Month: February 2012

Obama’s Tax Reform Plan Brings Out The Skeptics

Timothy Geithner, Treasury Secretary, outlined The Obama tax reform proposal to overhaul taxes on business as well as eliminating a few dozen loopholes for the 2012 Taxes. The plan is to bring the corporate tax rate down to the 28 percentile. As Obama revealed his plan, some of his critics do not believe that the cuts are not significant enough to be effective.

The proposal includes a minimum tax on foreign money earnings, though there were no details offered on how the plan would play out.

Geithner said in an interview that they wanted to restore the concept and policies in which American businesses gain success or fail based on the quality and worth of their product rather than the creativity of their tax law engineers.

Geithner went on to say that overhauling taxes will not be implemented for this year

Curtis Dubay, the tax policy senior analyst for Heritage Foundation, expressed limited optimism that this policy could be put in effect this year due to the fact it is an election year. He feared that the law might make things worse rather than better if it passed.

For William Gale, staff member of the nonpartisan Tax Policy Center, the proposal shared today demonstrates the difficulty in implementing major tax legislation on corporations due to the very difficult process of determining the current business income of the United States.

According to Gale, sometimes income gets taxed multiple times at the individual level of taxation and only once at the corporate tax level. There are even times when taxes are missed entirely.

One of the major goals of the proposal is to eliminate the inefficiency of taxing businesses and to make certain that the process is fair.

Geithner has been in contact with D-Mont. Sen. Max Baucus and Sen. Orrin Hatch, the Republican Utah representative. He hopes to meet with these two individuals in order to discuss the tax plan and establish a consensus.

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Taxes And The Proposed Tax Rates

The President Plans to Double Tax Rates for the Wealthy

President Obama is planning to tax income from capital gains as ordinary income. This will increase the top tax rate to 39.6 percent. These changes are meant to raise taxes of up to 1.4 trillion from top earners over the next decade.

Couples earning more than 200,000 annually will be required to treat income from dividends as ordinary income. According to the president, this would raise 206.4 billion dollars over the next decade.

According to Gene Sperling, the country cannot afford to lose 206.4 billion dollars on its revenue budget  by offering lower tax rates and tax cuts to top earners.

The president plans to increase the top tax rate to 39.6 percent by next year from the prevailing top rate of 35 percent. Capital gains would be taxed at a top rate of 20 percent from the prevailing 15 percent.

As part of his healthcare law, the president plans to increase the unearned income tax rate by 3.8 percent for couples earning at least 200,000 annually. Experts predict that in the next financial year, some taxpayers will have to pay federal taxes amounting to 43.4 percent on their dividends. This is almost an increase of 300 percent of what they are currently paying.

Pre-2003 Taxation

These proposals would return tax rates to pre-2003 levels. Proponents of these changes claim that it will promote a more efficient and just allocation of capital.

Generally, the president intends to reduce tax deficit on 2012 taxes by taxing the wealthy.

President Obama recently stated in a speech that the government does not need to continue offering tax cuts to individuals who are already doing very well.

There are many other changes in the tax codes that the Obama Administration is proposing.

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Taxes And The Proposed Budget

Obama’s 2013 Budget Estimates and Tax Changes

President Obama has plans to make changes in the tax code to raise funds for his 2013 budget to jump start the U.S. hiring.

His proposals are only a wish list to congress, which is not required to act on any of them. However, some of these proposals have already been acted on in the recent years.

The United States Tax code, which hasn’t been overhauled in a quarter century, is riddled with special deductions that favor select groups. While major changes in the tax code during an election year is unlikely, analysts are of the opinion that deficits in 2012 taxes may ignite debates in 2013.

The following are the proposed changes and budget estimates.

INDIVIDUAL TAXES

  • TAX CUTS. Workers are expected to pay lower payroll taxes through 2012.
  • BUSH TAX CUTS. Tax cuts for households earning more than 250 thousand dollars per year will not be available in 2013.

The issue must be resolved before the end of the year, or every taxpayer will be required to pay more taxes.

  • CARRIED INTEREST. Private equity managers and other wealthy people will be forced to pay a tax rate of 35 percent from the current 15 percent on capital gains.
  • BUFFET RULE. The buffet rule will be put into action. The rule states that every taxpayer who earns more than a million dollars per year should pay a minimum of 30 percent tax rate on all their incomes.

  • ITEMIZED DEDUCTIONS CAP. Exemptions for taxpayers who earn more than 200 thousand dollars will be removed.

    • CORPORATE TAXES

    • THE PROPOSED CORPORATE TAX RATE. The Obama administration is expected to lower the corporate tax rate from the current 35 percent to 20 percent.

    There are many other proposals that have elicited different remarks from people all over the country. Other changes are meant to simplify the process of tax return filing by U.S. taxpayers.

