Thursday, February 25, 2010

Senators Introduce Bipartisan Tax Simplification Bill
Washington, D.C. (February 24, 2010)
By WebCPA Staff

Sen. Ron Wyden, D-Ore., and Judd Gregg, R-N.H., have introduced legislation to eliminate many of the exemptions, deductions, credits and other tax breaks in the Tax Code.

Their bill, the Bipartisan Tax Fairness and Simplification Act of 2010, would also eliminate the alternative minimum tax and reduce the number of individual tax brackets from the current total of six to three: 15 percent, 25 percent and 35 percent. The bill would nearly triple the standard tax deduction. Wyden and Gregg plan to make it possible for most taxpayers to file a simple one-page 1040 form, and allow individuals and families to request that the IRS prepare a tax return for them to review and sign.

To encourage small business growth, those with gross annual receipts of up to $1 million would be able to permanently expense all equipment and inventory costs in a single year. To help American corporations compete internationally, the Wyden-Gregg bill would reduce the top corporate tax rate of over 35 percent and replace the existing six corporate rates and eight tax brackets with a single flat rate of 24 percent. Wyden-Gregg would reduce corporate tax rates approximately 30 percent — below the corporate tax rates of Canada, Germany, France, and many other U.S. trading partners — to help U.S. domestic and multinational corporations to better compete in a global economy.

“Senator Gregg and I are demonstrating that there is room for Democrats and Republicans to agree on tax reform,” said Wyden in a statement. “By simplifying the Tax Code and scaling back tax breaks for special interests, we can give everyone an opportunity to get ahead.”

The Wyden-Gregg bill would streamline the Tax Code by eliminating a number of specialized tax breaks that favor one business sector or group of individuals over another. They hope to make the Tax Code fairer and raise funds to extend tax relief on a more equitable basis. They contend that the simplifications would make it harder for businesses and individuals to avoid paying their taxes. The tax simplification would also include the elimination of incentives to export jobs and keep foreign earnings overseas.

“For far too long, our tax system has been overly complicated, burdensome and unfair to taxpayers and to small businesses that are the economic engines of our nation,” said Gregg in a statement. “This investment-oriented proposal will bring us back to common-sense tax laws that encourage people to create jobs and make our nation more competitive.”

Friday, February 19, 2010

Hidden Gotchas of Roth IRA Conversions
What’s not to like about a Roth IRA? As with traditional IRAs, earnings accumulate tax free. But unlike the traditional IRA, withdrawals are tax-free and minimum distributions after age 70 ½ are not mandatory. Add to this the 2010 special incentives to convert a traditional IRA to a Roth IRA, and it’s a wonder taxpayers aren’t lining up to do the conversion.

Or is it?

Mike Solomon, partner-in-charge of the tax department at the Philadelphia office of Amper, Politziner & Mattia, LLP, said his firm thought so.

“There was so much coverage about this in both the financial press and the popular press that we mobilized for a flood of conversions,” he said.

“Up until 2010, only people whose modified adjusted gross income was $100,000 or less were eligible for the Roth conversion,” Solomon explained. “But Congress, probably looking for additional revenue, removed the limitation for 2010 so that everyone is entitled to convert from a regular IRA to a Roth without any penalties or other limitations on contributions. The advantages are that once your Roth is funded all of the earnings are not deferred, they’re exempt, so whoever takes the money out — whether you or your heirs — will never have to pay any income tax on the earnings.

“Of course, when you convert your regular IRA to a Roth, you have to pay tax on the entire amount,” he added. “The government tried to make this a little less painful, so they said you can pay the entire amount of tax on your 2010 return [due in 2011], or you can choose to split it half-and-half, and pay half in 2011 and half in 2012.

“If that’s not enough, the government gives you another provision to encourage you to convert,” he said. “Say you had $300,000 to convert to a Roth IRA in March 2010, and six months later the market plunges. You now only have $200,000, yet you have to pay tax on $300,000. They allow you to convert it back to a regular IRA by October 15 of 2011 – the extended due date of your 2010 return.

