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Entries in Taxes (142)

Wednesday
Jul252012

Health Care Ruling Will Affect Cost of Law, Number of Those Covered

iStockphoto/Thinkstock(WASHINGTON) -- Last month's Supreme Court ruling on the Affordable Care Act has both good and bad news for Americans.

According to an analysis by the nonpartisan Congressional Budget Office, about three million people on the lower rung of the income scale won't have access to free medical coverage as originally dictated by the law.

However, the ruling also means that taxpayers won't be on the hook for an additional $84 billion since the high court ruled that states have the option of not taking part in a major expansion of the government Medicaid insurance program for the poor.

In spite of these changes, the CBO says the Affordable Care Act, which presumptive GOP nominee Mitt Romney says he will repeal if he wins the presidency, will remain mostly intact.

Should Obama be reelected, it would likely mean that 30 million people currently without health insurance will get covered by 2022.

Furthermore, the costs of additional coverage will be offset by new taxes and federal spending cuts that would help to lower the federal deficit, the CBO said.

Copyright 2012 ABC News Radio

Monday
Jul162012

Obama Mocks Romney Tax Plan at Playful Town Hall

Jay LaPrete/Getty Images(CINCINNATI) -- At his first town hall meeting of the 2012 campaign, President Obama Monday continued his personal assault on rival Mitt Romney, mocking the presumptive GOP nominee over a new report that estimates his jobs plan would create 800,000 jobs -- overseas.

“There’s a new study out by nonpartisan economists that says Gov. Romney’s economic plan would in fact create 800,000 jobs. There’s only one problem: The jobs wouldn’t be in America,” Obama said, drawing a mix of laughter, boos and applause from the crowd.

“They’d be in other countries. By eliminating taxes on corporations’ foreign income, Gov. Romney’s plan would actually encourage companies to shift more of their operations to foreign tax havens, creating 800,000 jobs in those other countries,” he said.

The study, authored by Reed College economist Kimberly Clausing -- an Obama campaign donor -- appears in the nonpartisan, nonprofit tax analysis publication Tax Notes. She concludes that Romney’s call for a territorial tax system, where companies pay no U.S. tax on foreign profits, would incentivize companies to move work to lower-tax countries abroad.

Left unmentioned by Obama is that several appointed members of his Export Council and the Council on Jobs and Competitiveness -- both meant to advise the president on economic policy -- also support a shift to a territorial tax system to boost economic growth.

Also unmentioned by the president, naturally, is a key Romney talking point that many of Obama's so-called "green initiatives" directly funded jobs and technology growth in other countries. Recently, Gov. Romney slammed Obama for, as one example, channeling more than $500 million of taxpayer-funded stimulus money to electric car company Fisker, which began building vehicles in Finland this year. 

“Our corporate tax rate is the highest in the industrial world and impairs the ability of American businesses to both compete globally and create jobs here at home,” said Romney campaign spokeswoman Amanda Henneberg.  “Mitt Romney has a comprehensive plan to reform the corporate tax code that will lower rates, get rid of incentives for firms to create jobs in other countries, and encourage the kind of economic growth President Obama has been unable to deliver.”

Still, the president argued that Romney’s proposal is part of a larger, divergent economic philosophy that would not benefit American workers or the middle class.

“This shouldn’t be a surprise,” Obama said of Romney’s tax plan, “because Gov. Romney’s experience has been investing in what were called pioneers of the business of outsourcing. Now he wants to give more tax breaks to companies that are shipping jobs overseas.”

“So I want everybody to understand, Ohio, I’ve got a different theory,” he said. “We don’t need a president who plans to ship more jobs overseas or wants to give more tax breaks to companies that are shipping jobs overseas. I want to give tax breaks to companies that are investing right here in Ohio.”

After making his economic pitch, Obama opened up the floor to questions from the lively and supportive audience of 1,200, participating in a playful exchange on topics that ranged from gay rights and energy policy to partisan gridlock in Washington and Girl Scout cookies.