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    Mobile Apps For Turbo Tax

    In today’s fast paced society, and with the rise of technology, more and more people are starting to rely more on mobile apps to use on turbo tax.

    The thing that a lot of people like about these mobile apps is that they are pretty easy to use and the data is really easy to import into their taxes.  There is a lot of help available with these apps including a lot of advice and answers that is free to those that need it.

    It is easy to do, and there is a lot of information available, but there are not a lot of options for e-filing. Only those people that can file with 1040EZ can use the mobile apps on their phones to e-file their taxes.

    There are many things on these mobile apps that can help people find the information that they may need.  Some things included are being able to track your refund, a preparatory checklist, and other tips as well.  You can ask a lot of questions and estimate the amount of money you will get back, and there is information there to help you.

    This new type of technology makes it really easy for people to file their taxes more quickly and get their money back faster, too.  These apps are so informative and easy to use that a lot of people are starting to like using this form of filing more often.  This very well may be the new way to start filing your taxes every year, especially when the technology develops even more.

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    Watch Out For Tax Scams

    Twelve tax scams to watch out for.

    Be wary of anyone sending you an email claiming to be from TurboTax or the IRS. These people could be identity thieves and not who they say they are. Never reply to an anonymous email that wants to know your personal information.

    Instead of replying to an email always call the organization that you are dealing with yourself. Do not go to any links that are in the email because they could be sending you to an unsafe website. Keep reading to learn the twelve most popular tax scams out there. Remember if you are caught in any sort of tax scam, then you will have to pay for it.

    1. Offshore accounts. People will try and evade paying United States taxes by placing their money in hidden offshore accounts.
    2. Stealing someone’s identity. If you get an email that looks suspicious, then send it [email protected].
    3. Tax preparer fraud. Some tax preparers will steal a portion of their client’s refund, so be sure that you only deal with a registered IRS tax preparer.
    4. Filing false forms and trying to get money that they are not entitled to.
    5. Fake Arguments that are just promoting a way for people to avoid paying what they owe in taxes.
    6. Social security with to much withholding credit.
    7. Deducting to much for charities and other tax-exempt companies.

    8. Abusing their retirement plans.

    9. Corporate ownership disguised as a third party.

    10. Filing a false zero wage return.

    11. Avoiding taxes through trusts.

    12. Exaggerated fuel tax credits.

    If you are aware of any type of tax fraud, then call the IRS at 1-800- 829- 3676 or use form 3949-A. You might be rewarded for your honesty by filing form 211 and following the proper procedures that are discussed in Notice 2008-4.

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    4 Overlooked Tax Deductions That Yield Big Rewards

    Tax time is upon us. While some people look forward to this time of year, many more dread it as they think about the amount of money that they may have to pay. It must be done, so let’s work at getting the most money back. After all, the IRS claims that millions overpay each year.

    1. State Income Taxes
    If you paid state taxes last year, then you are eligible to subtract them from your federal taxes this year. Make sure to know the exact amount that you paid in these taxes, so that your return is not delayed.

    2. Job Search Expenses
    Did you look for a new job in 2011? If so,  you are allowed to deduct up to 2 percent of your gross income for the expenses involved in a job search from this year’s taxes. To claim this deduction, you must not be looking for your first job, nor have any substantial break between your last job and the new one. The search must be for a job in the same occupation. If you pay an agency fee to help you in your search, then you can subtract that cost unless your new employer reimburses you for the cost. You can deduct cost for mailing and distributing your resume. If you travel, then the cost is deductible, as long as the primary reason for traveling was to look for a job.

    3. Donations
    We love those who give and so does the IRS, as long as you give to a qualified organization. If you get merchandise or a prize in exchange for your donation, then you can only donate the amount over the normal price of the merchandise. If you donate stock or real property, you can get a donation for the fair market value of those items. You must keep a record of the name of the organization, the date of the contribution and the amount of the donation. For amounts over $250, there are specific forms that you must file with the IRS. You can deduct the cost of travel to a volunteer position. You can also deduct any cost involved in your participation, such as uniforms. Don’t forget that you can also deduct your tithes and offerings to a religious organization.

    4. Work
    Many expenses can be deducted thanks to working. If you must have a cell phone for work, then the amount you pay for the cell phone above your normal usage is deductible. You can also deduct any dues paid to unions if you must belong to it in order to have your job. If you choose to belong to a professional organization, you can deduct those dues. You can also subtract the costs of any reading material that helps keeps you abreast on what is happening in your industry. If your job requires uniforms that would not be worn in the rest of your life, then you can subtract those costs.

    Looks a little better, doesn’t it? Remembering to take each deduction that you can will help to lower your tax bill – so don’t be lazy!

    Ashley Miller likes to write about finance, travel and Flowerdelivery.net.

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