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Entries in Taxes (142)

Friday
Feb112011

Tax Tip: Save the Stress, Hire a Tax Preparer

Photo Courtesy - Getty Images(NEW YORK) -- Choosing the right tax preparer could save you time and money.

Six in 10 Americans use the help of a preparer come tax season, according to the IRS, but Kiplinger’s Mary Beth Franklin says that most people can do it themselves if they have a straightforward return.

H&R Block’s Kathy Pickering says it often comes down to time.

“Even if they feel like they can do their taxes, they just don’t want to take the time, they don’t want to be bothered with the hassle factor,” Pickering said.

When choosing a tax preparer, make sure they have an IRS tax identification number. Jodie Reynolds of the Internal Revenue Service also suggests having the preparer sign your tax returns with that number.

“You’ll want to find out what their service fees are because if you go to a preparer that’s going to base their fee on a percentage of your refund, that should be a red flag,” Reynolds said.

Copyright 2011 ABC News Radio

Thursday
Feb102011

IRS Establishes Initiative for Taxpayers Hiding Assets Offshore

Photo Courtesy - Getty Images(WASHINGTON) -- The Internal Revenue Service announced a new voluntary disclosure initiative intended to "bring offshore money back into the U.S. tax system" allowing people with undisclosed income hidden overseas to "get current with their taxes," the agency said in a statement Tuesday.

According to the limited-time offer, Americans who have been hiding money in offshore accounts have until August to fess up and avoid jail time.  The initiative would require those who come forward to pay back taxes, interest and reduced penalties. 

IRS Commissioner Doug Shulman said the risk to individuals hiding assets offshore is increasing due to new laws forcing foreign banks to hand over information on American depositors.

Taxpayers have until the Aug. 31 deadline to file "all original and amended tax returns," the agency stated.

Copyright 2011 ABC News Radio

Wednesday
Feb092011

Tax Tip: Using Filing Software? Make Sure It's Up To Date

Photo Courtesy - Getty Images(NEW YORK) -- A growing number of taxpayers are becoming increasingly comfortable using computer software to file their returns.

“It’s going to guide you through it, help you find things that you might not have thought of on your own, and have all of the checks in there to make sure that your math is accurate,” said H&R Block’s Kathy Pickering.  “You’d be surprised how many people make simple math errors.”

Proponents of tax-filing software say it’s easy to file electronically.

“If you choose direct deposit as well, that’s when you can get your refund in as few as 10 days,” said Jodie Reynolds at the IRS.

A note of caution: because last year’s tax bill was passed so late, many software makers were forced to ship their products before all the tax code was written.  Make sure to update your software before filing your claim.

Copyright 2011 ABC News Radio

Wednesday
Feb092011

IRS Giving Tax Evaders a Second Chance Again

Photo Courtesy - Getty Images(WASHINGTON) -- Americans who cheated on their taxes and fled the U.S. rather than pay their debts to Uncle Sam are being offered partial amnesty by the Internal Revenue Service.

In a plan announced Tuesday, the IRS says the agency is giving scofflaws outside the country the opportunity to settle their tax bills with the government and pay reduced fines without serving jail time under a new voluntary disclosure program that expires Aug. 31.

IRS Commissioner Doug Shulman remarked that these tax evaders can either do it the easy way or they can make things tougher for themselves.

Shulman delivered the following message to citizens who've hidden their assets elsewhere: "If we find you, you face harsher penalties and the possibility of jail time.  If you come in voluntarily, you pay a steep price but avoid going to jail."

This new program isn't quite as forgiving as a 2009 program that found 15,000 tax cheats living abroad with offshore accounts.  In all, about 2,000 of those cases have been closed with the IRS getting back approximately $400 million.

Copyright 2011 ABC News Radio

Tuesday
Feb082011

POTUS to Propose Allowing States to Raise Taxes on Employers in 2014 

Photo Courtesy - Getty Images(WASHINGTON) -- The White House Tuesday announced that in next week's budget proposal for FY2012, the president will propose that states be allowed to raise taxes on employers starting in 2014 to pay for unemployment insurance. The proposal is being made in the context of trying to help states avoid raising taxes this year and next, senior administration officials said.