Tony White, who identified himself as a barber and small business owner, asked the president whether he could cut his hair.

“When can I cut your hair?” White said, drawing whoops and cheers from the crowd.

“You know that you would not want a president who was disloyal to his barber,” Obama replied with a big grin, as the crowd cheered. “Right? I mean, a man and his barber, that’s a -- that’s a strong connection.”

“I know, I know,” White replied.

“So I am not going to let you cut my hair, because my barber would be hurt,” quipped Obama.

“Just one time. Just once,” White pleaded.

“Maybe I’ll let you get me aligned a little bit,” Obama said with a chuckle. “Yeah, we could do that.”

Copyright 2012 ABC News Radio

Friday
Jun292012

White House Sticks to Individual Mandate as ‘Penalty,’ Not Tax

iStockphoto/Thinkstock(WASHINGTON) -- The White House and the Obama campaign Friday insisted that the individual mandate in the president’s health care bill is a “penalty,” not a tax, despite the Supreme Court’s ruling to uphold the law under Congress’ taxing power.

“For those who can afford health insurance but choose to remain uninsured, forcing the rest of us to pay for their care, a penalty is administered as part of the Affordable Care Act,” White House Press Secretary Jay Carney told reporters aboard Air Force One Friday.

“You can call it what you want. If you read the opinion, it is not a broad-based tax,” he said, stressing that the “penalty” would affect one percent of the population, based on CBO estimates. “It’s a penalty because you have a choice. You don’t have a choice to pay your taxes, right?”

The Supreme Court upheld the president’s signature health care law Thursday, saying its mandate that virtually all Americans buy health insurance was legal under Congress’ power to levy taxes.

While the ruling was a huge political victory for the president, that the mandate was deemed constitutional as a tax has provided Republicans with a new line of attack.

“The president of the United States himself promised up and down that this bill was not a tax,” Senate Minority Leader Mitch McConnell, R-Ky., said Thursday. “This was one of the Democrats’ top selling points because they knew it would never have passed if they said it was a tax. Well, the Supreme Court has spoken. This law is a tax. The bill was sold to the American people on a deception.”

During his 2008 campaign, Obama repeatedly promised not to raise taxes on middle-class families and he adamantly denied that the mandate amounted to a tax on the U.S. people.

“For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase,” the president told ABC News’ George Stephanopoulos in 2009.  “What it’s saying is, is that we’re not going to have other people carrying your burdens for you anymore than the fact that right now everybody in America, just about, has to get auto insurance. Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that if you hit my car, that I’m not covering all the costs.”

In addition to the White House, the Obama campaign is also pushing the mandate as a “penalty” and not a tax.

“Whether you call it a mandate or tax, what it is is a penalty on the very few Americans who don’t -- who can afford health care, don’t pay for it, end up in our emergency rooms getting free care and then we all pay for it in the form of premiums,” Obama campaign strategist David Axelrod said Friday morning on NBC’s Today Show.

Massachusetts Gov. Deval Patrick, a top Obama surrogate, later rebutted the “bizarre attack” that the bill represents a tax increase on the middle class and urged reporters on a conference call not to believe “the hype the other side is selling.”

Finding itself playing defense the morning after a huge political win, the Obama camp has embraced the ruling as an opportunity to hit rival Mitt Romney for championing a similar law as governor of Massachusetts.

“The penalty within the Affordable Care Act … is modeled exactly on the penalty that exists in the health care reform that was promoted and signed into law by Governor Romney in Massachusetts,” Carney said Friday.

Furthermore, Romney has admitted that, not only does he “like mandates,” but that the health law he ushered in as governor constituted a tax.

“You imposed tax penalties in Massachusetts?” ABC’s Charlie Gibson asked Romney in January 2008.

“Yes,” Romney replied. “We said, look, if people can afford to buy it, either buy the insurance or pay your own way; don’t be free-riders.”