“So you have the ability to split the tax over two years, and the ability to change your mind. These are vey unusual incentives in the law to encourage taxpayers to make the conversion,” he said.

“There’s another benefit to a Roth,” he added. “In a regular IRA, when you’re 70 ½, you have to start taking distributions, but in a Roth there’s no minimum distribution requirement. A lot of people look at this as an estate planning strategy whereby you can leave your heirs all of the Roth IRA without you or your heirs having to take distributions, and when the heirs do take distributions it won’t be taxable.”

Yet the anticipated volume of Roth conversions hasn’t materialized.

“We bought a proprietary program to show taxpayers how much better off they would be by converting,” said Solomon. “Each office had a designated expert for the conversion process, and a designated computer just to do Roth conversions. But when we showed an actual taxpayer how much he and his heirs would save if he would pay $350,000 for the privilege of converting, he practically lost consciousness. It turns out that there are very few taxpayers who want to writer a check for 35 percent of what they’re converting.

“A Roth is extremely attractive on a lot of levels,” he said. “But the barrier is that enjoying tax-free appreciation doesn’t always overcome the cost of paying the tax upfront. When you remove 35 percent of the value of the IRA to pay the tax, you have to make it up in tax-exempt appreciation over a long period of years to get ahead of the game. Most people won’t do it just based on an income tax analysis, but it’s an act of generosity to the heirs that makes it worthwhile for some people with a substantial estate.”

Estate tax considerations have to be paramount for the Roth conversion to be worthwhile, according to Solomon. “And when you pay tax on the conversion, don’t take it out of the IRA,” he said. “If you have $300,000 in an IRA and take out $100,000 to pay the tax, all of the models will tell you it doesn’t work. You have to be willing to fund the Roth with outside assets.”

Monday, February 15, 2010

Curbing debt: Shoulda, coulda. Now gotta
By Jeanne Sahadi, senior writerFebruary 15, 2010: 9:07 AM ET

NEW YORK ( -- In the past five years, the administrations of both parties have tried to reform three big-ticket items: the tax code, health care and Social Security.

The reform efforts would have helped put the federal budget on a more sustainable course.

But all have been tabled in one form or another because of partisan resistance to key ideas.

Now policymakers' work is infinitely harder as they wake up to the realization that they must deal soon with the country's long-term fiscal problems.

At stake ultimately is the United States' status as a first-class economy.

"It's going to take bold strokes to deal with this challenge. It's going to take big ideas, and it's going to take political courage because it's every hot-button issue that's out there. It is Social Security. It is Medicare. It is revenue. All of them," said Senate Budget Chairman Kent Conrad, D-N.D., at a hearing last week on fiscal sustainability.

The president's yet-to-be formed bipartisan fiscal commission will be asked to propose ways to hit two key targets:
  • to get annual deficits to 3% of gross domestic product by 2015;
  • to then stabilize the nation's total accrued debt at something far lower than 77% of GDP, which is where it would be by 2020 under President Obama's proposed 2011 budget.

As things stand today, federal spending -- much of it in Medicare and to a lesser degree Social Security -- is on track to grow much faster than the economy for decades.

To achieve better fiscal balance after the economy recovers means that lawmakers will have to agree to measures that run contrary to the ideologies of the left and the right: Cut spending and raise taxes.

"And [the plan] must have the support of the leadership of both political parties," said Alice Rivlin, former vice chairman of the Federal Reserve, former White House budget director under President Clinton and former director of the Congressional Budget Office.

Rivlin and former Republican Senator Pete Domenici have formed a bipartisan debt-reduction task force that will craft a debt-reduction budget plan for Congress and the public to consider by the end of the year.

They, like other deficit-hawk groups, are suggesting that lawmakers seriously reconsider a number of proposals made in the past five years. Here are just five that likely will get more play in coming months.