Under an agreement with the federal government, states collect taxes from employers on the first $7,000 in wages, at whatever rate they choose. The Obama administration proposal will allow them to collect taxes on the first $15,000 in wages. Hypothetically, the states could tax the larger amount at half the rate so taxes stay the same, but administration officials anticipate that states will not do that, given the rate of insolvency.

Right now states owe the federal government $42 billion in debt in terms of their obligations to the federal government for unemployment insurance -- the largest debt they've ever incurred under the present agreement.

Three of the states hardest-hit economically -- Michigan, Indiana and South Carolina -- have already seen tax rates for employers automatically triggered to a higher rate so as to avoid greater debt, and the administration says triggers for 20 other states are about to kick in.

For 2011 and 2012, as part of this proposal, the Obama administration would require a moratorium on states raising taxes to pay for unemployment insurance, and would allow states to avoid paying interest on their unemployment insurance debt.

Administration officials say this is a way for states to be given some breathing space to readjust their budgets during this period of economic recovery.

Copyright 2011 ABC News Radio 

Tuesday
Feb082011

Report: Obama's Budget Proposal Will Raise Taxes for Businesses

Photo Courtesy - The White House(NEW YORK) -- President Obama will unveil his budget proposal next week, which reportedly will help states swimming in deep debt after borrowing money to pay for unemployment benefits.

According to The Wall Street Journal, Obama's budget will benefit the states in need by doubling the amount of unemployment taxes businesses pay as opposed to raising taxes on workers in the troubled states.  Under the proposal, companies could pay up to $100 billion in taxes over a decade, reported the Journal citing someone familiar with the plan.

More than half of the country -- 30 states -- is in deep debt for taking out money to help pay for unemployment benefits that have increased since the recession hit.  These states could begin to see some much needed financial help come their way in 2014, when the plan is expected to take effect.

Copyright 2011 ABC News Radio

Tuesday
Feb082011

Tax Tip: Before All Else, Prepare the Necessary Paperwork

Photo Courtesy - Getty Images(NEW YORK) -- When it comes to filing your taxes, take the Boy Scout motto and be prepared. As you begin to get your paperwork together for your 2010 taxes, it may help to first look at your 2009 tax return.

“Seeing what your sources of income were and what type of deductions you had,” can give you a ballpark of what to expect this year, accountant Janice Hayman said.

Another tip? Make sure you have the right documents for both sides of the ledger.

“You say, ‘Here's how much I’ve earned’ and then you say ‘Here are the deductions that I can take to reduce my taxable income,’” said H&R Block’s Kathy Pickering.

Obtain your W-2 forms from all of your employers, your bank and investment statements, and any paperwork to support your deductions.

Note that it’s possible not everything will come in the mail, according to Kiplinger’s Mary Beth Franklin.

“As more and more of us are receiving documents electronically, certain things will no longer be in the mail. So make sure you're reading your e-mail inbox as well for those important documents.”

Copyright 2011 ABC News Radio

Friday
Jan282011

Hedge Fund Manager Takes Home Record $5 Billion in Profits 

Photo Courtesy - Getty Images(NEW YORK) -- A huge Wall Street payday is raising questions as to whether the nation's top earners should benefit from tax breaks while so many unemployed Americans continue to struggle. Hedge fund manager John Paulson made more than $5 billion in personal profits last year, the Wall Street Journal reported Friday. The jaw-dropping figure works out to roughly $159 rolling in every single second.

Industry experts say it could be the largest yearly haul ever for a financial trader, but the stunning income is hardly new for Paulson. He set the previous record of $4 billion in earnings in 2007 by betting against the risky mortgages that brought down the housing market.

Giant paydays may be back for Wall Street's top earners, but across the country the jobs aren't. The newest income record comes as the nation's unemployment remains stuck at more than nine percent. On top of that, a good portion of Paulson's profits are considered long-term capital gains, income that is taxed by the federal government at a rate of 15 percent. Meanwhile, most Americans pay an income tax rate up to 35 percent. The seeming disparity has some lawmakers angrily asking the question, why are hedge fund managers benefitting from tax breaks that the average American family does not receive?