Copyright 2012 ABC News Radio

Thursday
Jun282012

FHA Gave Mortgage Help to Thousands of Tax Deadbeats

iStockphoto/Thinkstock(WASHINGTON) -- Several thousand homeowners who got federal help to avoid defaulting on their mortgages were tax deadbeats who owed the government more than $77 million in back taxes, a new report has determined.

Despite owing the feds taxes, it was still legal for many of those to get help from the Federal Housing Administration. Others, however, were ineligible depending on the program for which they applied, but got the federal cash anyway.

The report by the Government Accountability Office released this week looked at two programs in the FHA during 2009 that were part of the government's Recovery and Reinvestment Act efforts to ease the mortgage crisis for many homeowners.

"In 2009, FHA insured over $1.44 billion in mortgages for 6,327 borrowers who at the same time had delinquent tax debt and benefited from the Recovery Act," the report stated. "According to IRS records, these borrowers had an estimated $77.6 million in unpaid federal taxes as of June 30, 2010."

The audit looked at the FHA's mortgage insurance program and its First Time Home Buyers Credits. Tax debtors were allowed to receive benefits from the FTHBC program, but are ineligible for the mortgage insurance program.

About half of the 6,327 had received help from the mortgage insurance program, the audit said.

Nevertheless, the GAO found that it could not determine "the proportion of borrowers who were ineligible" because of difficulty tracking each applicant, so they sampled eight borrowers.

"We found that five of our eight selected borrowers were not in valid repayment agreements at the time they obtained FHA mortgage insurance," it concluded.

The GAO warned that records show that tax deadbeats were as much as three times more likely also to default on their loans, "which potentially represents an increased risk to FHA."

The report is the most recent to detail problems with tax delinquents slipping through the review process to gain access to the FHA's mortgage insurance program.

Copyright 2012 ABC News Radio

Sunday
Apr292012

Apple Uses Legal Strategies to Avoid Paying Millions in Taxes 

Photo by Kevork Djansezian/Getty Images(NEW YORK) -- Apple, the most lucrative technology company in the world, has used legal strategies to avoid paying millions of dollars in taxes in California and 20 other states, The New York Times reports.

Although its headquarters are based in Cupertino, California, where the state's corporate tax rate is 8.84 percent, the technology giant put an office in Reno, Nevada, where the corporate tax rate is zero. Additionally, Apple has subsidiaries in other low-tax locations such as Ireland, the Luxembourg, the British Virgin Islands and Ireland, according to The Times.

While most companies employ strategies to reduce their taxes, Apple's savings are especially high--Wall Street analysts project that the technology company could bring in up to $45.6 billion this fiscal year, The Times says.

Copyright 2012 ABC News Radio

Tuesday
Apr172012

Tax Return Theft: How to Safeguard Your Refund

iStockphoto/Thinkstock(NEW YORK) -- It is a day dreaded by most Americans, the day taxes are due, but for hundreds of thousands of taxpayers it’s just the beginning of a nightmare where they discover Social Security numbers have been stolen and fake returns filed in their name.

Tax-related identity theft is an exploding problem. The Internal Revenue Service paid out $1.4 billion in fraudulent tax refunds last year to identity thieves who filed false returns, six times more than in 2010.

Experts say the fraud is attractive to scam artists because people are unaware they have been scammed until their tax return is rejected.

The fraud is perpetrated in three ways:

  1. A crook files a tax return using your name and Social Security number before you file your own.
  2. A crook uses your Social Security number when hired for a job and the income from that job shows up as yours.
  3. A crook steals the Social Security number of a child or elderly dependent of yours and claims them.

In order to minimize the likelihood of becoming a victim of identity theft the IRS has these recommendations:

  • Don’t carry your Social Security card or any document with your Social Security number on it.
  • Don’t give a business your Social Security number just because they ask for it. Only give it when it is required.
  • Check your credit report every 12 months.
  • Secure personal information in your home and on your computer.
  • Don’t give personal information over the phone or the Internet unless you initiated the contact or are sure you know who you are dealing with.

