.

Why make it hard to do the right thing? I think Pennsylvania made a smart move here – and I hope it pays off.Similar Posts:

Ask the taxgirl: Making Work Pay Credit for Married Couple

Kelly — Tue, 09 Mar 2010 03:28:03 +0000

Taxpayer asks:

If you are married and did not work, but your spouse earned $156,00, are you entitled to $800 credit or $400 for the working spouse?

Taxgirl says:

Your comma threw me – so I’ll answer it both ways.

If your spouse earned $15,600 and you file married jointly, you would be entitled to the $800 credit assuming that you otherwise qualify.

If, however, your spouse earned $156,000 and you file married jointly, you would not be entitled to the full credit. You’d be phased out to the tune of 2%. The phase-out works this way for married couples: subtract your qualifying income from $150,000 and multiply by 2%; subtract that amount from the full credit. If your income were $156,000, you’d have a credit of $680. Here’s the math:

$156,000 – $150,000 = $6,000

$6,000 x 2% = $120

$800 – $120 = $680

The result is that you’re totally phased out at $190,000 for married taxpayers filing jointly.

The key to remember is that the total credit for married credits is $800 irrespective of individual income. One quick caveat: if either spouse received an Economic Recovery Payment, you’ll deduct that amount from the full credit.

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NY Closer to Soda Tax?

Kelly — Mon, 08 Mar 2010 19:53:59 +0000

DOH! This version has been corrected. My original source indicated that the proposal was targeted to the city (like Philly) and not the state. Apologies for the error.

Just days after Philadelphia Mayor Michael Nutter announced plans for Philadelphia to tax soda, New York’s Mayor Michael Bloomberg signaled that his city supports state efforts to do the same.

(Sheesh, New York. First we win a World Series, then you win a World Series. We tax soda, you tax soda. What’s next?)

In his speech on Sunday, Bloomberg went through the blah-blah-blah of how the tax would help reduce obesity rates and accompanying medical costs before cutting to the chase: it’s going to make some money. It’s anticipated that it will raise about $1 billion each year – and at just half the rates of the Philly tax. The proposal for New York would levy a penny-per-ounce tax on soda.

Bloomberg expects some resistance. In 2008, Governor Paterson suggested a similar tax for the state of New York. Despite tentative support from Bloomberg at the time, the measure failed. Even so, the state of New York is trying it again. Bloomberg is blazing forward with the soda tax, saying, “In these tough economic times, easy fixes to our problems are hard to come by. But the soda tax is a fix that just makes sense.”

To make it more palatable, this version of the tax would be directly imposed on soda producers rather than tacked on as a sales tax. Of course, it’s just semantics – we all know that corporations will just pass the tax along to consumers.

With all of the emphasis on taxing soda, the industry is clearly concerned. The American Beverage Association has already spoken out against Philadelphia’s proposed tax – and against New York state’s version of the tax. I’m sure they’re sharpening their pencils for a new release as I type this…Similar Posts:

Microsoft Exec: Consumers Need to Pay More Taxes

Kelly — Sun, 07 Mar 2010 13:02:54 +0000

What if the head of Coca-Cola suggested a tax on sugary sodas to combat increasing instances of obesity? Or if the big three automakers heralded an increase in the gas tax as a way of repairing our highways? It would leave a lot of us scratching our heads.

That’s why many IT folks were left mouths agape last week when Microsoft Vice President for Trustworthy Computing Scott Charney suggested that an internet tax might be in order. Charney was speaking at an internet security conference when he opined that a broad tax on internet use would be a good way to offset costs associated with computer security breaches and vast internet attacks.

During his speech about increased cyber threats, Charney suggested the tax on internet use, noting, “You could say it’s a public safety issue and do it with general taxation.”

OF COURSE! That *totally* makes sense that consumers would have to bear the costs of fighting off cyber threats and internet attacks. It is, after all, our use of the internet that has contributed to this problem. That, and our opting to create operating systems that are vulnerable to these kinds of attack… Oh wait, that isn’t the fault of consumers at all. It’s more likely the fault of giant IT companies who build those operating systems.

But we don’t want those companies to bear the burden of those costs. I mean, they’re just struggling start up companies that don’t have the access to capital to properly address an issue directly related to the health of their own industry. Sheesh, Microsoft is barely scraping by – they only reeled in $6.6 BILLION in net profit in the fourth quarter of 2009 alone (Apple reported a measly $1.67 billion in net profit for its fiscal fourth quarter). Those kind of numbers totally scream that any additional research or costs to prevent breaches should be shouldered by consumers and not the companies responsible for the operating systems.