"I think it's outrageous," said Rep. Sander Levin, D-Mich. "He should pay like everybody else does, ordinary income taxes. He's simply managing other peoples' money, not his own."

Levin argued that closing the loophole could bring in $25 billion in taxes over the next decade alone, but the lawmakers will have a tough time changing regulations with a White House focused on strengthening ties to the business community. The Obama administration has sought a fresh start with big business, reaching out to Wall Street and the U.S. Chamber of Commerce.

"The government has tried repeatedly to tax these guys more, and they tend to back away because of lobbying, so I expect they'll continue to make these astronomical sums," said Sebastian Mallaby, the author of More Money Than God.

There are signs that the Obama administration is at least aware of the outrage. On Friday, Commerce Secretary Gary Locke acknowledged to ABC News that Paulson's hedge fund payday is enormous.

"It's really part of the bizarre tax code that we have," Locke said.

Paulson has defended the smaller taxes for elite top earners. At the height of the recession in November 2008, he spoke before the House Committee on Oversight and Government Reform.

"We certainly appreciate your concern for fairness in tax code, but I will say I believe our tax situation is fair," Paulson said.

Copyright 2011 ABC News Radio

Thursday
Jan132011

Illinois Set to Hike Taxes: Necessary or Bad for State's Economy?

Photo Courtesy - Getty Images(CHICAGO) -- As states across the country face mounting budget deficits, Illinois is preparing to hike taxes to cover a $15-billion budget shortfall.

In a plan just passed by the legislature and set to be signed by Gov. Pat Quinn, Illinois will more than double its state personal income tax rate and also levy increases on corporate income taxes to preserve some state services.

The personal income tax rate will jump from three to five percent, a 66-percent increase that some argue will hurt Illinois' economy and drive business to other states.

State Sen. Dan Duffy, a Republican, called the tax increase "the nuclear bomb of job bills," and Chicago Mayor Richard Daley, a Democrat, has said the hike will result in job losses.

But others say it's more important to keep the state government on track and programs in operation.

"I pity women trying to work and afford child care because these services were about to go away," Maria Whelan with Illinois Action for Children told ABC's Chicago affiliate, WLS.

Copyright 2011 ABC News Radio

Thursday
Dec022010

Fact Check: Who Gets Hurt, Who Gets Helped If Bush Tax Cuts Expire?

Photo Courtesy - ABC News(WASHINGTON) -- On Thursday, with the clock running down on the Bush tax cuts, Democrats in the House voted to make them permanent, but not for the wealthiest Americans.

Democratic senators, like Charles Schumer, D-N.Y., and Claire McCaskill, D-Mo., have said that continuing the Bush-era tax cuts for America's richest will give the millionaires a tax break, while Republicans in Congress, like the next Speaker of the House, Rep. John Boehner, R-Ohio, have said tax hikes will kill jobs.

So who's right? Will letting the top Bush tax cuts expire hit small business or the super-rich? The answer is both.

If the top tax cuts expire, someone making $1 million a year would see their taxes go up by about $43 thousand, and for someone making $10 million, it's a tax hike of more than $450 thousand.

But small business owners, like Drew Greenblatt, would be hit, too. When ABC News visited his 30-employee wire basket company in Baltimore earlier this year, he said an increase in the top tax rate would cost him about $40 thousand -- and likely at least one employee.

Small businesses aren't the only concern. What about the deficit? Extending tax cuts on the top brackets would add to the deficit, as would extending any of the cuts.

Extending the tax cuts for those with incomes under $200 thousand a year, as the president and Democrats are fighting for, will add an estimated $3.1 trillion to the deficit over 10 years. Extending any tax cuts for those over $200 thousand a year adds another $800 thousand to the deficit.

These figures are just estimates, though. According to Diane Swonk, chief economist at Mesirow Financial, a tax increase could bring in less than expected.

"Many of the wealthier individuals in particular will find ways to hide their money or they'll give more to charity," she said.

Despite what the politicians say, the truth is there is not much certainty with any of these numbers. The IRS doesn't keep records of how many truly small businesses pay taxes at the top income tax level, so no one knows for sure just how many businesses -- and jobs -- would be affected.

Copyright 2010 ABC News Radio







ABC News Radio