If you believe you are a victim of tax-related identity theft, here’s what you should do:

  • File a report with the Federal Trade Commission’s Identity Theft database.
  • Call the FTC’s hotline for individual ID theft counseling: 1-877-ID-THEFT
  • Place fraud alerts on your credit reports at www.experian.com, www.equifax.com and www.transunion.com.
  • Contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490.
  • Visit the IRS Taxpayer Advocate Service, which has a helpful toolkit, here.
  • Fill out the IRS Identity Theft Affidavit, Form 14039.

Copyright 2012 ABC News Radio

Tuesday
Apr172012

IRS Tax Day 2012: A Lonelier Post Office

Where did all the people go? This post office in NYC used to be packed with last minute filers on tax day. Not so much any more. ABC News(NEW YORK) -- For the United States Postal Service, tax deadline day is hardly as fun as it used to be.

“In the old days it was tax night parties and people standing outside grabbing the mail as you drive by,” said Connie Chirichello, a spokeswoman for USPS in New York.  “Things have totally changed.”

They’ve changed because most taxpayers are filing online.  For the week of April 6, the most recent for which data is available, 87 percent of taxes filed were done so electronically.

It means fewer of the financially strapped post offices around the country have the customers or the resources to stay open until midnight to accommodate procrastinators.

In California, for example, the Postal Service says there are 22 post offices with extended hours, about a quarter of the number open late in the past.

“[Taxpayers] were going to the post office to mail their return at 11:30 at night and over the last 15 years it has changed,” said Chirichello.

Copyright 2012 ABC News Radio

Tuesday
Apr172012

Tax Day: Still Haven't Filed Your Returns? Opt for an Extension

iStockphoto/Thinkstock(NEW YORK) -- Are you freaking out because you haven’t filed your taxes yet?

Relax, says New York tax accountant Janice Hayman.  “Do yourself a favor and file the extension and then you can file your return once you have a moment to breathe,” she says.

While April 15 is typically the tax-filing deadline, taxpayers received a two-day reprieve this year, pushing Tax Day to the 17th of the month.  But many people wait until the last day before mailing their annual returns.

Filers who rush through their forms are making a costly error.

“Frequently the mistakes are not in their favor,” says Hayman.  “They underestimate expenses or even worse they could underestimate income and that could certainly cause them more pain.”

Simple math mistakes are among the most frequent problems with taxpayers’ returns.  And these goofs can lead to questions from the IRS.

“Once you do your taxes you want to put them to bed,” says personal finance writer Farnoosh Torabi.  “You don’t want to hear from the IRS again unless it’s a refund check.  You don’t want to hear from the IRS saying you have to fill out the form again or we’re going to audit you.”

That’s why Hayman and nearly every other tax preparer says don’t do your paperwork in a rush.

“They should absolutely take their time and file that extension,” she says.  “You can do it electronically.  You can download a form and mail it in to the IRS or to your state.”

The IRS extension form is 4868, which you can get from the IRS' website.  While this gives you an additional six months to file, anything you owe on your 2011 taxes is due now.  You can send in a check with the extension form.

Another argument for filing an extension is that Tax Day is probably the worst day of the year to get your tax questions answered by a professional.

“It’s very hard right now to get somebody who’s coherent,” says Hayman.  “Taxpayers should take a step back, relax a moment and understand there’s no penalty for filing an extension.”

Copyright 2012 ABC News Radio

Monday
Apr162012

Seven Tax Deductions That Set Off Alarms

Comstock/Thinkstock(NEW YORK) -- With only one day before the Internal Revenue Service's April 17 deadline, here's a look at a range of common and uncommon tax loopholes that, depending on your career, border on gray to you, but to auditors can come across as flashing red lights:

Guard Dogs

If you have certified guard dogs for your business, they may be deductible.  Philadelphia tax attorney Kelly Phillips Erb said they can't be "junkyard dogs" to be deductible.