Raise the Social Security retirement age: Currently, the full retirement age is set to hit 67 in 2027. Moving up that timetable, and then adjusting the retirement age by just 1 month every 2 years after that, could take care of nearly a third of the long-term shortfall in Social Security.

"As life expectancy increases, we just can't afford to support people in retirement for as long as we have currently under these programs," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told lawmakers.

Slow the growth of entitlement benefits: To protect lower income seniors who depend most heavily on their Social Security benefits, one option would be to slow the growth of initial benefits for higher income people.

In terms of Medicare, MacGuineas said, one option is to ask higher income retirees who can afford it to contribute more to the cost of their benefits.

Reduce health insurance tax breaks: Everyone agrees controlling health costs is one of the biggest steps needed to reduce the growth in U.S. debt over time. One of the most effective ways to do so is to reduce or eliminate the tax breaks workers get when they buy their insurance at work.

Currently, the portion of premiums paid by employers is treated as tax-free compensation to workers, and there is no limit on how much employers may contribute. The cost in forgone revenue over 10 years is $2.5 trillion, Conrad said.

A cap would mean workers would pay income tax on the portion of their employer's contribution above the cap.

The theory is that workers would avoid paying income tax by choosing lower-cost plans over time.

Broaden the tax base: Close to half of tax filers will end up with no net federal income tax liability for 2009 thanks in large part to a complex host of credits, exemptions, deductions and exclusions. Those tax breaks reduce federal revenue intake by roughly $1 trillion a year.

"If we can get rid of a lot of tax expenditures, we can lower [marginal tax] rates actually below today's level and still raise additional revenues," said Rudolph Penner, a former CBO director who is now the co-chair of the Committee on the Fiscal Future of the United States.

Consider new revenue options: Generating more income tax revenue can be helpful, but raising taxes too high can dampen economic growth. So lawmakers will be looking for other sources of revenue on top of income taxes.

Among the ideas being considered is a national sales tax known as the value-added tax or a possible energy tax. To top of page

Sunday, February 14, 2010

US debt will keep growing even with recovery
By TOM RAUM, Associated Press Writer Tom Raum, Associated Press Writer

WASHINGTON – It's bad enough that Greece's debt problems have rattled global financial markets. In the world's largest economic and military power, there's a far more serious debt dilemma.

For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario — a full recovery and a return to prerecession employment levels.

The government already has made so many promises to so many expanding "mandatory" programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.

Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project.

That doesn't leave room for much else. What's left is the entire rest of the government, including military and homeland security spending, which has been protected and nurtured by the White House and Congress, regardless of the party in power.

The U.S. debt crisis also raises the question of how long the world's leading power can remain its largest borrower.

Moody's Investors Service recently warned that Washington's credit rating could be in jeopardy if the nation's finances didn't improve.

Despite election-year political pressure from voters for lawmakers to restrain spending, some recent votes suggests that Congress, left to its own devices, probably isn't up to the task of trimming deficits.

Both the Obama administration and Democratic leaders have put job creation ahead of deficit reduction for now.

The Senate faces an important vote after it returns on Feb. 22 from its President's Day recess on a bill intended to stimulate job growth. The legislation offers a $13 billion payroll tax credit for companies that hire unemployed workers, including an additional $1,000 tax credit for workers retained for a full year.

Proposed belt-tightening steps by President Barack Obama, including a freeze on some nondefense, nonentitlement spending, would make only a small dent in the mountain of debt.

The budget he submitted to Congress this month proposes record spending of $3.8 trillion for 2011. Taxes in next year's budget will support only $2.5 trillion of that spending, leaving $1.3 trillion to be borrowed.

The president's budget is a best-case outlook, from the administration's vantage point.

It doesn't take into account future liabilities from the growth of entitlement benefits and is based on projected economic growth that depends on a solid recovery. It assumes Congress will pass all of Obama's initiatives, including spending cuts and tax increases previously rejected by Congress.

Congress already has rejected a bipartisan deficit commission that could have forced Congress to take painful steps on tax increases and entitlements.

The commission would have been modeled on one that makes military base-closing decisions, forcing Congress to take up or down votes. The Senate turned aside the legislation last month after some original Republican supporters jumped ship once Obama endorsed the plan.

Proponents say this type of commission is the only way to make painful debt decisions. Obama says he'll create a bipartisan commission by presidential order instead.

"In the end, solving our fiscal challenge — so many years in the making — will take both parties coming together, putting politics aside, and making some hard choices about what we need to spend, and what we don't," Obama said in his weekly Saturday radio and internet address.

Still, his commission wouldn't have the power to force a congressional vote.

Obama's call for fiscal austerity came at the same time he signed legislation lifting the cap on government debt from $12.4 trillion — which is close to being breached — to $14.3 trillion to permit more borrowing.

The same law puts in place new budget rules praised by deficit hawks that would require future spending increases or tax cuts to be paid for with higher taxes or other spending cuts. "After a decade of profligacy, the American people are tired of politicians who talk the talk but don't walk the walk when it comes to fiscal responsibility," Obama said.

It's not clear when the debt's day of reckoning will arrive. But the overall national debt over the next few years will rise to 100 percent of the gross domestic product — a level viewed as alarming by the International Monetary Fund and international economists.

The Social Security system, the biggest social spending program, has begun paying out more in benefits than it collects in payroll taxes. For the past quarter-century, Social Security had produced a surplus that helped finance the rest of the government.

Medicare, the health care program that now covers 45 million elderly and disabled people, is in worse shape. It's been paying out more than it takes in since 2008 and its trust fund is projected to run out of money in 2017.

Carmen Reinhart, an economics professor at the University of Maryland and a former IMF official, suggested the nation's fast-growing indebtedness may not have a visible impact at this point on ordinary Americans. But some day it will pounce.

"One thing we can say with a fair amount of certainty," she said. "We never know when the wolf will be at our door. The wolf is very fickle and markets can turn very quickly. And a high debt level makes us very vulnerable to shifts in sentiment that we cannot predict."

Tuesday, February 2, 2010

Obama's budget: Impact on your taxes
By Jeanne Sahadi, senior writer, February 2, 2010: 9:44 AM ET

NEW YORK ( -- President Obama, in his proposed 2011 budget, is calling on Congress to make a number of tax changes for individuals.

Some ideas are new. Many others were made last year, but not enacted by Congress. So the estimates of the revenue that may be raised by his proposals may be overly optimistic.

Across the universe of individual and corporate taxes, "what's most striking is how little new ground [the president's budget] ploughs," said Clint Stretch, managing principal of tax policy at Deloitte Tax LLC.

Here's a breakdown of some of Obama's key proposals for 2011 and beyond that would affect individuals:

High-income households
Let tax cuts expire: The 2001 and 2003 Bush tax cuts are scheduled to expire by 2011. Obama is sticking to his call to let those tax cuts expire for high-income households ($200,000 for individuals; $250,000 for families). The White House estimates close to $700 billion would be raised over 10 years.

This provision would raise the top two individual income tax rates to where they were in 2001, before passage of the Bush tax cuts. The 33% bracket would become 36%. And the 35% bracket would rise to 39.6%.

In addition, the long-term capital gains tax rate would increase to 20%, up from 15% currently.

The provision would also reinstate so-called phaseouts for high-income households, which would essentially reduce their eligibility for a host of personal exemptions.

The House may be amenable to letting the tax cuts expire in 2011 for wealthier Americans. But Stretch said it may be a tougher vote in the Senate, where there may be more of an inclination to wait until 2012 when the economy is expected to be on firmer footing.

Limit itemized deductions: The president proposes to cap at 28% the rate at which high-income households can itemize their deductions. Currently the value of a deduction is equal to the deductible amount multipled by one's top income tax rate, which can range well above 28%. So deductions will be worth less to a high-income tax filer under the president's proposal.

Capping itemized deductions is a proposal he made last year and it went nowhere. That's in part because many in Congress said it would seriously curb charitable giving, even though that is not a foregone conclusion. If the measure gains any traction this year, it's likely Congress would limit the cap to only certain types of deductions, thereby muting its revenue-raising effect.

The White House estimates that capping the rate on deductions could raise $291 billion over 10 years.

Obama maps routes to lower deficits
Keep the estate tax: The president's budget assumes the estate tax will be made permanent at a $3.5 million exemption level per person and a top rate of 45% on taxable estates. That's much more generous than current law, which calls for a $1 million exemption level and a 55% top rate starting in 2011.

But it's less generous than a proposal getting bipartisan support in the Senate. The Senate proposal would institute a $5 million exemption level per person and a top rate of 35%.

Altering the estate tax to the levels Obama has proposed would increase the deficit by $262 billion over 10 years.

Raise taxes on investment fund manager profits: Obama would like to tax the portion of profits paid to managers of hedge funds and private equity funds as ordinary income rather than as a capital gain. That would subject it to much higher tax rates than the 15% capital gains rate currently imposed. The White House estimates the measure would raise $24 billion over 10 years.

This is a carryover proposal from last year. While Congress hasn't acted on it yet, there's a fair chance they may move on it in the next year, since lawmakers will be looking for ways to pay for other costly legislation they'd like to pass.

Eliminate capital gains tax on small business stock: There are currently capital gains tax breaks in place for investors in small businesses, defined as companies with gross assets of $50 million or less. But the president is proposing to eliminate the capital gains tax altogether on stock in small businesses held for at least five years. The measure would only apply to stock acquired after Feb. 17, 2009. The cost of the president's proposal is an estimated $8.1 billion over 10 years.

Lower and middle income households
Make tax cuts permanent: The president's budget assumes all the 2001 and 2003 tax cuts will be made permanent for everyone making less than $200,000 ($250,000 for couples), which is the majority of American households.

That means, among other things, that today's rates on income tax, capital gains and dividends would remain the same.

It's an expensive proposition, however, costing federal coffers nearly $2 trillion over 10 years.

Permanently protect the middle class from the "wealth" tax: The administration assumes in the president's budget that Congress will permanently change the parameters of the Alternative Minimum Tax (AMT). That would protect tens of millions of middle-income families from having to pay the tax, which was originally intended only for the highest earners.

The cost of such a provision is close to $660 billion over 10 years.

Extend the Make Work Pay credit: The president's 2011 budget calls for a one-year extension of the stimulus-created tax credit that adds a few dollars to workers' paychecks every pay period. The extension is estimated to boost the deficit by $61.2 billion over 10 years.

Calling for just a one-year extension is a switch from Obama's call to make the credit permanent last year. The hope may still be that the credit is renewed every year -- as many tax breaks are. But by only calling for a one-year extension, the impact on the 10-year deficit appears to be less.

Permanently expand a low-income tax credit: The stimulus package temporarily expanded the Earned Income Tax Credit for very low-income families with three or more children. The expansion meant such families could claim a credit equal to 45% of their qualifying earnings, up from 40%, so that they could get a maximum credit of $5,657. President Obama wants to make that increase permanent at an estimated cost of $15.2 billion over 10 years.

Expand child-care tax credit: Under the president's budget, families making less than $85,000 would be able to claim nearly double the child and dependent care tax credit for which they currently qualify. The White House estimates the increase will raise the deficit by $12.6 billion over 10 years.

Permanently extend the American Opportunity Tax Credit: Created under stimulus legislation, the American Opportunity Tax Credit expanded for 2009 and 2010 the existing Hope Scholarship tax credit and made it partially refundable -- meaning that a tax filer could get money back even if it meant he or she would be getting back more from Uncle Sam than paid in federal income tax.

The credit is worth up to $2,500 for higher education expenses, up from $1,800 previously. The president would like to make the measure permanent, adding to the deficit by $75.4 billion over 10 years.

Monday, February 1, 2010

Obama unveils 2011 budget with $3.83T in spending
By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer – 37 mins ago

WASHINGTON – President Barack Obama unveiled a multitrillion-dollar spending plan Monday, pledging an intensified effort to combat high unemployment and asking Congress to quickly approve new job-creation efforts that would boost the deficit to a record-breaking $1.56 trillion.

Obama's new budget blueprint preaches the need to make tough choices to restrain run-away deficits, but not before attacking what the administration sees as the more immediate challenge of lifting the country out of a deep recession that has cost 7.2 million jobs over the past two years.

The result is a budget plan that would give the country trillion-dollar-plus deficits for three consecutive years. Obama's new budget projects a spending increase of 5.7 percent for the current budget year and forecasts that spending would rise another 3 percent in 2011 to $3.83 trillion.

"Until America is back at work, my administration will not rest and this recovery will not be finished," Obama declared in his budget message.

Addressing the fact that his budget first projects big increases in the deficit before starting to lower these imbalances, Obama told reporters, "It's very important to understand, we won't be able to bring down this deficit overnight given that the recovery is still taking hold and families across the country still need help."

Obama's budget offers tax cuts for businesses, including a $5,000 tax credit for hiring new workers this year, help for the unemployed and $25 billion more for cash-strapped state governments. All the temporary measures would boost the deficit over the next two years by $245 billion.

The deficit for this year would surge to a record-breaking $1.56 trillion, topping last year's then-unprecedented $1.41 trillion gap, a number which had dwarfed the previous record of $454.8 billion set in 2008 under former President George W. Bush.

The administration is forecasting that deficits over the next decade will add an additional $8.5 trillion to the national debt, even if Congress adopts the administration's package of proposals to trim future deficits starting in 2011. Those include a three-year freeze on spending for government programs, an effort which does not touch popular benefit programs such as Social Security and Medicare and which also exempts defense and homeland security. It also proposes a boost in taxes on the wealthiest Americans, families making more than $250,000 annually, by allowing the Bush tax cuts of 2001 and 2003 to expire.

Republicans were not impressed with Obama's deficit cutting, saying that it fell far short of the bold steps needed in light of the fiscal challenges the country is facing.

"This country is sinking into a fiscal quagmire," said Sen. Judd Gregg, the top Republican on the Senate Budget Committee. "These circumstances call for a bold, game-changing budget that will turn things around."

The administration argued that Obama inherited a deficit that was already topping $1 trillion when he took office and, given the severity of the downturn, the president had to spend billions stabilizing the financial system and jump-starting economic growth.

Obama's new budget carries forward the pledge he made in his State of the Union address: To put full attention on reviving the moribund U.S. economy, an effort to convince recession-battered voters that Democrats are in tune with the issues that affect their lives.

Obama's new budget assumes enactment of a comprehensive health care program, the issue that dominated the president's first year in office. Passage of that proposal is currently stalled with Democrats trying to figure out how to cope with the loss of a key Democratic seat that gave them the 60 votes they needed to overcome a Republican filibuster.

Obama's job proposals would push government spending in 2010 to $3.72 trillion and increase that amount to $3.83 trillion in the 2011 budget year, which begins on Oct. 1.

The deficit in 2011 would total $1.27 trillion, the third straight trillion-dollar-plus imbalance. The deficit would fall to $828 billion in 2012 but would remain at levels surpassing any previous deficits through 2020.

The deficit for this year would be 10.6 percent of the total economy, a figure unmatched since the country was emerging from World War II. The administration does not trim the deficit below 3.6 percent of GDP for any year in the next decade, failing to meet its goal of lowering the deficit to 3 percent of GDP by 2015.

White House Budget Director Peter Orszag said the administration will rely on a deficit commission which the president will create by executive order to recommend ways to further reduce the deficit plus cope with deficits projected to soar further in the next decade with the retirement of millions of baby boomers.

