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Map: Corporate Alternative Minimum Taxes by State, as of July 1, 2014

Tax Foundation - Thu, 2014-12-11 11:45

Many Americans are familiar with the federal alternative minimum tax (AMT) as a calculation that they have to do at the end of their individual tax form if they take “too many” deductions. Not everyone is aware that the federal government also subjects corporate entities to the AMT, and a few handfuls of states do too. This week’s map shows which states levy a corporate AMT as of July 1, 2014, the snapshot date of our 2015 State Business Tax Climate Index. Just eight states have them.

While corporate AMTs are designed to be a “backstop,” they represent a fundamental failure in the tax code. The stated reason for the AMT is to protect against firms that are able to take “too many” deductions or credits, but those credits are ostensibly placed there by policymakers for a reason. Instead of admitting that the code has too many holes, however, policymakers have instead constructed a parallel tax code called the AMT, and forced firms to comply with all its complexities in addition to the already hectic state corporate income tax.

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Categories: Tax news

Volunteers needed to provide free tax help - Daily Herald

Google IRS Federal Income Tax - Thu, 2014-12-11 10:16

Volunteers needed to provide free tax help
Daily Herald
PHOENIX, AZ - - Last year more than 900 Utahns gave back to their communities as volunteers that provided free tax services by preparing more than 25,000 Federal and state of Utah individual income tax returns through the IRS' Volunteer Income Tax ...

and more »
Categories: Tax news

Republicans mount late bid to make charity tax breaks permanent

Yahoo Tax - Wed, 2014-12-10 18:13
By Kevin Drawbaugh WASHINGTON (Reuters) - At the 11th hour of a scramble by the U.S. Congress to keep the federal government funded and open, Republicans in the House of Representatives on Wednesday called for making a handful of temporary tax breaks for charitable giving permanent. The last-minute move, led by Republican Representative Dave Camp, drew criticism from Democrats. They said his plan would add $11 billion to the national debt because it offers no new sources of tax revenue to offset the drain on the federal budget that making the tax breaks permanent would impose. ...
Categories: Tax news

Former CPA from Heber City sentenced to federal prison in tax case - Deseret News

Google IRS Federal Income Tax - Wed, 2014-12-10 15:11

Deseret News

Former CPA from Heber City sentenced to federal prison in tax case
Deseret News
He must also pay $250,340 in restitution to the IRS. Jenkins, 64, was indicted by a federal grand jury in June 2013. Prosecutors alleged that Jenkins filed a false 2007 income tax return for himself in September 2008 that claimed a federal income tax ...
Heber man sentenced to federal prison for millions of dollars in tax scamDaily Herald
Utah tax accountant sent to prison for income tax crimesSalt Lake Tribune

all 5 news articles »
Categories: Tax news

IRS Announces 2015 Standard Mileage Rates - Forbes

Google IRS Federal Income Tax - Wed, 2014-12-10 12:43

IRS Announces 2015 Standard Mileage Rates
Forbes
Despite those tumbles, the standard mileage rate for federal income taxes is going up for business miles. The Internal Revenue Service (IRS) has issued the 2015 optional standard mileage rates and beginning on January 1, 2015, the standard mileage ...

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Exclusive: Atlantic City, N.J. to slash bond deal, sell casino tax liens

Yahoo Tax - Wed, 2014-12-10 11:34

By Hilary Russ (Reuters) - Atlantic City is expected to slash a bond sale by 71 percent to $40 million because the multitude of uncertainties facing the city have made it difficult to borrow, a city official told Reuters on Wednesday. The struggling New Jersey gambling hub planned a mid-November bond sale of up to $140 million to refund old debt and pay for property tax appeals by overvalued casinos. But that deal is likely to be transformed to a note sale before the end of this calendar year and cut to just $40 million, Atlantic City revenue director Michael Stinson said. ...


Categories: Tax news

IRS Paid $6 Billion In Bogus Child Tax Credits To People Who Were Not Eligible ... - Headlines & Global News

Google IRS Federal Income Tax - Wed, 2014-12-10 11:26

Headlines & Global News

IRS Paid $6 Billion In Bogus Child Tax Credits To People Who Were Not Eligible ...
Headlines & Global News
In 2009, Obama's economic stimulus package had temporarily granted the expansion of credit to additional families that were not able to make enough money to pay out their federal income tax. Accorded until 2017, these families receive the $1,000-per ...
IG: IRS paid $6 billion in bogus child tax creditsKansas City Star
IG: IRS Paid $6B in Bogus Child Tax CreditsFox Business

all 116 news articles »
Categories: Tax news

Treasury Report: Improper Payments Remain a Problem in EITC, Child Credit

Tax Foundation - Wed, 2014-12-10 10:15

The Treasury Inspector General for Tax Administration (TIGTA) this week released yet another report on the issue of improper payments in refundable tax credits. Improper payments are any sort of payment made by the IRS in error – whether from an honest mistake or from deliberate fraud by the tax filer. The report concluded that “significant changes in IRS compliance processes would be necessary to make any significant reduction in improper payments.”