Similarly, private jets that are purchased for security reasons could be deductible for corporations, and not just if they offer convenience or comfort, Erb said.

Gambling

Casual gamblers may not realize they can deduct their gambling losses as professional gamblers do.  There are some things to note, however, said Erb. 

First, you may deduct gambling losses only if you itemize deductions, which Erb said is only a third of tax filers.

Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos, cash winnings and the fair market value of prizes like cars and trips.

Second, the amount of losses you deduct can't exceed the amount of gambling income reported on your return.  That rule doesn't apply to professional gamblers.

"If it's your real job and you lose money, then you can deduct those losses," she said.  "But if you're just a casual gambler, you're out of luck if you always lose."

Home Office Costs

"You could find a million things for home offices that people can wrongly think they can deduct," Erb said.  But unless your home office is your primary place of business, auditors will take note if you deduct for related costs.

Many people treat their kitchen table or living room as their home office or home office storage area, but it's often not a primary place of work.

"If you choose to work from home because you want to, that doesn't create a home office," Erb said.

Clothing

Ted Schwartz, president and chief investment officer of Capstone Investment Financial Group and ABC News personal finance columnist, said he once had a client who was a professional wrestler who tried to deduct formal clothing he wore for interviews or other public appearances.  His reasoning was that he would never wear suits unless for work.

"I told him, 'if you have a wrestling uniform, that's an expense,' but clothing is not," Schwartz said.

Erb has a friend who works at a high-end retail store and is required to wear acceptable, nice clothing.  She wanted to deduct for the costs, which were significant on her budget, because said she said she would not wear that clothing of her own volition.

"She would never wear that clothing outside of work, but the IRS doesn't care," she said.

Legal Expenses

Certain personal legal expenses could be deductible to a degree, said Erb.

"Sometimes you can write off legal expenses if they are related to producing income," she said.

Writing off tax services from a divorce attorney could be deductible.  Writing off legal services related to a custody battle would probably not be.

Travel and Entertainment

Writing off travel and entertainment expenses is considered "low-hanging fruit" for auditors.

Mixing business with pleasure usually means a meal or trip is not deductible, said Erb.

"I've had a lot of folks who try to claim related expenses, which is where the fraud tends to be," she said.

Diet and Fitness Costs

While health and diet expenses that are prescribed by a physician can be deductible, advice from a doctor will not support an expense you try to write off.

"Dieters will say their doctor instructed them to lose weight," Erb said.  "Or they try to deduct a club membership because the doctor said to exercise more.  Those are only deductible if they are prescribed.  Not if a doctor just told them to do something."

Copyright 2012 ABC News Radio

Friday
Apr132012

Obama’s Secretary Paid Higher Tax Rate Than He Did

Ryan McVay/Thinkstock(WASHINGTON) -- President Obama on Friday released his 2011 federal income tax, with he and his wife reporting an adjusted gross income of $789,674. The Obamas paid $162,074 in total tax – an effective federal income tax rate of 20.5 percent. The Obamas also reported donating approximately 22 percent of their income to charity — $172,130.

President Obama has been making a big political push for the “Buffett Rule,” which would require millionaires to pay a minimum of 30 percent of their income in taxes. To illustrate the point, the president has pointed out that billionaire investor Warren Buffett pays a lower tax rate than does his secretary.

President Obama’s secretary, Anita Decker Breckenridge, makes $95,000 a year. White House spokeswoman Amy Brundage tells ABC News that Breckenridge “pays a slightly higher rate this year on her substantially lower income, which is exactly why we need to reform our tax code and ask the wealthiest to pay their fair share.”

It should be noted that president would not be impacted by the Buffett Rule, though he would see his taxes go up if the so-called Bush tax cuts on higher income wage-earners were allowed to expire, as the president says he wants.

Copyright 2012 ABC News Radio