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Bitcoins are property, not currency, IRS says regarding taxes

Yahoo Tax - Tue, 2014-03-25 16:03

By Kevin Drawbaugh and Patrick Temple-West WASHINGTON (Reuters) - Wading into a murky tax question for the digital age, the U.S. Internal Revenue Service said on Tuesday that bitcoins and other virtual currencies are to be treated, for tax purposes, as property and not as currency. "General tax principles that apply to property transactions apply to transactions using virtual currency," the IRS said in a statement, meaning that bitcoins would be taxed as ordinary income or as assets subject to capital gains taxes, depending on the circumstance. Bitcoin, the best-known virtual currency, started circulating in 2009.


Categories: Tax news

IRS says bitcoin will be taxed like property

Yahoo Tax - Tue, 2014-03-25 15:31
WASHINGTON (AP) — Virtual currencies like bitcoin will be taxed like property — not currency, the Internal Revenue Service said Tuesday.
Categories: Tax news

Rhode Island house elects new speaker following probe into former leader

Yahoo Tax - Tue, 2014-03-25 14:23
Rhode Island's House of Representatives on Tuesday elected its Democratic majority leader, Nicholas Mattiello, as speaker to fill a void created when a fellow Democrat stepped down this weekend amid a federal probe. Mattiello, first elected as state representative in November 2006, received the votes of 61 lawmakers, ten times the support of his nearest rival and fellow Democrat, Representative Michael Marcello. The prior speaker, Gordon Fox, on Saturday resigned his post after FBI officials searched his home and office in a joint investigation with the state's U.S. attorney, Internal Revenue Service and state police. The speaker position is one of the most powerful figures in Rhode Island politics, overseeing the passage of legislation in the 75-member lower house.
Categories: Tax news

IRS will tax Bitcoin as property, rather than as currency - PCWorld

Google IRS Federal Income Tax - Tue, 2014-03-25 14:21

IRS will tax Bitcoin as property, rather than as currency
PCWorld
And employers who pay people in bitcoins will have to declare them on a W-2 form for the purpose of federal income tax, insurance contributions and federal unemployment tax. As with regular wages, that requirement generally kicks in when the amount ...

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IRS: Answers to tax questions about Bitcoin - USA TODAY

Google IRS Federal Income Tax - Tue, 2014-03-25 13:11

IRS: Answers to tax questions about Bitcoin
USA TODAY
Consequently, the fair market value of virtual currency paid as wages is subject to federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and ...

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IRS: Bitcoin is not currency - USA TODAY

Google IRS Federal Income Tax - Tue, 2014-03-25 12:31

Washington Post

IRS: Bitcoin is not currency
USA TODAY
"General tax principles that apply to property transactions apply to transactions using virtual currency." The guidance means that wages paid in Bitcoin are subject to federal income tax withholding and payroll taxes and must be reported on W-2 forms.
Got Bitcoins? Here's how the IRS says to report them on your tax return.Washington Post (blog)

all 337 news articles »
Categories: Tax news

Companies must pay taxes on severance payments: U.S. high court

Yahoo Tax - Tue, 2014-03-25 11:46

By Lawrence Hurley and Patrick Temple-West WASHINGTON (Reuters) - The U.S. Supreme Court ruled on Tuesday that taxes are due for Social Security and Medicare on severance packages paid to workers who are laid off involuntarily, overturning a lower court ruling that could have led to a wave of payroll tax refund requests from U.S. businesses. In a win for the Obama administration and the U.S. Internal Revenue Service, the court voted 8-0 that Quality Stores Inc., a defunct retailer, and its employees are not entitled to tax refunds totaling about $1 million. The tax refund at issue was small, but the IRS said the stakes in the case were huge because, if Quality Stores had won, thousands more refund claims could have resulted, possibly totaling as much as $1 billion. If Quality Stores had won, many companies were ready to file for tax refunds, said Ruth Wimer, a partner at the law firm McDermott Will & Emery LLP, calling the decision "bad news" for employers and employees.


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Who Would Pay a Higher Illinois Income Tax?

Tax Foundation - Tue, 2014-03-25 06:45

This morning we released a new report by my colleague Liz Malm, on how a proposed Illinois tax increase would affect small businesses and job creation.

For several months, there has been buzz in Illinois political circles about a progressive income tax, timed to prevent the scheduled drop in the state's current flat income tax from 5% to 3.75% at the end of this year. Last week, House Speaker Michael Madigan put out a plan that would impose a top rate of 8% on income over $1 million. Other leading plans have top rates as high as 11%, increasing taxes on all taxpayers.

Here are some key findings of our new report:

61 percent of employers in Illinois are pass-through entities (individual proprietors, partnerships, and S corporations), meaning they pay business taxes through the individual income tax. Implementing a graduated, or progressive, rate structure would increase taxes on many of these businesses. Pass-through employers employ 38 percent of Illinois employees. This varies widely by industry, with the highest concentrated in the construction sector (78% of employers and 65% of employees); professional, scientific, and technical services (77% of employers and 53% of employees); agriculture, forestry, fishing, and hunting (73% of employers and 47% of employees); administrative and support and waste management services (70% of employers and 55% of employees); real estate and rental and leasing services (70% of employers and 54% of employees); and transportation and warehousing (68% of employers and 30% of employees). Pass-throughs tend to be smaller in size, with the majority of pass-through employers employing less than 10 people. The Illinois economy is underperforming in comparison to other states in the region and the country as a whole. Experts express caution over using taxes as a solution to the state’s large and rising pension debt.

While most people think taxes on "millionaires" only affect wealthy heirs with trust funds, the reality is that most Illinois employers, employing a large proportion of Illinois workers, pay taxes through the individual tax code. Increasing their taxes directly affects job creation and economic growth.

Illinois already has one of the highest state-local tax burdens in the country, and while it has fiscal challenges, it should try to address them without destroying one of the best features of its tax code: a low, simple income tax.

Check out the full report here.

Categories: Tax news

Wisconsin Approves Income Tax Reduction, Business Tax Reforms

Tax Foundation - Tue, 2014-03-25 06:15

Wisconsin Governor Scott Walker (R) yesterday signed Act 145 into law, a budget bill that makes a number of tax changes. These include:

Reducing the lowest income tax rate from 4.4% to 4.0%, a tax reduction for all income taxpayers (a $98 million reduction over two years). Increases net operating loss carryforwards from 15 years to 20 years, aligning the state with federal law Caps tax revenue and state aid that can be received by technical college districts, and increases state aid to those districts. The hope is that the two items together will have the effect of reducing local property taxes by several hundred million dollars Recoupling Wisconsin depletion rules to federal law Clarifying that taxpayers are not required to use net operating loss (NOL) carrybacks, but may do so at their option Tightens the job tax credit to require beneficiaries to increase net employment in Wisconsin Allows several tax credits to be used against the state alternative minimum tax (AMT) Clarifies definitions related to sales taxes on the printing industry

These reductions and reforms are retroactive to January 1, 2014, except the technical college reforms that will start in 2015. The corporate tax changes that align the state with federal law are especially welcome, as they reduce duplicative tax preparation and reduce Wisconsin’s corporate tax rule disadvantages relative to other states. They also build on previous reforms to align depreciation rules and net operating loss carrybacks with federal law, and will improve the state’s business tax competitiveness.

The income tax changes also build on earlier reductions since 2012. While the top rate has dropped only slightly, from 7.75 percent to 7.65 percent (compare that to neighboring Illinois’s proposed 8 percent top rate and Minnesota’s recent increase from 7.85 percent to 9.85 percent), all rates have dropped and one mid-level bracket was deleted (see table). Using his own executive authority, Walker has also reduced Wisconsin's excessive tax withholding, which is presently designed to withhold 120 percent of projected tax liability. Taxpayers get the excess money back when they file their taxes, but it is essentially a forced-interest free loan to the state in the meantime. The money also sat on the state's books as a liability, worsening the paper deficit by some $323 million.

2012

2013

2014

Bracket

Rate

Bracket

Rate

Bracket

Rate (pre-cut)

Rate (post-cut)

>$0

4.60%

>$0

4.40%

>$0

4.40%

4.00%

>$10,570

6.15%

>$10,750

5.84%

>$10,910

5.84%

5.84%

>$21,130

6.50%

>$21,490

6.27%

>$21,820

6.27%

6.27%

>$158,500

6.75%

 

 

 

 

 

>$232,660

7.75%

>$236.600

7.65%

>$240,190

7.65%

7.65%

 

Categories: Tax news

IRS overwhelmed by tax return identity theft scams - Examiner.com

Google IRS Federal Income Tax - Mon, 2014-03-24 15:04

Examiner.com

IRS overwhelmed by tax return identity theft scams
Examiner.com
Astronomical as it sounds, these statistics do not include the almost 480,000 fraudulent refund claims filed using the Social Security numbers of Puerto Rican citizens, who generally do not file federal tax returns unless earning stateside income, or ...
This Could Be in Your Wallet — Tax Refunds from 2010Patch.com
Nearly 24000 Arizona residents could be owed old tax refundsArizona Republic
Arizonans owed millions in IRS refundsArizona Daily Star
The Star-Ledger -Oswego Daily News
all 66 news articles »
Categories: Tax news

How People Respond to Investment Taxes and What This Means for Economic Growth

Tax Foundation - Mon, 2014-03-24 14:15

Capital gains realizations and dividend payouts increased significantly between 2011 and 2012, ahead of a tax increase in 2013.

According to the IRS, capital gains realizations increased 60.4 percent, increasing from $310.9 billion in 2011 to 498.7 billion in 2012. Qualified dividends saw a similar increase, up 50.9 percent after increasing from $125.2 billion in 2011 to $188.9 billion in 2012.

This increase corresponded with an increase in both the capital gains and dividends tax rates. On January 1, 2013, the capital gains and dividends tax rate rose from 15 percent to 23.8 percent (which includes the 3.8 percent surcharge from the Affordable Care Act).

This result – large timing changes corresponding with investment tax changes – isn’t unusual with capital gains because taxpayers are able to choose when they sell their stocks and collect their gains. The data shows this to be true.

Th chart below compares the capital gains tax rate and federal revenue. Before the capital gains rate went up in 1986, we see a similar case to 2012, as people sold their stocks ahead of the tax increase. Likewise, when the rates are cut, you can see the revenues spike as well.

This helps illustrate an important point: capital is highly responsive to taxes. This is important because investment is crucial to growing the economy.

Unfortunately, current U.S. tax policy creates heavy biases against saving and investment through double, triple, and even quadruple taxation. We have the highest corporate rate in the OECD and have high taxes on dividends, capital gains, and business investment. And currently, the United States ranks second to last in investment as a percentage of GDP among developed countries and has been on the decline.

This is bad for everyone.

In the long-run, lower investment means a smaller capital stock. This means that workers will have fewer factories and machines and less equipment to work with. This means fewer computers, backhoes, front loaders, lawn mowers, pumpjacks, office buildings, etc. When workers don’t have tools to work with, they become less productive; wages drop, economic growth slows, and lower living standards.

On the other hand, if we remove biases against saving and investment, we would see the opposite. Productivity and wages would increase, the economy would growth, and living standards would increase.

For more on the effect of taxes on investment and what tax changes can improve the economy, see here and here.

Categories: Tax news

'Inevitable glitches' ahead for U.S. anti-tax evasion law: IRS

Yahoo Tax - Mon, 2014-03-24 13:58

A new U.S. anti-tax evasion law, set to take effect on July 1, will encounter "inevitable glitches," said the head of the U.S. Internal Revenue Service on Monday, adding that the IRS will be sympathetic to banks doing their best to comply. The Foreign Account Tax Compliance Act (FATCA) will require foreign banks, insurers and investment funds to send the IRS information about Americans' offshore accounts worth more than $50,000. Acknowledging banks' concerns about costs and complexity, he said, "We will be understanding of those problems as long as those (financial) intermediaries are making reasonable, good faith efforts to comply." Signed into law by President Barack Obama in 2010, the law was originally supposed to take effect on January 1, 2013.


Categories: Tax news

Wisconsin Governor Walker signs $504 million tax cut

Yahoo Tax - Mon, 2014-03-24 13:20

Wisconsin Governor Scott Walker, a Republican, on Monday signed into law a measure that uses the state's projected surplus to give a tax break of more than $500 million to workers and property owners. The law puts into place $504 million in tax cuts, consisting of $406 million in property tax relief and a $98 million state income tax break for those in the lowest tax bracket. "This is a great day for the hardworking taxpayers of Wisconsin," Walker said in a statement. Walker, who is running for re-election this year, has vowed to funnel most of Wisconsin's projected surplus to residents through tax breaks.


Categories: Tax news

State Sales Tax Jurisdictions Approach 10,000

Tax Foundation - Mon, 2014-03-24 11:15

A number of states are calling on Congress to authorize them to collect sales taxes on interstate Internet transactions, including at a congressional hearing early this month. The states claim that they have simplified their sales tax systems so that compliance is no longer burdensome.

The growing number of sales tax jurisdictions, as reported by the tax software company Vertex, suggests the states have more simplification work to do. There are now 9,998 different sales tax jurisdictions in the United States, up more than 300 when Vertex last reported the figure in 2011.

The number of jurisdictions vary widely by state. New Jersey, despite a plethora of local governments, has just two jurisdictions – statewide and areas bordering Delaware. Texas by contrast, despite endorsing congressional action while itself declined to adopt uniform tax definitions or other sales tax reforms, has over 1,500 different sales tax jurisdictions.

Certainly, number of jurisdictions isn't everything. We have put together a chart of essential simplifications in a federal online sales tax bill, including unified audits, uniform bases and definitions, notice of rate and base changes, liability waivers, and federal court jurisdiction. No matter how it’s measured, states haven’t yet fulfilled their promises to simplify their sales taxes.

State

Total Sales Tax Jurisdictions, 2014

Alabama

791

Alaska

103

Arizona

131

Arkansas

370

California

231

Colorado

307

Connecticut

1

District of Columbia

1

Florida

56

Georgia

162

Guam

1

Hawaii

2

Idaho

9

Illinois

443

Indiana

1

Iowa

994

Kansas

428

Kentucky

1

Louisiana

341

Maine

1

Maryland

1

Massachusetts

1

Michigan

1

Minnesota

35

Mississippi

3

Missouri

1242

Nebraska

209

Nevada

18

New Jersey

2

New Mexico

142

New York

84

North Carolina

105

North Dakota

137

Ohio

96

Oklahoma

587

Pennsylvania

3

Puerto Rico

79

Rhode Island

1

South Carolina

41

South Dakota

251

Tennessee

125

Texas

1515

Utah

310

Vermont

12

Virginia

174

Washington

346

West Virginia

11

Wisconsin

70

Wyoming

23

TOTALS

9998

Source: Vertex, Inc.

Categories: Tax news

Who pays most income taxes? - CNNMoney

Google IRS Federal Income Tax - Mon, 2014-03-24 10:52

CNNMoney

Who pays most income taxes?
CNNMoney
And they are paying the lion's share of federal income tax revenue -- 74% in 2011. That's up from 61% in 1997, according to an analysis of IRS data by the Tax Foundation. The biggest jump during that time period was among 55- to 65-year-olds. Their ...
Who pays most income taxes? People 45 and upWCVB Boston

all 9 news articles »
Categories: Tax news

Will The IRS Ever Accept Your Tax Returns With A Tweet? - Forbes

Google IRS Federal Income Tax - Mon, 2014-03-24 06:42

Forbes

Will The IRS Ever Accept Your Tax Returns With A Tweet?
Forbes
The federal government and the IRS? Much less so. Tax returns even for a simple taxpayer can be byzantine. If the only thing you had to list on your return was your name, Social Security Number and total income, that should fit within 140 characters ...

and more »
Categories: Tax news

Former Inmate Gets 5 ½ Years in Federal Prison for Leading IRS Tax Fraud from ... - Shoals Insider

Google IRS Federal Income Tax - Sun, 2014-03-23 23:53

Shoals Insider

Former Inmate Gets 5 ½ Years in Federal Prison for Leading IRS Tax Fraud from ...
Shoals Insider
BIRMINGHAM – A federal judge recently sentenced the ringleader of a federal tax fraud that was run from inside an Alabama state prison to serve more than five years in federal prison, announced U.S. Attorney Joyce White Vance, Internal Revenue Service ...

Categories: Tax news

Reasons for Filing an Extension of your Federal Income Tax - Tax Law Home (blog)

Google IRS Federal Income Tax - Sun, 2014-03-23 00:15

Reasons for Filing an Extension of your Federal Income Tax
Tax Law Home (blog)
April 15, the date when state and federal income tax returns are due, is only a few weeks away. While many ... If a taxpayer owes taxes as of April 15, that money is still due to the IRS on April 15 even if the taxpayer files an extension. Filing an ...

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9 retirement savings tax tips - Pensacola News Journal

Google IRS Federal Income Tax - Sat, 2014-03-22 23:00

9 retirement savings tax tips
Pensacola News Journal
"Stretching the retirement savings available for an additional 20 years of life expectancy requires correctly managing the complex retirement taxation rules established by Congress and the IRS," says Byrnes, who is also associate dean at the Thomas ...

and more »
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Rhode Island House speaker resigns amid probe

Yahoo Tax - Sat, 2014-03-22 20:12

The Democratic speaker of the Rhode Island House of Representatives resigned his leadership position on Saturday, a day after law enforcement officials searched his office and home in an investigation. Gordon Fox said in a statement that he is giving up the speakership he has held since 2010 and that he would serve out his term as a representative in the House but would not run for re-election this fall. "The process of governing must continue and the transition of leadership must be conducted in an orderly manner." The U.S. Attorney's Office for Rhode Island confirmed on Friday that two search warrants were executed in a joint investigation with the FBI, the Internal Revenue Service and state police.


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