Treasury has covered this issue repeatedly, as has Tax Foundation. (For example, here and here.) The estimate for 2013 – that 24% of all EITC payments were made in error – is essentially in line with the trend of improper payments for the past decade.

Estimated EITC Improper Payments for Fiscal Years 2003 Through 2013

Year

Minimum Improper Payments Percentage

Maximum Improper Payments Percentage

Minimum Improper Payments, 2013 Dollars (Billions)

Maximum Improper Payments, 2013 Dollars (Billions)

2003

25%

30%

$12.07

$14.61

2004

22%

27%

$10.58

$13.16

2005

23%

28%

$11.42

$13.57

2006

23%

28%

$11.37

$13.46

2007

23%

28%

$11.65

$13.78

2008

23%

28%

$11.99

$14.15

2009

23%

28%

$12.21

$14.50

2010

24%

29%

$16.37

$19.69

2011

21%

26%

$14.25

$17.37

2012

21%

25%

$11.72

$13.74

2013

22%

26%

$13.30

$15.60

 

In other words, in terms of actual results, no progress been made yet on the issue.

However, the Treasury reports have slowly gotten closer to identifying the problems with the EITC, and this year, they further identify the Additional Child Tax Credit as having similar issues. The results of the reports suggest that a legislative fix may be in order.

One issue is that refundable tax credits are extremely complex. Publication 596, which tells taxpayers how to file the earned income credit, is 39 pages long. Making the EITC simpler would both reduce error rates among honest tax filers, and help the IRS in enforcement against unscrupulous fraudsters.

One surprising area of complexity, for example, is what constitutes a “child,” and how to verify that. The Treasury report covers this issue in detail. This may seem like a ridiculous problem, if you’re an ordinary human being, but it’s actually a big deal for the IRS. Not all children have stable, year-round living situations. Some spend time with two parents who live separately. Some live with non-biological relatives. And then there are even stranger edge cases; the IRS actually has to provide filing guidance for parents of kidnapped children. The IRS really isn’t built to handle things like this.

Another area of complexity is the eligibility requirements, which are numerous, difficult, and overlapping. The motive behind complex eligibility requirements is understandable – though ultimately misguided. Refundable credits are supposed to spend money to help people, and you don’t want that help going to “the wrong people.” But as the audit shows, billions of dollars are quite literally going to the wrong people anyway.

Refundable tax credits are long overdue for simplification and consolidation.

Categories: Tax news

Congress Agrees on Details of $1.1 Trillion Spending Bill to Avoid Government Shutdown

Tax Foundation - Wed, 2014-12-10 08:30

On Tuesday night, the House of Representatives and the U.S. Senate agreed to terms on a spending bill that will fund the federal government through September 30, 2015. Congress must pass the bill by Thursday to avoid a government shutdown.

The house is expected to hold a vote on the bill on Thursday and the Senate will likely take up the measure this weekend, according to reports. In this case, the House is likely to pass a stop-gap bill to avoid a government shutdown while the Senate considers the bill.

The spending bill introduced by the House includes 11 appropriations bill that fund their respective agencies through the end of the 2015 fiscal year, and a 12th measure that funds the Department of Homeland Security “under a temporary 'Continuing Resolution' mechanism that expires on February 27, 2015."

The “Omnibus” bill includes $521 billion in defense funding, $492 billion in non-defense spending, and additional funding related to the U.S. Ebola response ($5.4 billion) and funds related to combatting ISIS ($64 billion).

For highlights of the bill, see here. For all the details on the bill, see here.

Categories: Tax news

Watchdog: IRS paid $6 billion in bogus child tax credits - Fox News

Google IRS Federal Income Tax - Wed, 2014-12-10 05:56

Fox News

Watchdog: IRS paid $6 billion in bogus child tax credits
Fox News
The once-championed way to help low-income working families is now facing problems with how it is ran. The 2009 economic stimulus package temporarily expanded the credit to more families that don't make enough money to pay federal income tax.
Ex-IRS employee found guilty of tax fraudPhiladelphia Business Journal
IRS paid $6 billion in bogus child tax creditsManteca Bulletin
IG: IRS paid $6 billion in bogus child tax creditsWink News

all 116 news articles »
Categories: Tax news

Tri State Metal Company, Inc. Charged With Federal Tax And Currency Crimes ... - eNews Park Forest

Google IRS Federal Income Tax - Tue, 2014-12-09 17:26

Tri State Metal Company, Inc. Charged With Federal Tax And Currency Crimes ...
eNews Park Forest
In total, Tri State allegedly paid its employees cash wages totaling more than $1.47 million and failed to collect and pay the IRS federal income tax withholdings, FICA taxes, and Medicare withholdings on the cash wages. The charges further allege that ...

and more »
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IG: IRS paid $6 billion in bogus child tax credits - Bluefield Daily Telegraph

Google IRS Federal Income Tax - Tue, 2014-12-09 16:33

IG: IRS paid $6 billion in bogus child tax credits
Bluefield Daily Telegraph
Obama's 2009 economic stimulus package temporarily expanded the credit to more families that don't make enough money to pay federal income tax. The expanded credit expires at the end of 2017. These families receive the $1,000-per-child credit in the ...

and more »
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Photos from the Tax Foundation's 77th Annual Dinner

Tax Foundation - Tue, 2014-12-09 12:30

Photos from the Tax Foundation’s 77th Annual Dinner are here!

We’d like to thank everyone who attended for joining us on such a special and exciting evening. We had a wonderful time and we hope you did, too. We’re already looking forward to our 78th Annual Dinner in 2015 and hope to see you there!

The highlight of the evening was annual award ceremony, featuring three of the most noteworthy tax reform advocates of 2014.

First, following an introduction by Senator Orrin Hatch, Mark Prater, one of the most respected tax experts on Capitol Hill, accepted the Exemplar of Excellence in Public Service Award.

Additionally, Congressman Pat Tiberi accepted the Public Sector Distinguished Service Award for his leadership in promoting fundamental tax reform, permanent bonus expensing, and a more competitive U.S. business tax system.

Finally, Governor John Engler was awarded with the Private Sector Distinguished Service Award for his leadership in promoting fundamental tax reform and a more competitive U.S. tax system since returning to the private sector.

Year after year, the Tax Foundation Annual Dinner serves as the centerpiece of celebration for positive, pro-growth tax reform in the U.S. Open to all, reservations are already being taken for the 78th Annual Dinner, to be held on Thursday, November 19th, 2015, at the Ritz-Carlton, Washington, DC. 

Categories: Tax news

IRS is looking for tax help volunteers in Utah - Standard-Examiner

Google IRS Federal Income Tax - Tue, 2014-12-09 12:24

Standard-Examiner

IRS is looking for tax help volunteers in Utah
Standard-Examiner
Last year more than 900 Utahns gave back to their communities as volunteers that provided free tax services by preparing more than 25,000 federal and state of Utah individual income tax returns through the IRS Volunteer Income Tax Assistance and tax ...

and more »
Categories: Tax news

Investigator: IRS paid at least $6 billion in child tax credits to people who ... - Minneapolis Star Tribune

Google IRS Federal Income Tax - Tue, 2014-12-09 09:55

Investigator: IRS paid at least $6 billion in child tax credits to people who ...
Minneapolis Star Tribune
Obama's 2009 economic stimulus package temporarily expanded the credit to more families that don't make enough money to pay federal income tax. The expanded credit expires at the end of 2017. These families receive the $1,000-per-child credit in the ...

Categories: Tax news

Texans in Medicaid gap can avoid fine for being uninsured - San Antonio Express-News

Google IRS Federal Income Tax - Mon, 2014-12-08 19:34

Texans in Medicaid gap can avoid fine for being uninsured
San Antonio Express-News
The penalty — known by the IRS as the “individual shared responsibility payment” — generally will be imposed on individuals and families who chose not to get health insurance this past year. ... Payment is due when the federal income tax return is filed.

Categories: Tax news

U.S. sues Deutsche Bank for alleged tax fraud, seeks $190 million

Yahoo Tax - Mon, 2014-12-08 14:51

By Jonathan Stempel NEW YORK (Reuters) - The U.S. government on Monday sued Deutsche Bank AG , seeking to recoup more than $190 million from the German bank over alleged tax fraud more than 14 years ago. According to a complaint filed in the U.S. District Court in Manhattan, Deutsche Bank used "insolvent" shell companies to conduct a series of fraudulent conveyances designed to hide taxable gains from the U.S. Internal Revenue Service. U.S. ...


Categories: Tax news

DOJ sues Deutsche Bank, others, for avoiding federal income taxes - CNBC

Google IRS Federal Income Tax - Mon, 2014-12-08 13:20

TIME

DOJ sues Deutsche Bank, others, for avoiding federal income taxes
CNBC
The U.S. government filed a lawsuit on Monday accusing Deutsche Bank of tax fraud for engaging in a series of transactions designed to evade federal income taxes. The lawsuit seeks more than $190 million in taxes, penalties and interest, according to U ...
U.S. Files Lawsuit Against Deutsche Bank For Alleged Tax FraudNasdaq
US Hits Deutsche Bank With $190 Million Tax Fraud LawsuitTIME
UPDATE 1-US sues Deutsche Bank for alleged tax fraud, seeks $190 mlnReuters
Fox Business
all 88 news articles »
Categories: Tax news

Historians Who Criticize Dynamic Scoring

Tax Foundation - Mon, 2014-12-08 12:00

For many decades, Congress has used static scoring for tax legislation, which assumes taxes have no impact on the overall economy. That is hard to defend, especially among those who were taught in economics that prices matter. This is why there has been a push for dynamic scoring which takes into account how taxes affect incentives to work and invest. Dynamic scoring will tell you, for instance, that if tax rates are raised to 100 percent, don’t expect everyone to just keep on working and investing as if nothing happened.

The push for dynamic scoring has been underway for years, dating back to the Kennedy tax cuts. There just hasn’t been much progress. The Joint Tax Committee does use dynamic analysis on occasion, such as for the Camp proposal, but it is used so rarely and so non-transparently that lawmakers can hardly tell what is driving what.

Defenders of static scoring depict dynamic scoring as “Republican math” that will be used to claim tax cuts pay for themselves. It’s true that some tax cuts do not pay for themselves, but some do, such as cutting the corporate tax and other taxes on investment. Our model indicates that cutting the corporate tax rate, for instance, would eventually pay for itself due to increases in wages and income and the fact that most federal tax revenue comes from taxing wages and income.

We do not predict that corporate tax revenue would rise with a corporate rate cut, just that other federal tax revenue would rise. This may be too cautious an assumption, however, given the evidence of major corporate tax cuts across the developed world. Corporate tax rates have dropped roughly in half since 1981 in the average developed country, from about 48 percent to now 25 percent. In those countries with the largest corporate tax rate cuts, corporate tax revenue has increased as a share of GDP. The following charts show the evidence, from the eight developed countries with the biggest corporate rate cuts, based on OECD data.

In all eight of these countries, corporate tax revenue as a share of GDP increased following corporate tax cuts. In two of these countries, the UK and Canada, it appears to be a close call, but further analysis shows there also corporate tax revenue increased after the tax cuts.

Historians critical of dynamic scoring who claim to be part of the “reality-based community” should take note: sometimes tax cuts pay for themselves.

Follow William McBride on Twitter

Categories: Tax news

What is the Simplest Tax System?

Tax Foundation - Mon, 2014-12-08 10:30

You might be tempted to say, “a non-existent tax” is the simplest, though that would not accurately answer the question. Instead, a per-person or lump-sum tax is arguably the right answer.

Economist Joel Slemrod provided this answer in his chapter in Henry Aaron and William Gale’s book, Economic Effects of Fundamental Tax Reform. The topic of tax complexity was an important part of the discourse concerning fundamental tax reform at that time, and still is today. Nonetheless, complexity in the tax code has become increasingly prevalent since the 1990s.

In fact, complexity was the key issue facing taxpayers in 2012 as reported by the Taxpayer Advocate Service’s annual report. Moreover, the 2013 annual report cited onerous tax return filings that require taxpayers to outsource tax filing to professional preparers and concerns with “voluntary compliance” as key issues of complexity.

Normative economics aside, a per-person tax is one of the most economically efficient taxes for raising revenue. The tax does not distort economic decision-making, is broad-based—applying to everyone equally—and offers a simpler way to comply with the IRS. Regardless of the desirability of such a tax structure, it serves as an exemplar of simplicity.

Lawmakers not only have an implicit contract with voters to legislate in an efficient, practical, and simple manner—i.e., holding compliance costs low—but also de facto have the obligation to legislate in an understandable, non-vague fashion, as it is a constitutional standard. The Supreme Court case from 1926, Connally v. General Construction Co., declares this.

As Slemrod mentions, interesting questions seldom have a simple answer. A per-person tax ranks high on efficiency but could raise distributional concerns; meaning, too much simplicity may not be worth it. However, even the most challenging of tradeoffs are often accompanied by certain principles that, when followed, increase the probability of desirable outcomes. Simplicity is one of those principles of sound tax policy and should be remembered in any tax reform discussion.

More on simplicity here and here.

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