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Tax Fraud, Tax Protestors, and the Most Awesome Willfulness Doctrine in ... - Above the Law

Google IRS Federal Income Tax - Thu, 2014-08-07 07:18

Tax Fraud, Tax Protestors, and the Most Awesome Willfulness Doctrine in ...
Above the Law
These included placing her property in sham trusts, establishing a sham charitable foundation, sending harassing correspondence to IRS employees and filing bogus tax returns, trust returns, private-foundation returns and other false documents with the IRS.

Categories: Tax news

Guilty plea in $313000 tax fraud - Manteca Bulletin

Google IRS Federal Income Tax - Thu, 2014-08-07 01:58

Guilty plea in $313000 tax fraud
Manteca Bulletin
Wagner's press release said that because of that suggestion by the preparer, Robertson filed two false federal income tax returns — one for the 2005 tax year claiming a $90,538 refund and a second for the 2007 tax year claiming a $313,248 refund ...
Manteca woman pleads guilty to tax fraudModesto Bee

all 3 news articles »
Categories: Tax news

French court rejects part of Hollande's tax-cutting effort

Yahoo Tax - Wed, 2014-08-06 14:18

A top French court rejected a plank of President Francois Hollande's economic reform package on Wednesday, just as a coalition partner threatened to quit the government in another spat over legislation. Hollande has staked his credibility on efforts to jump-start economic growth and job creation in Europe's second-largest economy by slashing 30 billion euros ($54 billion) off payroll taxes paid by firms. The Socialist Hollande and his more popular prime minister, Manuel Valls, had folded in the measures after left-wing lawmakers accused them of leaning too far toward the business community. The government, which has also promised to cut income taxes for low- and middle-income workers, is likely to seek to resurrect the low-income tax cuts in the 2015 public spending bill.


Categories: Tax news

What's the Tax Deal on College Scholarships? - Accountingweb.com

Google IRS Federal Income Tax - Wed, 2014-08-06 09:54

What's the Tax Deal on College Scholarships?
Accountingweb.com
For instance, based on the ruling, college athletic scholarships might be subject to federal income tax. But the IRS quickly nipped this notion in the bud. In response to a Congressional inquiry, the IRS issued a new information letter stating that the ...

Categories: Tax news

Michigan Personal Property Tax Reform Voted into Law

Tax Foundation - Wed, 2014-08-06 08:15

Big news out of Michigan: voters yesterday approved Prop 1, a personal property tax cut that will amount to about $500 million per year on net. While individuals only pay property taxes on their real estate, businesses in many states have to pay an additional tax on all of their property that can be touched and moved—from staplers to desk chairs to manufacturing equipment. We’re critical of the negative incentive these taxes create on acquiring new machinery and improving production processes. While personal property taxes only apply to businesses, this negative incentive hurts everyone in the economy because it makes us less productive.

In Michigan, Prop 1 will increase the personal property tax exemption to $80,000, will create an exemption for all new property purchased, and will phase-in relief for existing property. The result is a healthy phase-out of the tax over time as businesses replace their old equipment, and an immediate removal of any negative incentives to acquiring new equipment tomorrow. The $80,000 exemption means smaller businesses will not pay this tax at all.

The proposal was approved 69-31, which quite frankly is a more sizeable margin than we had expected, and is a good sign for taxpayer understanding of the issue. One of the more frequent problems with reforming personal property taxes is that they are a local revenue source, so localities will fight hard to protect the revenue stream. In Michigan, they skirted this issue by diverting state use tax revenues to localities to keep them whole.

If you’ve followed our work over the years, you know that we’ve done a lot of work on personal property taxes, from our background paper back in 2012, to our work in Indiana in 2014 (which led to a win), to our frequent blogging on the topic. In Michigan this year, I worked with James Hohman of the Mackinac Center on an op-ed in the Detroit News, and he also has an excellent primer paper on Prop 1. Today, the credit goes to him and his team for a job well done on educating taxpayers. This is serious tax reform.

More on Michigan.

Follow Scott on Twitter.

Categories: Tax news

Sign Up for Our Latest Newsletter: Letters from the President

Tax Foundation - Wed, 2014-08-06 08:00

We’ve had a tremendously successful year here at the Tax Foundation, and we want to share our successes and progress with you. Even though our Weekly Newsletter covers our most popular releases, it doesn’t offer any insight to our work on the ground, traveling around the country and speaking with legislators, business owners, and taxpayers about the importance of well-structured tax policy.

In order to fill you in on the weekly happenings here at the Tax Foundation, we are excited to announce a new weekly update from Tax Foundation President Scott Hodge.

If you’re interested in getting more involved with our work, sharing your ideas, and staying in touch with the movement for smarter tax policy, then we invite you to sign up.

To sign up for our newsletters, click here!

Categories: Tax news

Greek government red-faced over property tax error

Yahoo Tax - Wed, 2014-08-06 07:55

Crisis-hit Greece's government was scrambling on Wednesday to correct errors in a new property tax that forced homeowners to pay vastly inflated sums. Property owners across the country were in uproar after the values used to calculate the tax increased tenfold compared to last year, while even incomplete buildings were charged the full levy. In parliament, lawmakers from both parties in the ruling government coalition demanded an overhaul to the new property tax. To stem the criticism, Prime Minister Antonis Samaras has ordered the finance ministry to revert to last year's real estate values, state news agency ANA said.


Categories: Tax news

IRS wants Stavros Center to pay $5.4M in back taxes; Amherst nonprofit for ... - GazetteNET

Google IRS Federal Income Tax - Wed, 2014-08-06 07:13

IRS wants Stavros Center to pay $5.4M in back taxes; Amherst nonprofit for ...
GazetteNET
AMHERST — Leaders of the Stavros Center for Independent Living say more than $5 million in federal tax liens filed by the Internal Revenue Service are suspected processing errors and not a result of unpaid taxes at the non-profit agency based in ...

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FAIR Tax Abolishes IRS - Then What? - Forbes

Google IRS Federal Income Tax - Wed, 2014-08-06 06:30

Forbes

FAIR Tax Abolishes IRS - Then What?
Forbes
The FairTax Plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to ...
I Inherited $20K. Do I Have to Pay Taxes?Fox Business

all 4 news articles »
Categories: Tax news

What is the Consumed Income Tax?

Tax Foundation - Wed, 2014-08-06 06:30

Since the 1940’s the United States has relied most heavily on the individual income tax, which accounts for 40 to 50 percent of total federal revenue. Income is currently defined as consumption plus change in net worth – also known as the “Haig-Simons” definition of income. This definition of income leads to the double taxation of saving and investment while it taxes current consumption only once, making our tax code non-neutral.

Our current tax base requires $775 billion dollars of tax expenditures to move toward tax neutrality. Even with such large modifications to the tax base we still double tax capital gains and many types of interest income, among others. Piecemeal modification of the tax code through tax expenditures is an imperfect remedy because it introduces unnecessary complexity and further distortions. 

In contrast to our current tax system, a consumed income tax achieves neutrality between current consumption and future consumption (savings and investment) by taxing each dollar of income once. A consumed income tax redefines the tax base to tax only consumption.

All income is either current consumption or future consumption. By not taxing future consumption (savings), individuals are able to invest their saving until they are ready to spend it. The investment of savings puts that money in the hands of the productive economy, whether in the form of a loan for a home or the purchase of a piece of equipment for an agriculture business.

IRAs and Roth IRAs provide a good example of the structure and function of a neutral consumption tax. Individuals using Roth IRA retirement accounts pay taxes on earned income whether it is spent or saved.  When the investor withdraws their savings, the gains from investment are not taxed.

Traditional IRAs provide the same economic treatment but the equation is flipped. Under traditional IRAs, an individual pays no taxes when the income is earned, but instead pays taxes on any withdrawal from their account, including taxes on any gains from investment.

In both cases, the tax treats saving and investment neutrally in regard to consumption. Giving all income the same treatment as IRAs would create a consumed income tax.

Our current tax regime discourages future investment and incentivizes current consumption. Taxing all economic activity neutrally would remove the disincentive to save and result in more saving and investment.

Saving and investment are the engine that grows the economy by supplying the tools for future innovation and productivity. The consumed income tax would be a boon for economic growth. 

Categories: Tax news

The U.K.'s Inversion Experiences are a Good Lesson for the U.S.

Tax Foundation - Wed, 2014-08-06 06:00

If there is one thing that Americans are not good at it is learning lessons from the experiences of other countries. We tend to look upon issues and events as unique to the American experience and struggle to find our own solutions, often failing to realize that other countries have suffered similar problems and have already discovered viable remedies.

So it is with the latest “wave” of corporate inversions. To read this morning’s latest article on the trend in the Washington Post, “U.S. officials gird for rash of corporate expatriations,” you would think this is a uniquely American problem with its own set of political dynamics. Hardly.

The United Kingdom went through a similar experience less than a decade ago and, after some brief handwringing, acted decisively to reform their tax system in a manner that not only solved the problem, but has made the U.K. a destination for U.S. corporate inversions.

Here is how we summarized their experience in a 2011 study, “10 Reasons the U.S. Should Move to a Territorial System of Taxing Foreign Earnings”:

Britain’s worldwide tax system produced a different set of consequences than Japan’s. Because the European Union allows capital to move as freely between the member states as it moves among the 50 U.S. states, more than a dozen British multinational firms chose to move their headquarters to countries with more favorable tax climates to protect their foreign earnings from the U.K. tax code.

The common fact pattern for each of these companies was that they derived roughly 75 percent of their profits from outside the U.K., yet the British worldwide tax system subjected their foreign earnings to U.K. taxes. Even though the U.K. corporate tax rate was 28 percent at the time, it was still higher than the European Union average. Thus, the companies felt that the only way to protect the majority of their earnings from U.K. tax was to move to a low-tax country, such as Ireland, or a country with both lower taxes and a worldwide tax system such as the Netherlands or Switzerland.

Shocked by these trends, the British government began implementing changes to their international tax rules to make the system more friendly to global businesses. The recently released U.K. budget includes changes in the Controlled Foreign Company (CFC) rules for 2012 "towards a more territorial corporate tax system that reflects the global reality of modern business. The interim improvements are designed to make the current CFC rules easier to operate and, where possible, to increase competitiveness."[1]

On the day after the government released its budget, two of those expatriate firms announced that they would consider moving back to England.[2]

Ironically, the pharmaceutical firm Shire was one of those U.K. firms that fled to Ireland. [We blogged on the exodus of U.K. firms here and here.] Shire is now the merger partner of the Illinois-based company AbbVie, which announced its inversion plans this year. You have to wonder if the U.S. had cut its corporate tax rate and moved to a territorial tax system years ago whether companies like Shire would be looking to merge with U.S. firms and move their headquarters here.

At this point, we probably won’t know until after the 2016 presidential election.

 

 


[1] HM Revenue & Customs, "Overview of Tax Legislation and Rates," March 23, 2011, p. A71. http://www.hmrc.gov.uk/budget2011/index.htm

[2] Steve McGrath, "WPP, publisher may end tax exile," The Wall Street Journal, March 25-27, 2011.

 

Categories: Tax news

LEGAL POINTERS | Applying for tax-exempt status - Queen Anne News

Google IRS Federal Income Tax - Tue, 2014-08-05 15:50

LEGAL POINTERS | Applying for tax-exempt status
Queen Anne News
Another important concept is that once you apply for and obtain your tax-exempt status with the IRS (federal taxes), you will still be subject to state and local taxes, unless an exemption exists. Some states track the federal tax-exempt status (mostly ...

Categories: Tax news

LEGAL POINTERS | Applying for tax-exempt status - Queen Anne and Mangolia News

Google IRS Federal Income Tax - Tue, 2014-08-05 15:48

BenefitsPro

LEGAL POINTERS | Applying for tax-exempt status
Queen Anne and Mangolia News
Another important concept is that once you apply for and obtain your tax-exempt status with the IRS (federal taxes), you will still be subject to state and local taxes, unless an exemption exists. Some states track the federal tax-exempt status (mostly ...
IRS clarifies same-sex spousal health coverageBenefitsPro
U.S. watchdog gives IRS high marks on Obamacare eligibility dataJamestown Sun
News You Can Use: Don't Auto-Renew Your Obamacare PolicyMother Jones

all 36 news articles »
Categories: Tax news

U.S. watchdog gives IRS high marks on Obamacare eligibility data

Yahoo Tax - Tue, 2014-08-05 15:12

The U.S. Internal Revenue Service has provided nearly accurate information on eligibility data for consumers who sought subsidized health coverage through Obamacare's private insurance exchanges, a federal watchdog said on Tuesday. A report released by the Treasury Inspector General for Tax Administration said data on consumer income and family size that the IRS sent to healthcare exchanges last October was accurate in 99.97 percent of cases. The data was used to determine whether insurance applicants were eligible to purchase coverage through the exchanges during an initial six-month open enrollment period, which ended in March. The report also said the agency's accuracy rate stood at 100 percent when it came to calculating federal tax credits that help cover insurance premiums for families earning up to 400 percent of the federal poverty line, or $95,400 per year for a family of four.


Categories: Tax news

IRS Issues DING Guidance - WealthManagement.com

Google IRS Federal Income Tax - Tue, 2014-08-05 10:19

IRS Issues DING Guidance
WealthManagement.com
Incomplete non-grantor trusts are separate taxpayers for income tax purposes and are structured so that most transfers to and distributions from these trusts are incomplete gifts for federal gift tax purposes. They're frequently formed in states with ...

Categories: Tax news

Material Participation Of Trusts And Estates: Mattie Carter Trust Case - Forbes

Google IRS Federal Income Tax - Tue, 2014-08-05 08:00

Material Participation Of Trusts And Estates: Mattie Carter Trust Case
Forbes
1411 imposes the 3.8-percent Net Investment Income Tax (NIIT) on net investment income (NII) for individuals, trusts and estates. ... This distinction is important because it forms a significant part of the IRS's position regarding material ...

Categories: Tax news

More Perspective on Inversions: Not a Threat to the Tax Base but the Face of U.S. Uncompetiveness

Tax Foundation - Tue, 2014-08-05 08:00

In recent weeks there has been an excessive amount of hand-wringing and gnashing of teeth about corporate inversions. The comments range from the White House calling these companies unpatriotic to reporters claiming that inversions are eroding the corporate tax base.

It is time for a little perspective.

First, while the number of companies moving their headquarters abroad has increased in recent years, the numbers are very small compared to the 1.6 million corporations in the U.S.—of which roughly 5,000 are publicly traded. According to the Congressional Research Service, just five companies moved their headquarters abroad in 2013, down from nine in 2012. This year, seven companies have taken steps to merge with a foreign-based company and move their headquarters abroad.

So all this hysteria is over the fact that 0.1 percent of all publicly traded U.S. firms moved their headquarters to another country. The nearby chart shows the number of inversions annually since 1983. As Congressman Sander Levin (D-MI) illustrates on his website, there have been 47 corporate inversions over the past decade. Even so, this ten year figure represents less than 1 percent of all publicly traded companies and 0.003 percent of all U.S. corporations. Hardly a tidal wave of expatriations.

Now, what about the tax base? In a recent Washington Post article, BusinessWeek’s Allan Sloan says that “All of this threatens to undermine our tax base, with projected losses in the billions.” Sloan endorses legislation written by Sander Levin and his brother Michigan Senator Carl Levin, the “Stop Corporate Inversions Act of 2014” (H.R. 4679). The bill would supposedly save the Treasury $19 billion over ten years by limiting inversions to deals where the U.S. purchaser of a foreign entity must be 50 percent of the new company, unlike today where the U.S. firm can be 80 percent of the new company.

If this legislation is meant to protect the U.S. corporate tax base, then the erosion threat can’t be that bad. The Congressional Budget Office currently projects corporate tax revenues will total $4.8 trillion over the next ten years. Thus, $19 billion represents a savings of 0.4 percent of those projected corporate tax revenues over a decade. In Washington, that is a rounding error.

The reason inversions are getting so much attention today, even though they are few in number and not a threat to the tax base, is that they put a face on what has until now been an abstraction in the political debate—the fact that the U.S. has the least competitive corporate tax rate and international tax regime in the industrialized world. People tend not to take storm warnings seriously until the first tree blows down.

And the reason for the over-the-top reactions from the White House, and lawmakers like the Levin brothers, is that inversions are an embarrassing reminder that their world view—which says that taxes don’t matter—is fundamentally wrong. Reality is a hard pill to swallow.

 

Categories: Tax news

More Perspective on Inversions: Not a Threat to the Tax Base but a Face of the Problem of U.S. Uncompetiveness

Tax Foundation - Tue, 2014-08-05 08:00

In recent weeks there has been an excessive amount of hand-wringing and gnashing of teeth about corporate inversions. The comments range from the White House calling these companies unpatriotic to reporters claiming that inversions are eroding the corporate tax base.

It is time for a little perspective.

First, while the number of companies moving their headquarters abroad has increased in recent years, the numbers are very small compared to the 1.6 million corporations in the U.S.—of which roughly 5,000 are publicly traded. According to the Congressional Research Service, just five companies moved their headquarters abroad in 2013, down from nine in 2012. This year, seven companies have taken steps to merge with a foreign-based company and move their headquarters abroad.

So all this hysteria is over the fact that 0.1 percent of all publicly traded U.S. firms moved their headquarters to another country. The nearby chart shows the number of inversions annually since 1983. As Congressman Sander Levin (D-MI) illustrates on his website, there have been 47 corporate inversions over the past decade. Even so, this ten year figure represents less than 1 percent of all publicly traded companies and 0.003 percent of all U.S. corporations. Hardly a tidal wave of expatriations.

Now, what about the tax base? In a recent Washington Post article, BusinessWeek’s Allan Sloan says that “All of this threatens to undermine our tax base, with projected losses in the billions.” Sloan endorses legislation written by Sander Levin and his brother Michigan Senator Carl Levin, the “Stop Corporate Inversions Act of 2014” (H.R. 4679). The bill would supposedly save the Treasury $19 billion over ten years by limiting inversions to deals where the U.S. purchaser of a foreign entity must be 50 percent of the new company, unlike today where the U.S. firm can be 80 percent of the new company.

If this legislation is meant to protect the U.S. corporate tax base, then the erosion threat can’t be that bad. The Congressional Budget Office currently projects corporate tax revenues will total $4.8 trillion over the next ten years. Thus, $19 billion represents a savings of 0.4 percent of those projected corporate tax revenues over a decade. In Washington, that is a rounding error.

The reason inversions are getting so much attention today, even though they are few in number and not a threat to the tax base, is that they put a face on what has until now been an abstraction in the political debate—the fact that the U.S. has the least competitive corporate tax rate and international tax regime in the industrialized world. People tend not to take storm warnings seriously until the first tree blows down.

And the reason for the over-the-top reactions from the White House, and lawmakers like the Levin brothers, is that inversions are an embarrassing reminder that their world view—which says that taxes don’t matter—is fundamentally wrong. Reality is a hard pill to swallow.

 

Categories: Tax news

When Did Your State Adopt Its Tax on Distilled Spirits?

Tax Foundation - Tue, 2014-08-05 06:45

This week’s tax map takes a look at when each state first adopted its distilled spirits excise tax, if it has one. Federal taxation of alcohol dates back to the earliest years of the republic but state excise taxes all followed swiftly on the heels of the Twenty-first Amendment. With the end of federal alcohol prohibition in 1933, states retained the authority to permit or prohibit alcohol sales. Most states quickly legalized, either as “liquor control states” shown in gray, or with private liquor sales, like the color-coded states. No state legalized prohibition without swiftly applying high taxes to liquor, though states varied in when they ended prohibition, with Oklahoma remaining a constitutionally “dry” state until 1959. Among states that adopted government liquor sales monopolies after ending prohibition, only Washington State has since privatized liquor sales.

(Click on the map to enlarge it. Reposting policy)

In 1791, almost immediately after the Constitution was ratified, Alexander Hamilton pushed for a national excise tax on liquor as a means of raising revenue to pay down the national debt. Hamilton believed a tax on distilled spirits would be useful both because they were widely consumed, and thus represented a fairly large tax base, but also because he perceived distilled spirits to be a luxury good, and thus a tax might be fairly progressive. Many social reformers also believed distilled spirits were damaging to society, and so looked favorably on higher taxes. These arguments for excise taxes, that they tax socially damaging goods, or luxury goods, or serve as advantageous and politically popular revenue sources, continue today in various forms.

In reality, the tax turned out to be disproportionately burdensome on poor- and middle-income farmers living in the territories and new states beyond the Appalachian mountains. The traditional distilled drinks of “Western states” (such as Bourbon from my home state of Kentucky, or Tennessee Whiskey) arose as ways of turning grain into a product that could be easily and profitably sold in the urban centers of the east. The new tax, then, injured these grain farmers and western pioneers. This led to the so-called Whiskey Rebellion, wherein disgruntled westerners rose up against the government, only to be swiftly crushed by George Washington and almost 13,000 militia. Throughout the 19th century, federal excise taxes on distilled spirits remained a major revenue item, so large that prohibition of alcohol, while politically popular, was considered impossible until after the Sixteenth Amendment permitted an income tax in 1913.

States also taxed alcohol, and especially distilled spirits. However, prior to prohibition, state alcohol taxation tended to be occupationally-focused, requiring licensing by producers and sellers of alcohol at an approximately fixed rate, rather than a strict excise tax. Even so, these taxes were a large component of many states’ tax collections.

There were also some states that, far from taxing alcohol, enacted state-level prohibition far earlier than the nation on the whole. The first state to enact prohibition lasting until national prohibition began was Kansas, in 1880, and the state did not repeal until 1948, giving it the longest time under prohibition of any state in the union. Other states with early prohibition regimes include Maine, Vermont, Iowa, North Dakota, Mississippi, Alabama, Georgia, Oklahoma, North Carolina, Tennessee, Oregon, West Virginia, Washington, Montana, and others. Many of these early-prohibition states became liquor control states after the end of national prohibition. Liquor control states also tend to have higher effective taxes on distilled spirits.

Oklahoma’s last-in-the-nation end of prohibition came after decades of referendums as urban voters in favor of legalization repeatedly failed to defeat rural voters opposed to it. Finally, however, legalization won out as Oklahoma’s revenue needs increased, and legalization was seen as an alternative to other taxes. Perhaps more interestingly, the pro-legalization Governor Howard Edmondson (D) launched an aggressive enforcement campaign, raiding establishments illicitly serving alcohol and enforcing Oklahoma’s laws with unprecedented consistency. Even advocates of prohibition were taken aback by the drastic consequences of full enforcement of the laws they claimed to support, and so the “dry” coalition collapsed.

Since the end of prohibition, state liquor policies have been remarkably stable. While rates and markups in privatized and control states have varied, only Washington State has made the switch from liquor control to privatization. As part of that change, the state levied new taxes and fees on distilled spirits, leading to even higher liquor prices. Indeed, throughout the history of liquor taxation in the United States, decreasing control or regulation has in almost all cases been paired with (and often motivated by) increased excise taxes.

Read more on alcohol excise taxes here.

Follow Lyman and Richard on Twitter.

Categories: Tax news

Homeowner Association IRS Ruling Highlights Schizophrenic Nature Of ... - Forbes

Google IRS Federal Income Tax - Tue, 2014-08-05 06:15

Homeowner Association IRS Ruling Highlights Schizophrenic Nature Of ...
Forbes
Unless they have vast reserves earning significant investment income, homeowners associations can avoid any significant tax liability by filing Form 1120H, which allows the organization to exclude assessments. Despite that option, some homeowners ...

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