Much of the spending surge starting in 2008 reflects the cost of massive economic stimulus measures passed by Congress to deal with the worst economic downturn since the Great Depression. The surge in the deficits reflects not only the increased spending but also a big drop in tax revenues, reflecting the 7.2 million people who have lost jobs since the recession began and weaker corporate tax receipts.

Obama's new budget attempts to navigate between the opposing goals of pulling the country out of a deep recession and getting control of runaway deficits. The administration insists that once the recession is history, the government will turn its attention to attacking the deficits.

On the anti-recession front, Obama's new budget proposed extending the popular Making Work Pay middle-class tax breaks of $400 per individual and $800 per couple through 2011. They were due to expire after this year. The budget also proposes making $250 payments to Social Security recipients to bolster their finances in a year when they are not receiving the normal cost-of-living boost to their benefit checks because of low inflation. Obama will also seek a $25 billion increase in payments to help recession-battered states.

In a bow to worries over the soaring deficits, the administration proposed a three-year freeze on spending beginning in 2011 for many domestic government agencies. It would save $250 billion over the next decade by following the spending freeze with caps that would keep increases after 2013 from rising faster than inflation.

Military, veterans, homeland security and big benefit programs such as Social Security and Medicare would not feel the pinch. Federal support for elementary and high school education would get what the administration termed the biggest increase in history. The Pell Grant college tuition program which would see an increase of $17 billion to just under $35 billion, helping an additional 1 million students.

The budget reveals some of the changes the administration is seeking in an overhaul of the No Child Left Behind school accountability law. The administration wants to change how schools are judged to be succeeding or failing, looking not only at a single year's test score but at how kids and schools are progressing over time.

In Obama's new budget, there would be substantial increases for homeland security and veterans programs — exempt from Obama's partial freeze — with a 3.4 percent increase in the Pentagon's core budget to $549 billion for next year.

The administration would kill $175 billion worth of Environmental Protection Agency clean water accounts used as a pork-barrel kitty by Congress.

Obama also kills his predecessor's signature space program to return astronauts to the moon. NASA had already spent $9.1 billion on the program, which was projected to cost $100 billion by 2020. Obama's new budget said NASA will be "launching a bold new effort" with an extra $1.2 billion annually for five years, money expected to be used to encourage private companies to build, launch and operate their own spacecraft for the benefit of NASA and others. NASA would pay the private companies to carry U.S. astronauts.

The new Obama budget will also include a proposal to levy a fee on the country's biggest banks to raise an estimated $90 billion to recover losses from the government's $700 billion financial rescue fund.


AP writers Andrew Taylor, Stephen Ohlemacher, Seth Borenstein, Darlene Superville and Libby Quaid contributed to this report.

IRS Electronic Payment Options

I have been advocating paying taxes electronically for quite some time now. Doing so is not only safe and accurate but eliminates any concern about the checks getting lost in the mail or stolen. This is especially true if the payment amount is large. Paying taxes electronically removes any potential late payment penalties.

It is so easy to forget sending in quarterly estimated tax payments. Setting them up to have the payments taken out of your bank account automatically on the due date makes a lot of sense.

The December 2009 issue of the Journal of Accountancy has an article on the subject and the author agrees. One caveat is that I would not advise anyone to pay taxes with their credit card unless it is the last resort.

Below is the first and last paragraphs of the article. You can click on the link to read the entire article.

With the e-filing of tax returns becoming more and more prevalent, practitioners and their clients should also take advantage of other electronic services that the IRS has introduced in recent years. These include the Electronic Federal Tax Payment System (EFTPS), electronic funds withdrawal, and payment by credit or debit card. This article
discusses the requirements and advantages of these electronic services.

More and more taxpayers are using electronic means to pay their taxes due to the number of available payment options. While each option has its pros and cons, depending upon the taxpayer’s or the practitioner’s needs, the options are safe and secure and give the taxpayer a streamlined way to pay taxes.