And let’s not lose sight of the fact that this is an issue of national importance. If you label it a “public safety issue”, it automatically gets more credibility. That’s why, in his speech, Charney likened concerns about internet safety to national health care threats, like preventable disease. While I realize that many industries rely heavily on technology (including my own), I didn’t know – until now – that cyber attacks apparently affect our nation on the same level as swine flu and polio. I, for one, now *completely* agree with being taxed more since I worry just as much about the safety of my laptop as I do about my children contracting a potentially fatal disease. And I am *really* grateful to Microsoft for comparing the two, to put it into perspective.

Mostly, I just sleep a little better at night knowing that those in positions of power at Microsoft have my best interests at heart and want to tax me for my own good. God love em.Similar Posts:

Ask the taxgirl: Cheerleading Expenses

Kelly — Fri, 05 Mar 2010 13:34:44 +0000

Taxpayer asks:

Hi,

I am a stay-at-home from California and I have a daughter in Cheerleading. Can I deduct the expenses? She also attends a public school that requires uniforms – why can I not deduct those?

Thank you so much,

Taxgirl says:

Nope, you can’t deduct the costs associated with your daughter’s cheerleading (unless this was professional cheerleading, which I am guessing it is not). It stinks, I know – I have three kids myself and they are always needing money for this thing or the next. But not deductible, just the cost of raising a child which the feds make an effort to address through personal exemptions and child-related tax credits.

And nope, the cost of uniforms for public or private school is not deductible. Again, I feel your pain: two of my kids are in Philadelphia public school and have to wear school uniforms. But check out this post for some additional thoughts about reducing your costs. That said, be sure and check your state rules. In some states, like Louisiana, you can deduct the costs of school uniforms under certain circumstances.

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Rangel We Have Heard on High

Kelly — Fri, 05 Mar 2010 03:57:00 +0000

Of course, one of the biggest tax stories of the year would hit while I was on the road… But never fear, I’m on it.

And by biggest, I mean huge.

Representative Charles B. Rangel (D-NY) has been dodging ethics complaints left and right for a few years now. It’s made news for a few reasons, the most notable of which being that many of the complaints involve tax compliance issues – this from a man who chairs the committee that writes tax policy in our country. Rangel has denied wrongdoing and shrugged off other charges as mere oversights. And incredibly, his own party has stood behind him through it all.

The issues grew more serious last week when Rangel was admonished for violating gift rules in Congress. Rangel had accepted corporate-sponsored trips to the Caribbean in 2007 and 2008. The trips to Antigua, Barbuda and St. Maarten were organized by charity but underwritten by corporations like AT&T and Verizon. He claimed, miraculously, that he didn’t know it was wrong (Charlie, can you hear me now?).

The admonishment sent Democrats scrambling. Even House Speaker Nancy Pelosi (D-CA) who, when voted into power, had vowed to run the cleanest House in recent history found herself dodging major criticisms after defending Rangel following the public rap on the wrist.

Sensing that public opinion was firmly on their side, Republicans planned to force a vote to remove Rangel from his position as Chairman of the House Ways and Means Committee. Widely considered the most powerful committee person on the Hill, a public ousting would likely have ended Rangel’s career. So he decided to remove himself on Wednesday – just after swearing that he wouldn’t the night before. The move was considered temporary (at least as far as Rangel was concerned) but Republicans asked for – and got – confirmation that his action would be considered a resignation and not a leave of absence.

After a brief power struggle, Rep. Sander M. Levin (D-MI) was voted in as the new chair. Levin, elected to the House in 1982, is in his 14th term in Congress.

With a significant power shift like this, you’d think the Democrats would offer up some well-written statement to make us feel better. Something full of hope, something to inspire us, something that says that this was the right thing to do so that the House can get on with the important issues of the day. And yet, Rep. Pelosi offered up this gem:

Chairman Charlie Rangel has informed me of his request for a leave of absence from his duties and responsibilities as Chairman of the Committee on Ways and Means. I will honor his request.

I commend Chairman Rangel for his decades of leadership on jobs, health care, and the most significant economic issues of the day.

Way to sound powerful there, Nancy.

In the midst of all of this, there is some goodness. Perhaps with Rangel and his whole set of baggage pushed to the back burner, the Ways and Means Committee can actually get some work done. There is, after all, the small matter of a ginormous deficit to tackle – and expiring tax cuts on the horizon. Back to tax policy, maybe?Similar Posts: