http://www.cbsnews.com/stories/2010/09/18/business/main6879213.shtml
Latest Actions by FDIC Bring Year's Total Bank Failures to 125
(AP) Regulators on Friday shut down three Georgia banks and one each in New Jersey, Ohio and Wisconsin, boosting to 125 the number of U.S. bank failures this year amid the tough economic climate and growing loan defaults.
The Federal Deposit Insurance Corp. on Friday took over the Georgia banks: Bank of Ellijay, in Ellijay, with $168.8 million in assets; First Commerce Community Bank of Douglasville, with $248.2 million in assets; and Peoples Bank, based in Winder, with $447.2 million in assets.
The FDIC also seized ISN Bank in Cherry Hill, N.J., with $81.6 million in assets; Bramble Savings Bank of Milford, Ohio, with $47.5 million in assets; and Maritime Savings Bank, based in West Allis, Wis., with assets of $350.5 million.
Community & Southern Bank, based in Carrollton, Ga., agreed to assume the assets and deposits of Bank of Ellijay, First Commerce Community Bank and Peoples Bank. In addition, the FDIC and Community & Southern Bank agreed to share losses on $602.5 million of the three failed banks' loans and other assets.
Georgia, where the meltdown in the real estate market brought an avalanche of soured mortgage loans, has been one of the hardest hit states for bank collapses. The failures of the three banks Friday brought to 14 the number of Georgia banks that have fallen this year. Also high on the list of failure-heavy states are California, Florida and Illinois.
New Century Bank, based in Phoenixville, Pa., agreed to assume the assets and deposits of ISN Bank. New Century Bank does business as Customers Bank. The FDIC and New Century agreed to share losses on $64.8 million of ISN Bank's loans and other assets.
Foundation Bank, based in Cincinnati, is assuming the assets and deposits of Bramble Savings Bank.
And North Shore Bank, based in Brookfield, Wis., agreed to acquire all the deposits of Maritime Savings Bank and $177.6 million of its assets.
The failure of Bank of Ellijay is expected to cost the deposit insurance fund $55.2 million; that of First Commerce Community Bank, $71.4 million; that of Peoples Bank, $98.9 million; ISN Bank, $23.9 million; Bramble Savings Bank, $14.6 million; and Maritime Savings Bank, $83.6 million.
With 125 closures nationwide so far this year, the pace of bank failures exceeds that of 2009, which was already a brisk year for shutdowns. By this time last year, regulators had closed 94 banks.
The pace has accelerated as banks' losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.
The number of bank failures is expected to peak this year and be slightly higher than the 140 that fell in 2009. That was the highest annual tally since 1992, at the height of the savings and loan crisis. The 2009 failures cost the insurance fund more than $30 billion. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three succumbed in 2007.
The growing bank failures have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, and its deficit stood at $20.7 billion as of June 30.
The number of banks on the FDIC's confidential "problem" list jumped to 829 in the second quarter from 775 three months earlier, even as the industry as a whole had its best quarter since 2007, making $21.6 billion in net income. Banks with more than $10 billion in assets - only 1.3 percent of the industry - accounted for $19.9 billion of the total earnings.
The FDIC expects the cost of resolving failed banks to total around $60 billion from 2010 through 2014.
The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.
Depositors' money - insured up to $250,000 per account - is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul law enacted in July.
By AP Business Writer Marcy Gordon
Saturday, September 18, 2010
Friday, September 17, 2010
Obstacle to Deficit Cutting: A Nation on Entitlements
http://finance.yahoo.com/banking-budgeting/article/110680/nation-of-entitlements?mod=bb-budgeting
by Sara Murray, WALL STREET JOURNAL
Thursday, September 16, 2010
Efforts to tame America's ballooning budget deficit could soon confront a daunting reality: Nearly half of all Americans live in a household in which someone receives government benefits, more than at any time in history.
At the same time, the fraction of American households not paying federal income taxes has also grown -- to an estimated 45% in 2010, from 39% five years ago, according to the Tax Policy Center, a nonpartisan research organization.
A little more than half don't earn enough to be taxed; the rest take so many credits and deductions they don't owe anything. Most still get hit with Medicare and Social Security payroll taxes, but 13% of all U.S. households pay neither federal income nor payroll taxes.
"We have a very large share of the American population that is getting checks from the government," says Keith Hennessey, an economic adviser to President George W. Bush and now a fellow at the conservative Hoover Institution, "and an increasingly smaller portion of the population that's paying for it."
The dimensions of the budget hole were underscored Monday, when the Treasury reported that the government ran a $1.26 trillion deficit for the first 11 months of the fiscal year, on pace to be the second-biggest on record.
Yet even as Americans express concern over the deficit in opinion polls, many oppose benefit cuts, particularly with the economy on an uneven footing. A Wall Street Journal/NBC News poll conducted late last month found 61% of voters were "enthusiastic" or "comfortable" with congressional candidates who support cutting federal spending in general. But 56% expressed the same enthusiasm for candidates who voted to extend unemployment benefits.
As recently as the early 1980s, about 30% of Americans lived in households in which an individual was receiving Social Security, subsidized housing, jobless benefits or other government-provided benefits. By the third quarter of 2008, 44% were, according to the most recent Census Bureau data.
That number has undoubtedly gone up, as the recession has hammered incomes. Some 41.3 million people were on food stamps as of June 2010, for instance, up 45% from June 2008. With unemployment high and federal jobless benefits now available for up to 99 weeks, 9.7 million unemployed workers were receiving checks in late August 2010, more than twice as many as the 4.2 million in August 2008.
Still more Americans -- 19 million by 2019, according to the Congressional Budget Office -- will get federal aid to buy health insurance when legislation passed this year is implemented.
The expanding federal safety net has helped shelter many families from the worst of the downturn. Charlene A. Mueller-Holden doesn't fit the stereotype of a person on benefits. Laid off from J.P. Morgan Chase & Co. (NYSE: JPM - News) in January 2008, Ms. Mueller-Holden, 38, drew unemployment for 99 weeks.
The Newark, Del., resident knocked $40 a month off her mortgage payments through the federal Making Home Affordable Program, designed to keep people in their homes by helping them modify or refinance their mortgages. But when her unemployment benefits ran out, Ms. Mueller-Holden and her husband, a government employee, couldn't afford the $1,008 monthly payments.
She turned to the Delaware State Housing Authority which, under a federally subsidized program aimed at helping families with children stay in their homes, gave her $1,000 a month for five months toward mortgage payments. She and her two sons ate lunch for free at the local school this summer, and she has applied for free lunch for one of her sons who will be a first grader this year.
Ms. Mueller-Holden's family earned too little to pay federal taxes last year, and received an extension on their state taxes. "Quite frankly, I don't care about the deficit," says Ms. Mueller-Holden. "It's going to take years upon years upon years to pay this all back," she says, so it's better to focus on job growth now and deal with the deficit later.
Government data don't show how many of the households receiving government benefits also escape federal taxes. But there is certainly some overlap between the two groups, since many benefits are aimed at those earning too little to pay income taxes and at people who don't have jobs, and who thus don't pay payroll taxes.
Cutting spending on these "entitlements" is widely seen as an inevitable ingredient in any credible deficit-reduction program. Yet despite occasional bouts of belt-tightening in Washington and bursts of discussion about restraining big government, the trend toward more Americans receiving government benefits of one sort or another has continued for more than 70 years -- and shows no sign of abating.
An aging population is adding to the ranks of Americans receiving government benefits, and will continue to do so as more of the large baby-boom generation, those born between 1946 and 1964, become eligible. Today, an estimated 47.4 million people are enrolled in Medicare, up 38% from 1990. By 2030, the number is projected to be 80.4 million.
The difficulty of restraining benefits when so much of the population depends on them is now on view across Europe, where efforts to rein in deficits are forcing governments to cut popular entitlements. European countries have traditionally provided far more generous welfare benefits than the U.S. has, including monthly allowances for children regardless of income, free college tuition and universal health care. Public retirement programs are also bigger, since the combination of aging populations and low birth rates means fewer workers are paying into the system.
In recent months, political leaders in Europe have struggled to convince voters that change is necessary. German Chancellor Angela Merkel has exempted pensions from her government's planned budget cuts, reflecting the growing power of the retiree vote. French President Nicolas Sarkozy is facing mass protests, including a national strike week, as he tries to raise France's minimum retirement age from 60 to 62. Greece's government had to face down demonstrations this year when it slashed pension benefits, as it was forced to do to get bailout money from other European countries and the International Monetary Fund.
Still, Europe does offer examples that change is possible. Germany slashed benefits for the long-term unemployed in 2004, a step that analysts credit with prompting more Germans to get jobs as well as improving the country's budget balance. Cuts to entitlements are politically possible, says Daniel Gros, director of the Center for European Policy Studies, a nonpartisan think tank in Brussels, "but societies need some time to get used to the idea."
The U.S. government first offered large-scale assistance during Franklin Delano Roosevelt's New Deal. The Social Security Act, passed in 1935, created the popular retirement program as well as unemployment compensation, the early stages of what became known as "welfare" and assistance to the blind and elderly. In the 1940s, the G.I. Bill offered unemployment benefits, education assistance and loans to veterans. That same decade, Washington began offering free or reduced-price lunches to children from low-income families and, a decade later, monthly benefits to the disabled.
Lyndon Johnson's Great Society programs brought food stamps plus Medicare and Medicaid. In the 1970s, Supplemental Security Income was created on top of routine Social Security benefits for the poorest of the elderly and disabled, and so-called Section 8 vouchers began subsidizing rental housing. The earned-income tax credit was launched in 1975 to offer extra cash to low-wage workers, and grew in the 1990s to become one of the government's principle antipoverty programs.
Benefits for children were expanded in 1997 with the State Children's Health Insurance Program during the Clinton administration -- and were expanded again in 2009. Shortly after President Barack Obama took office, Congress passed the American Recovery and Reinvestment Act, the stimulus bill, which among other things extended unemployment compensation and offered incentives for states to cover more workers.
All this is expensive. Payments to individuals -- a budget category that includes all federal benefit programs plus retirement benefits for federal workers -- will cost $2.4 trillion this year, up 79%, adjusted for inflation, from a decade earlier when the economy was stronger. That represents 64.3% of all federal outlays, the highest percentage in the 70 years the government has been measuring it. The figure was 46.7% in 1990 and 26.2% in 1960.
When the economy recovers, some -- but not all -- current recipients of federal aid are likely to lose their benefits, which some say is reason enough to keep them going for now.
"If there became an expectation that government was going to provide over half of the population's well-being to a significant degree without requiring anything of the recipients, there would be reason for concern," says Robert Reischauer, a former Congressional Budget Office director and now president of the Urban Institute, a liberal-leaning think tank in Washington, D.C. "I don't think that's where we are or where we're headed."
The public appears divided on what to do. A new Allstate/National Journal poll found that 35% of voters want the government to make sure future retirees receive all the benefits they've been promised even if it means raising taxes. Another 34% said the government should make retirement programs "financially sustainable" by making some cuts to those benefits and raising some taxes, and 22% said they'd be willing to see benefits cut to restrain the programs' rising costs.
The call for restraining benefits resonates with voters like Robert Letherman. "You name it, someone is lining up to get bailed out, or a handout, courtesy of the hard-working American taxpayer," says Mr. Letherman, 39, a real-estate developer in Elkhart, Ind.
Mr. Letherman says he has struggled through the recession like many others, but doesn't qualify for government assistance. His income has declined 40% since 2007. Some $4 million in development projects percolating in the spring of 2007 have since been shelved.
He supports helping people in need, says Mr. Letherman, but believes many people game the system. Extended unemployment benefits, for example, give some Americans an excuse not to go back to work, he says. If it were up to him, government would be half the size it is now.
He favors eliminating pensions for all government workers, excluding military and intelligence personnel, and would impose a nationwide sales tax to pay off the country's debt. "If we continue down the path of deficit spending, the great recession of 2008 will be nothing compared to what we will face in five, 10, 20 years," he says.
Cutting federal benefits while the economy is still weak would be a mistake, some analysts say, because it could hinder recovery by giving consumers less money to spend.
Paul Hester has relied on government benefits since he lost his job in June 2009. The 54-year-old microbiologist has a master's degree and was earning a salary of $50,000 at the Indiana State Department of Health. He says he regularly looks for jobs, but has landed only two interviews in the past year.
Influenced by the credit wariness of parents who lived through the Great Depression, the Indianapolis resident has always been thrifty. He once watched his dad walk into a dealership, "plop down $10,000 in cash and buy a car." Mr. Hester has one credit card, and before he was unemployed, he tried to pay it off every month.
He lives on $375 a week in unemployment checks and his health-insurance premiums are subsidized by the federal government under a provision in the fiscal stimulus enacted by Congress in February 2009. His daughter, a college sophomore, pays for part of her schooling with Pell Grants, a federal program for low-income students that is set to expand because of new legislation that increased the number and size of grants.
"I don't like taking government money," says Mr. Hester, but "what else is there?"
-- Marcus Walker contributed to this article.
Write to Sara Murray at sara.murray@wsj.com
__________
Don't know whether these entitlements cause people to become lazy. The WSJ article definitely implies people tend to stay away looking for work when they can get a free handout. Here are a couple of articles that discuss poverty level is at an all time high:
http://www.nytimes.com/2010/09/17/us/17poverty.html
http://money.cnn.com/2010/09/16/news/economy/Census_poverty_rate/index.htm
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/16/AR2010091602698_pf.html
http://www.sacbee.com/2010/09/17/3036096/poverty-in-california-continues.html
And here is an article, titled, "Household wealth takes step backwards":
http://money.cnn.com/2010/09/17/news/economy/household_net_worth/index.htm
by Sara Murray, WALL STREET JOURNAL
Thursday, September 16, 2010
Efforts to tame America's ballooning budget deficit could soon confront a daunting reality: Nearly half of all Americans live in a household in which someone receives government benefits, more than at any time in history.
At the same time, the fraction of American households not paying federal income taxes has also grown -- to an estimated 45% in 2010, from 39% five years ago, according to the Tax Policy Center, a nonpartisan research organization.
A little more than half don't earn enough to be taxed; the rest take so many credits and deductions they don't owe anything. Most still get hit with Medicare and Social Security payroll taxes, but 13% of all U.S. households pay neither federal income nor payroll taxes.
"We have a very large share of the American population that is getting checks from the government," says Keith Hennessey, an economic adviser to President George W. Bush and now a fellow at the conservative Hoover Institution, "and an increasingly smaller portion of the population that's paying for it."
The dimensions of the budget hole were underscored Monday, when the Treasury reported that the government ran a $1.26 trillion deficit for the first 11 months of the fiscal year, on pace to be the second-biggest on record.
Yet even as Americans express concern over the deficit in opinion polls, many oppose benefit cuts, particularly with the economy on an uneven footing. A Wall Street Journal/NBC News poll conducted late last month found 61% of voters were "enthusiastic" or "comfortable" with congressional candidates who support cutting federal spending in general. But 56% expressed the same enthusiasm for candidates who voted to extend unemployment benefits.
As recently as the early 1980s, about 30% of Americans lived in households in which an individual was receiving Social Security, subsidized housing, jobless benefits or other government-provided benefits. By the third quarter of 2008, 44% were, according to the most recent Census Bureau data.
That number has undoubtedly gone up, as the recession has hammered incomes. Some 41.3 million people were on food stamps as of June 2010, for instance, up 45% from June 2008. With unemployment high and federal jobless benefits now available for up to 99 weeks, 9.7 million unemployed workers were receiving checks in late August 2010, more than twice as many as the 4.2 million in August 2008.
Still more Americans -- 19 million by 2019, according to the Congressional Budget Office -- will get federal aid to buy health insurance when legislation passed this year is implemented.
The expanding federal safety net has helped shelter many families from the worst of the downturn. Charlene A. Mueller-Holden doesn't fit the stereotype of a person on benefits. Laid off from J.P. Morgan Chase & Co. (NYSE: JPM - News) in January 2008, Ms. Mueller-Holden, 38, drew unemployment for 99 weeks.
The Newark, Del., resident knocked $40 a month off her mortgage payments through the federal Making Home Affordable Program, designed to keep people in their homes by helping them modify or refinance their mortgages. But when her unemployment benefits ran out, Ms. Mueller-Holden and her husband, a government employee, couldn't afford the $1,008 monthly payments.
She turned to the Delaware State Housing Authority which, under a federally subsidized program aimed at helping families with children stay in their homes, gave her $1,000 a month for five months toward mortgage payments. She and her two sons ate lunch for free at the local school this summer, and she has applied for free lunch for one of her sons who will be a first grader this year.
Ms. Mueller-Holden's family earned too little to pay federal taxes last year, and received an extension on their state taxes. "Quite frankly, I don't care about the deficit," says Ms. Mueller-Holden. "It's going to take years upon years upon years to pay this all back," she says, so it's better to focus on job growth now and deal with the deficit later.
Government data don't show how many of the households receiving government benefits also escape federal taxes. But there is certainly some overlap between the two groups, since many benefits are aimed at those earning too little to pay income taxes and at people who don't have jobs, and who thus don't pay payroll taxes.
Cutting spending on these "entitlements" is widely seen as an inevitable ingredient in any credible deficit-reduction program. Yet despite occasional bouts of belt-tightening in Washington and bursts of discussion about restraining big government, the trend toward more Americans receiving government benefits of one sort or another has continued for more than 70 years -- and shows no sign of abating.
An aging population is adding to the ranks of Americans receiving government benefits, and will continue to do so as more of the large baby-boom generation, those born between 1946 and 1964, become eligible. Today, an estimated 47.4 million people are enrolled in Medicare, up 38% from 1990. By 2030, the number is projected to be 80.4 million.
The difficulty of restraining benefits when so much of the population depends on them is now on view across Europe, where efforts to rein in deficits are forcing governments to cut popular entitlements. European countries have traditionally provided far more generous welfare benefits than the U.S. has, including monthly allowances for children regardless of income, free college tuition and universal health care. Public retirement programs are also bigger, since the combination of aging populations and low birth rates means fewer workers are paying into the system.
In recent months, political leaders in Europe have struggled to convince voters that change is necessary. German Chancellor Angela Merkel has exempted pensions from her government's planned budget cuts, reflecting the growing power of the retiree vote. French President Nicolas Sarkozy is facing mass protests, including a national strike week, as he tries to raise France's minimum retirement age from 60 to 62. Greece's government had to face down demonstrations this year when it slashed pension benefits, as it was forced to do to get bailout money from other European countries and the International Monetary Fund.
Still, Europe does offer examples that change is possible. Germany slashed benefits for the long-term unemployed in 2004, a step that analysts credit with prompting more Germans to get jobs as well as improving the country's budget balance. Cuts to entitlements are politically possible, says Daniel Gros, director of the Center for European Policy Studies, a nonpartisan think tank in Brussels, "but societies need some time to get used to the idea."
The U.S. government first offered large-scale assistance during Franklin Delano Roosevelt's New Deal. The Social Security Act, passed in 1935, created the popular retirement program as well as unemployment compensation, the early stages of what became known as "welfare" and assistance to the blind and elderly. In the 1940s, the G.I. Bill offered unemployment benefits, education assistance and loans to veterans. That same decade, Washington began offering free or reduced-price lunches to children from low-income families and, a decade later, monthly benefits to the disabled.
Lyndon Johnson's Great Society programs brought food stamps plus Medicare and Medicaid. In the 1970s, Supplemental Security Income was created on top of routine Social Security benefits for the poorest of the elderly and disabled, and so-called Section 8 vouchers began subsidizing rental housing. The earned-income tax credit was launched in 1975 to offer extra cash to low-wage workers, and grew in the 1990s to become one of the government's principle antipoverty programs.
Benefits for children were expanded in 1997 with the State Children's Health Insurance Program during the Clinton administration -- and were expanded again in 2009. Shortly after President Barack Obama took office, Congress passed the American Recovery and Reinvestment Act, the stimulus bill, which among other things extended unemployment compensation and offered incentives for states to cover more workers.
All this is expensive. Payments to individuals -- a budget category that includes all federal benefit programs plus retirement benefits for federal workers -- will cost $2.4 trillion this year, up 79%, adjusted for inflation, from a decade earlier when the economy was stronger. That represents 64.3% of all federal outlays, the highest percentage in the 70 years the government has been measuring it. The figure was 46.7% in 1990 and 26.2% in 1960.
When the economy recovers, some -- but not all -- current recipients of federal aid are likely to lose their benefits, which some say is reason enough to keep them going for now.
"If there became an expectation that government was going to provide over half of the population's well-being to a significant degree without requiring anything of the recipients, there would be reason for concern," says Robert Reischauer, a former Congressional Budget Office director and now president of the Urban Institute, a liberal-leaning think tank in Washington, D.C. "I don't think that's where we are or where we're headed."
The public appears divided on what to do. A new Allstate/National Journal poll found that 35% of voters want the government to make sure future retirees receive all the benefits they've been promised even if it means raising taxes. Another 34% said the government should make retirement programs "financially sustainable" by making some cuts to those benefits and raising some taxes, and 22% said they'd be willing to see benefits cut to restrain the programs' rising costs.
The call for restraining benefits resonates with voters like Robert Letherman. "You name it, someone is lining up to get bailed out, or a handout, courtesy of the hard-working American taxpayer," says Mr. Letherman, 39, a real-estate developer in Elkhart, Ind.
Mr. Letherman says he has struggled through the recession like many others, but doesn't qualify for government assistance. His income has declined 40% since 2007. Some $4 million in development projects percolating in the spring of 2007 have since been shelved.
He supports helping people in need, says Mr. Letherman, but believes many people game the system. Extended unemployment benefits, for example, give some Americans an excuse not to go back to work, he says. If it were up to him, government would be half the size it is now.
He favors eliminating pensions for all government workers, excluding military and intelligence personnel, and would impose a nationwide sales tax to pay off the country's debt. "If we continue down the path of deficit spending, the great recession of 2008 will be nothing compared to what we will face in five, 10, 20 years," he says.
Cutting federal benefits while the economy is still weak would be a mistake, some analysts say, because it could hinder recovery by giving consumers less money to spend.
Paul Hester has relied on government benefits since he lost his job in June 2009. The 54-year-old microbiologist has a master's degree and was earning a salary of $50,000 at the Indiana State Department of Health. He says he regularly looks for jobs, but has landed only two interviews in the past year.
Influenced by the credit wariness of parents who lived through the Great Depression, the Indianapolis resident has always been thrifty. He once watched his dad walk into a dealership, "plop down $10,000 in cash and buy a car." Mr. Hester has one credit card, and before he was unemployed, he tried to pay it off every month.
He lives on $375 a week in unemployment checks and his health-insurance premiums are subsidized by the federal government under a provision in the fiscal stimulus enacted by Congress in February 2009. His daughter, a college sophomore, pays for part of her schooling with Pell Grants, a federal program for low-income students that is set to expand because of new legislation that increased the number and size of grants.
"I don't like taking government money," says Mr. Hester, but "what else is there?"
-- Marcus Walker contributed to this article.
Write to Sara Murray at sara.murray@wsj.com
__________
Don't know whether these entitlements cause people to become lazy. The WSJ article definitely implies people tend to stay away looking for work when they can get a free handout. Here are a couple of articles that discuss poverty level is at an all time high:
http://www.nytimes.com/2010/09/17/us/17poverty.html
http://money.cnn.com/2010/09/16/news/economy/Census_poverty_rate/index.htm
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/16/AR2010091602698_pf.html
http://www.sacbee.com/2010/09/17/3036096/poverty-in-california-continues.html
And here is an article, titled, "Household wealth takes step backwards":
http://money.cnn.com/2010/09/17/news/economy/household_net_worth/index.htm
Thursday, September 16, 2010
Expiring tax cuts hit taxpayers at every level
http://news.yahoo.com/s/ap/20100917/ap_on_bi_ge/us_tax_cuts
By STEPHEN OHLEMACHER, Associated Press Writer
WASHINGTON – Here's some pressure for lawmakers: If they don't reach agreement on extending soon-to-expire Bush-era tax cuts, nearly all their constituents back home will get big tax increases.
A typical family of four with a household income of $50,000 a year would have to pay $2,900 more in taxes in 2011, according to a new analysis by Deloitte Tax LLP, a tax consulting firm. The same family making $100,000 a year would see its taxes rise by $4,500.
Wealthier families face even bigger tax hikes. A family of four making $500,000 a year would pay $10,800 more in taxes. The same family making $1 million a year would get a tax increase of $53,200.
The estimates are based on total household income, including wages, capital gains and qualified dividends. The estimated tax bills take into account typical deductions at each income level.
Democrats have been arguing for much of the past decade that tax cuts enacted in 2001 and 2003 under former President George W. Bush provided a windfall for the wealthy. That's true, but they also reduced taxes for the working poor, the middle class, and just about everyone in between.
Those tax cuts expire at the end of the year, setting the stage for a high-stakes debate just before congressional elections in November. If Congress fails to act, families at every income level will see more taxes being withheld from their paychecks come January.
The tax cuts enacted in 2001 and 2003 reduced marginal income tax rates at every level. They also provided a wide range of income tax breaks for education, families with children and married couples.
Taxes on capital gains and dividends were reduced, while the federal estate tax was gradually repealed, though only for this year.
President Barack Obama wants to extend the tax cuts for individuals making less than $200,000 and joint filers making less than $250,000 in adjusted gross income. That's income from wages, capital gains and dividends, before standard deductions and exemptions are subtracted.
Republicans and a growing number of Democrats in Congress want to extend all the tax cuts, at least temporarily.
On Thursday, House Republican Leader John Boehner of Ohio said he wants an up-or-down vote on extending all the tax cuts before congressional elections in November.
"Raising taxes on anyone, especially small businesses, is the wrong thing to do in a struggling economy," Boehner said. "On the issue of job killing tax hikes the American people are not going to accept anything less than the vote that they deserve."
House Speaker Nancy Pelosi, D-Calif., wouldn't commit to vote on any tax proposals before the election. She did, however, pledge to address them by the end of the year.
"The only thing I can tell you is that the tax cuts for the middle class will be extended this Congress," Pelosi told reporters Thursday.
More than half the country backs raising taxes on the richest Americans, according to a new Associated Press-GfK Poll. The survey showed that by 54 percent to 44 percent, most people support raising taxes on the highest earners.
In a breakdown of the numbers, 39 percent agree with Obama, while 15 percent favor raising taxes on everyone by allowing the cuts to expire at year's end. Still, 44 percent say the existing tax cuts should remain in place for everyone, including the wealthy.
While Obama's plan would spare about 97 percent of tax filers, it would mean big tax increases for the wealthy.
Under Obama's plan, a family of four making $325,000 a year would get a tax increase of $5,400, while the same family making $1 million a year would get a tax increase of $56,300, according to the analysis by Deloitte Tax.
A family of four making $5 million a year would get a tax increase of $325,600.
Pelosi said the nation cannot afford to extend tax cuts for top earners.
"I see no justification for going into debt to foreign countries to underwrite and subsidize tax cuts for the wealthiest people in America," Pelosi said.
Making all the tax cuts permanent would add about $3.9 trillion to the national debt over the next decade, according to congressional estimates. Obama's plan would cost a little more than $3 trillion over the same period.
___
Associated Press writer Laurie Kellman contributed to this report.
By STEPHEN OHLEMACHER, Associated Press Writer
WASHINGTON – Here's some pressure for lawmakers: If they don't reach agreement on extending soon-to-expire Bush-era tax cuts, nearly all their constituents back home will get big tax increases.
A typical family of four with a household income of $50,000 a year would have to pay $2,900 more in taxes in 2011, according to a new analysis by Deloitte Tax LLP, a tax consulting firm. The same family making $100,000 a year would see its taxes rise by $4,500.
Wealthier families face even bigger tax hikes. A family of four making $500,000 a year would pay $10,800 more in taxes. The same family making $1 million a year would get a tax increase of $53,200.
The estimates are based on total household income, including wages, capital gains and qualified dividends. The estimated tax bills take into account typical deductions at each income level.
Democrats have been arguing for much of the past decade that tax cuts enacted in 2001 and 2003 under former President George W. Bush provided a windfall for the wealthy. That's true, but they also reduced taxes for the working poor, the middle class, and just about everyone in between.
Those tax cuts expire at the end of the year, setting the stage for a high-stakes debate just before congressional elections in November. If Congress fails to act, families at every income level will see more taxes being withheld from their paychecks come January.
The tax cuts enacted in 2001 and 2003 reduced marginal income tax rates at every level. They also provided a wide range of income tax breaks for education, families with children and married couples.
Taxes on capital gains and dividends were reduced, while the federal estate tax was gradually repealed, though only for this year.
President Barack Obama wants to extend the tax cuts for individuals making less than $200,000 and joint filers making less than $250,000 in adjusted gross income. That's income from wages, capital gains and dividends, before standard deductions and exemptions are subtracted.
Republicans and a growing number of Democrats in Congress want to extend all the tax cuts, at least temporarily.
On Thursday, House Republican Leader John Boehner of Ohio said he wants an up-or-down vote on extending all the tax cuts before congressional elections in November.
"Raising taxes on anyone, especially small businesses, is the wrong thing to do in a struggling economy," Boehner said. "On the issue of job killing tax hikes the American people are not going to accept anything less than the vote that they deserve."
House Speaker Nancy Pelosi, D-Calif., wouldn't commit to vote on any tax proposals before the election. She did, however, pledge to address them by the end of the year.
"The only thing I can tell you is that the tax cuts for the middle class will be extended this Congress," Pelosi told reporters Thursday.
More than half the country backs raising taxes on the richest Americans, according to a new Associated Press-GfK Poll. The survey showed that by 54 percent to 44 percent, most people support raising taxes on the highest earners.
In a breakdown of the numbers, 39 percent agree with Obama, while 15 percent favor raising taxes on everyone by allowing the cuts to expire at year's end. Still, 44 percent say the existing tax cuts should remain in place for everyone, including the wealthy.
While Obama's plan would spare about 97 percent of tax filers, it would mean big tax increases for the wealthy.
Under Obama's plan, a family of four making $325,000 a year would get a tax increase of $5,400, while the same family making $1 million a year would get a tax increase of $56,300, according to the analysis by Deloitte Tax.
A family of four making $5 million a year would get a tax increase of $325,600.
Pelosi said the nation cannot afford to extend tax cuts for top earners.
"I see no justification for going into debt to foreign countries to underwrite and subsidize tax cuts for the wealthiest people in America," Pelosi said.
Making all the tax cuts permanent would add about $3.9 trillion to the national debt over the next decade, according to congressional estimates. Obama's plan would cost a little more than $3 trillion over the same period.
___
Associated Press writer Laurie Kellman contributed to this report.
Wednesday, September 15, 2010
41 White House aides owe the IRS $831,000 in back taxes -- and they're not alone
http://latimesblogs.latimes.com/washington/2010/09/congress-taxes-irs.html
Over the years a lot of suspicion has built up across the country about Washington and its population of opportunistic transients coming to see themselves as a special kind of person, somehow above average working Americans who don't labor down in that monument-strewn former swamp.
Well, finally, an end to all those undocumented doubts. Thanks to some diligent digging by the Washington Post, those suspicions can at last be put to rest.
They're correct. Accurate. Dead-on. Laser-guided. On target. Bingo-bango. As clear as it's always seemed to those Americans who don't feel special entitlements and do meet their government obligations.
We now know that federal employees across the nation owe fully $1 billion in back taxes to the Internal Revenue Service.
As in, 1,000 times one million dollars. All this political jabber about giving middle-class ...
... Americans a tax cut. Thousands of feds have been giving themselves one all along -- unofficially. And these tax scofflaws include more than three dozen folks who work for the president with that newly decorated Oval Office.
The Post's T.W. Farnum did some research and found that out of the total sum, just 638 workers on Capitol Hill owe the IRS $9.3 million in back taxes. As in, overdue. The IRS gets stiffed by the legislative body that controls its budget. How Washington works.
Now, back taxes have been a problem for the Obama-Biden administration. You may recall early on that Tom Daschle was the president's top pick to run the Health and Human Services Department. But it turned out the former Democratic senator, who was un-elected from South Dakota in 2004, owed something like $120,000 to the IRS for things from his subsequent benefactor that he just forgot to pay taxes on. You know how that is. $120G's here or there. So he dropped out.
And then we learned this guy Timothy Geithner owed something like $42,000 in back taxes and penalties to the IRS, which is one of the agencies that he'd be in charge of as secretary of the Treasury. The fine fellow who's supposed to know about handling everyone else's money. In the end this was excused by Washington's bipartisan CYA culture as one of those inadvertent accidental oversights that somehow never seem to happen on the side of paying too much taxes.
And under Geithner's expert guidance the U.S. economy has been, well, wow! Just look at it.
Privacy laws prevent release of individual tax delinquents' names. But we do know that as of the end of 2009, 41 people inside Obama's very own White House owe the government they're allegedly running a total of $831,055 in back taxes. That would cover a lot of special chocolate desserts in the White House Mess.
In the House of Representatives, 421 people owe a total $6,524,892. In the Senate, 217 owe $2,774,836. In the IRS' parent department, Treasury, 1,204 owe $7,670,814. At the Labor Department, where Secretary Hilda Solis' husband had some back-tax problems before her confirmation, 463 owe $7,481,463. Eighty-one workers for the Federal Reserve System's board of governors owe $1,076,733.
Over at the Justice Department, which is so busy enforcing other laws and suing Arizona, 1,971 employees still owe $14,350,152 in overdue taxes.
Then, we come to the Department of Homeland Security, which is run by Janet Napolitano, the former governor of Arizona who preferred to call terrorist acts "man-caused disasters." Homeland Security is keeping all of us safe by ensuring that a brave Dutch tourist is aboard every inbound international flight to thwart any would-be bomber with explosives in his underpants.
Within that department, there reside 4,856 people who owe the tax agency a whopping total of $37,012,174.
And they're checking our pockets for metal and coins?
-- Andrew Malcolm
Also read http://www.washingtonpost.com/wp-dyn/content/article/2010/09/09/AR2010090903376.html
Over the years a lot of suspicion has built up across the country about Washington and its population of opportunistic transients coming to see themselves as a special kind of person, somehow above average working Americans who don't labor down in that monument-strewn former swamp.
Well, finally, an end to all those undocumented doubts. Thanks to some diligent digging by the Washington Post, those suspicions can at last be put to rest.
They're correct. Accurate. Dead-on. Laser-guided. On target. Bingo-bango. As clear as it's always seemed to those Americans who don't feel special entitlements and do meet their government obligations.
We now know that federal employees across the nation owe fully $1 billion in back taxes to the Internal Revenue Service.
As in, 1,000 times one million dollars. All this political jabber about giving middle-class ...
... Americans a tax cut. Thousands of feds have been giving themselves one all along -- unofficially. And these tax scofflaws include more than three dozen folks who work for the president with that newly decorated Oval Office.
The Post's T.W. Farnum did some research and found that out of the total sum, just 638 workers on Capitol Hill owe the IRS $9.3 million in back taxes. As in, overdue. The IRS gets stiffed by the legislative body that controls its budget. How Washington works.
Now, back taxes have been a problem for the Obama-Biden administration. You may recall early on that Tom Daschle was the president's top pick to run the Health and Human Services Department. But it turned out the former Democratic senator, who was un-elected from South Dakota in 2004, owed something like $120,000 to the IRS for things from his subsequent benefactor that he just forgot to pay taxes on. You know how that is. $120G's here or there. So he dropped out.
And then we learned this guy Timothy Geithner owed something like $42,000 in back taxes and penalties to the IRS, which is one of the agencies that he'd be in charge of as secretary of the Treasury. The fine fellow who's supposed to know about handling everyone else's money. In the end this was excused by Washington's bipartisan CYA culture as one of those inadvertent accidental oversights that somehow never seem to happen on the side of paying too much taxes.
And under Geithner's expert guidance the U.S. economy has been, well, wow! Just look at it.
Privacy laws prevent release of individual tax delinquents' names. But we do know that as of the end of 2009, 41 people inside Obama's very own White House owe the government they're allegedly running a total of $831,055 in back taxes. That would cover a lot of special chocolate desserts in the White House Mess.
In the House of Representatives, 421 people owe a total $6,524,892. In the Senate, 217 owe $2,774,836. In the IRS' parent department, Treasury, 1,204 owe $7,670,814. At the Labor Department, where Secretary Hilda Solis' husband had some back-tax problems before her confirmation, 463 owe $7,481,463. Eighty-one workers for the Federal Reserve System's board of governors owe $1,076,733.
Over at the Justice Department, which is so busy enforcing other laws and suing Arizona, 1,971 employees still owe $14,350,152 in overdue taxes.
Then, we come to the Department of Homeland Security, which is run by Janet Napolitano, the former governor of Arizona who preferred to call terrorist acts "man-caused disasters." Homeland Security is keeping all of us safe by ensuring that a brave Dutch tourist is aboard every inbound international flight to thwart any would-be bomber with explosives in his underpants.
Within that department, there reside 4,856 people who owe the tax agency a whopping total of $37,012,174.
And they're checking our pockets for metal and coins?
-- Andrew Malcolm
Also read http://www.washingtonpost.com/wp-dyn/content/article/2010/09/09/AR2010090903376.html
Wednesday, September 8, 2010
Economists further scale back U.S. growth outlook
http://news.yahoo.com/s/nm/20100908/bs_nm/us_usa_economy
By Chris Reese
NEW YORK (Reuters) – Stubbornly high unemployment and signs of persistent weakness in the housing market have prompted economists to further cut their outlook for U.S. growth in the second half of the year, a Reuters poll showed on Wednesday.
The September poll marked the third consecutive month economists had scaled back expectations for gross domestic product in the second half, and followed the U.S. government's announcement on Friday that unemployment ticked up to 9.6 percent in August.
Lower growth expectations means the U.S. Federal Reserve is unlikely to raise interest rates until the third quarter of 2011, according to the poll, not the second quarter as forecast in a poll a month ago. However, the chances of the world's biggest economy falling back into recession have fallen to 20 percent, from 25 percent a month ago.
The median of forecasts in a survey of more than 70 economists puts annualized U.S. GDP growth at 1.8 percent in the third quarter of this year and 2.1 percent in the fourth quarter.
A similar poll conducted in early August forecast third-quarter growth at 2.4 percent and fourth-quarter growth at 2.5 percent. A poll taken in July forecast growth of 2.6 percent and 2.7 percent during the respective quarters.
Struggling homes sales, weak consumer confidence and the lofty unemployment levels are prompting economists to rein in growth expectations.
"The real risk is sub-par growth for an extended period," said Michelle Girard, senior economist at RBS in Stamford, Connecticut.
Overall, GDP is forecast to average 2.7 percent in 2010, down from 2.9 percent in the August poll and 3 percent in the July poll. The median of forecasts in the most recent poll was for average GDP growth of 2.4 percent in 2011, down from an August forecast of 2.7 percent and a July forecast of 2.8 percent.
The government said on Friday that U.S. employment fell for a third straight month in August, with 54,000 jobs lost during the month. The drop was less than expected, however, and private hiring increased.
Still, the lack of substantial job creation troubled some economists. Jonathan Basile, economist at Credit Suisse in New York, said his bank on Friday reduced its expectations for third-quarter GDP to 2 percent from 2.5 percent, and for the fourth quarter to 2.2 percent from 3.2 percent.
"There has been a downshift in private jobs growth, and that is consistent with our new forecast which has just been downgraded," Basile said.
FED ON HOLD
The slower growth will probably mean the U.S. Federal Reserve will hold recommended interest rates at their current level near zero until at least the second half of next year, according to the results of the poll.
The median of forecasts is for the central bank to increase rates to 0.25 percent in the third quarter of 2011 from the current range of zero to 0.25 percent.
In the early August poll, the median called for an initial rate increase to 0.5 percent in the second quarter of 2011.
The Fed is now expected to increase interest rates to 0.75 percent in the fourth quarter of next year, down from an original estimate of a hike to 1.25 percent during the quarter.
And while growth is expected to slow, the median of forecasts from economists assigns only a 20 percent chance the U.S. will tip into a double-dip recession, down from a 25 percent chance in an August 27 poll.
Inflation was also forecast to remain subdued. The third- and fourth-quarter consumer price index was forecast at 1.2 percent and 0.9 percent respectively, which were virtually unchanged from the August poll. The overall CPI index was expected to be 1.6 percent higher for 2010, in line with August's forecast.
Core CPI, which does not include food or energy costs, was estimated at 1 percent in the third quarter of this year, up from 0.9 percent in the August poll, while fourth-quarter core CPI was pegged at 0.9 percent, which was unchanged from the previous poll.
(Polling by the Bangalore Polling Unit)
(Editing by Susan Fenton)
By Chris Reese
NEW YORK (Reuters) – Stubbornly high unemployment and signs of persistent weakness in the housing market have prompted economists to further cut their outlook for U.S. growth in the second half of the year, a Reuters poll showed on Wednesday.
The September poll marked the third consecutive month economists had scaled back expectations for gross domestic product in the second half, and followed the U.S. government's announcement on Friday that unemployment ticked up to 9.6 percent in August.
Lower growth expectations means the U.S. Federal Reserve is unlikely to raise interest rates until the third quarter of 2011, according to the poll, not the second quarter as forecast in a poll a month ago. However, the chances of the world's biggest economy falling back into recession have fallen to 20 percent, from 25 percent a month ago.
The median of forecasts in a survey of more than 70 economists puts annualized U.S. GDP growth at 1.8 percent in the third quarter of this year and 2.1 percent in the fourth quarter.
A similar poll conducted in early August forecast third-quarter growth at 2.4 percent and fourth-quarter growth at 2.5 percent. A poll taken in July forecast growth of 2.6 percent and 2.7 percent during the respective quarters.
Struggling homes sales, weak consumer confidence and the lofty unemployment levels are prompting economists to rein in growth expectations.
"The real risk is sub-par growth for an extended period," said Michelle Girard, senior economist at RBS in Stamford, Connecticut.
Overall, GDP is forecast to average 2.7 percent in 2010, down from 2.9 percent in the August poll and 3 percent in the July poll. The median of forecasts in the most recent poll was for average GDP growth of 2.4 percent in 2011, down from an August forecast of 2.7 percent and a July forecast of 2.8 percent.
The government said on Friday that U.S. employment fell for a third straight month in August, with 54,000 jobs lost during the month. The drop was less than expected, however, and private hiring increased.
Still, the lack of substantial job creation troubled some economists. Jonathan Basile, economist at Credit Suisse in New York, said his bank on Friday reduced its expectations for third-quarter GDP to 2 percent from 2.5 percent, and for the fourth quarter to 2.2 percent from 3.2 percent.
"There has been a downshift in private jobs growth, and that is consistent with our new forecast which has just been downgraded," Basile said.
FED ON HOLD
The slower growth will probably mean the U.S. Federal Reserve will hold recommended interest rates at their current level near zero until at least the second half of next year, according to the results of the poll.
The median of forecasts is for the central bank to increase rates to 0.25 percent in the third quarter of 2011 from the current range of zero to 0.25 percent.
In the early August poll, the median called for an initial rate increase to 0.5 percent in the second quarter of 2011.
The Fed is now expected to increase interest rates to 0.75 percent in the fourth quarter of next year, down from an original estimate of a hike to 1.25 percent during the quarter.
And while growth is expected to slow, the median of forecasts from economists assigns only a 20 percent chance the U.S. will tip into a double-dip recession, down from a 25 percent chance in an August 27 poll.
Inflation was also forecast to remain subdued. The third- and fourth-quarter consumer price index was forecast at 1.2 percent and 0.9 percent respectively, which were virtually unchanged from the August poll. The overall CPI index was expected to be 1.6 percent higher for 2010, in line with August's forecast.
Core CPI, which does not include food or energy costs, was estimated at 1 percent in the third quarter of this year, up from 0.9 percent in the August poll, while fourth-quarter core CPI was pegged at 0.9 percent, which was unchanged from the previous poll.
(Polling by the Bangalore Polling Unit)
(Editing by Susan Fenton)
Friday, August 20, 2010
1099 Reporting Changes Provoke Opposition
The IRS has a problem if this 1099-MISC filing requirement under the Health Care Reform Act is not repealed because there is another requirement for credit card companies to report all charged sales to the IRS for each merchant. This will double up all credit card/PayPal type sales. The IRS commissioner recently announced that the IRS would use its power to exempt purchases using credit cards from 1099-MISC reporting. However, if businesses don't report credit card purchases on 1099-MISC, they would have the added burden to segregate cash purchases from credit card purchases. Most small businesses don't have that kind of capability. The result is all credit card sales to businesses will be reported twice.
If this filing requirement is repealed, then the cost of the health care reform will be bigger on paper, as the Obama administration claims this filing requirement would generate tax revenues.
http://www.webcpa.com/news/1099-Reporting-Changes-Provoke-Opposition-55300-1.html
By Roger Russell, Senior Editor, Accounting Today
My guess is that there’s at least a 50-50 chance that the new Form 1099 reporting mandate will be repealed or modified before they go into effect. On almost anyone’s benefit-burden scale, the burdens far outweigh the benefits.
While they don’t go into effect until 2012, they have created a firestorm of concern and criticism, and have been a frequent topic on editorial pages and Sunday talk shows. The requirements, included in the health care legislation passed in March, will require the tracking of payments for goods in addition to services, and for payments to corporations as well as individuals. All businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors
The AICPA was among the numerous organization responding to the requirements, saying it would be especially burdensome and costly for small businesses to compile the data and prepare the Form 1099-MISC return, and calling for outright repeal of the measure.
Moreover, the AICPA said, information provided by the forms will not be particularly helpful in collecting any unpaid taxes because it will be difficult to reconcile payments reported on the forms with the income reported by the vendor.
“This expansion of information reporting may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face,” the AICPA stated. “When businesses start tax compliance planning for 2012, Section 9006 [of the Patient Protection and Affordable Care Act, the health care legislation that introduced the mandate] will impose a significant increase in costs on business with respect to the accumulation of relevant information and the preparation and mailing of Forms1099-MISC.”
In addition, many corporations operate on a fiscal year basis rather than on a calendar year, the Institute noted. “Receipt of Forms 1099-MISC by these fiscal year corporations would not provide useful information as the corporations would be receiving calendar year information, triggering a burdensome income reconciliation procedure for the taxpayer that would be necessary to interpret the data,” said the AICPA.
“We strongly support repeal of the requirement,” AICPA senior technical manager Benson Goldstein told me.
At the same time, he said, the Institute will participate in offering suggestions to the IRS to implement the legislation in a more reasonable manner.
“We will take the opportunity to offer comments to the IRS,” he said. “Our commenting is not to hedge our bets. It’s just that we are taking the opportunity that the IRS is offering because we don’t know how the legislative calendar will work out. But our strongly held view is that the better way is repeal.”
This week, the U. S. Chamber of Commerce sent its own letter to Congress calling for repeal. The letter included 1,100 signatures from local chambers of commerce, associations, and businesses of all sizes. The letter pointed out that the requirement would increase accounting costs, and expose businesses to costly and unjustified audits.
Moreover, it said the mandate could alter marketplace behavior to the detriment of small businesses and startups. Customers might consolidate their purchases by using several large vendors with broad geographic presence and more diverse product lines instead of a number of small vendors.
The logic of the requirement falls apart when you consider how the information will be used. For example, even if Home Depot received 1099s from all of its business customers, would the information be of any value? And if the information has no value, it shouldn’t be required.
If this filing requirement is repealed, then the cost of the health care reform will be bigger on paper, as the Obama administration claims this filing requirement would generate tax revenues.
http://www.webcpa.com/news/1099-Reporting-Changes-Provoke-Opposition-55300-1.html
By Roger Russell, Senior Editor, Accounting Today
My guess is that there’s at least a 50-50 chance that the new Form 1099 reporting mandate will be repealed or modified before they go into effect. On almost anyone’s benefit-burden scale, the burdens far outweigh the benefits.
While they don’t go into effect until 2012, they have created a firestorm of concern and criticism, and have been a frequent topic on editorial pages and Sunday talk shows. The requirements, included in the health care legislation passed in March, will require the tracking of payments for goods in addition to services, and for payments to corporations as well as individuals. All businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Forms 1099 to vendors
The AICPA was among the numerous organization responding to the requirements, saying it would be especially burdensome and costly for small businesses to compile the data and prepare the Form 1099-MISC return, and calling for outright repeal of the measure.
Moreover, the AICPA said, information provided by the forms will not be particularly helpful in collecting any unpaid taxes because it will be difficult to reconcile payments reported on the forms with the income reported by the vendor.
“This expansion of information reporting may prove to be so burdensome to small businesses that we believe it will significantly contribute to the hurdles to growth and formation that businesses face,” the AICPA stated. “When businesses start tax compliance planning for 2012, Section 9006 [of the Patient Protection and Affordable Care Act, the health care legislation that introduced the mandate] will impose a significant increase in costs on business with respect to the accumulation of relevant information and the preparation and mailing of Forms1099-MISC.”
In addition, many corporations operate on a fiscal year basis rather than on a calendar year, the Institute noted. “Receipt of Forms 1099-MISC by these fiscal year corporations would not provide useful information as the corporations would be receiving calendar year information, triggering a burdensome income reconciliation procedure for the taxpayer that would be necessary to interpret the data,” said the AICPA.
“We strongly support repeal of the requirement,” AICPA senior technical manager Benson Goldstein told me.
At the same time, he said, the Institute will participate in offering suggestions to the IRS to implement the legislation in a more reasonable manner.
“We will take the opportunity to offer comments to the IRS,” he said. “Our commenting is not to hedge our bets. It’s just that we are taking the opportunity that the IRS is offering because we don’t know how the legislative calendar will work out. But our strongly held view is that the better way is repeal.”
This week, the U. S. Chamber of Commerce sent its own letter to Congress calling for repeal. The letter included 1,100 signatures from local chambers of commerce, associations, and businesses of all sizes. The letter pointed out that the requirement would increase accounting costs, and expose businesses to costly and unjustified audits.
Moreover, it said the mandate could alter marketplace behavior to the detriment of small businesses and startups. Customers might consolidate their purchases by using several large vendors with broad geographic presence and more diverse product lines instead of a number of small vendors.
The logic of the requirement falls apart when you consider how the information will be used. For example, even if Home Depot received 1099s from all of its business customers, would the information be of any value? And if the information has no value, it shouldn’t be required.
8109 coupons to be discontinued
I have always advocated use of electronic payments. Using EFTPS (electronic federal tax payment system) is easy and convenient.
http://www.webcpa.com/news/IRS-Expands-Use-Electronic-Payments-55301-1.html
Washington, D.C. (August 19, 2010)
By WebCPA Staff
The Internal Revenue Service issued proposed regulations on Thursday to significantly increase the number of electronic transactions between taxpayers and the federal government.
In accordance with a Financial Management Service initiative announced in April of this year, the proposed regulations (REG 153340-09) would eliminate the rules for making federal tax deposits by paper coupon because the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010. The proposed regulations generally maintain the existing rules for depositing federal taxes through the Electronic Federal Tax Payment System.
Using EFTPS to make federal tax deposits provides substantial benefits to both taxpayers and the government, the IRS noted. EFTPS users can make tax payments 24 hours a day, seven days a week from home or the office.
Deposits can be made online with a computer or by telephone. EFTPS also significantly reduces payment-related errors that could result in a penalty. The system helps taxpayers schedule dates to make payments even when they are out of town or on vacation when a payment is due. EFTPS business users can schedule payments up to 120 days in advance of the desired payment date.
Information on EFTPS, including how to enroll, can be found at www.eftps.gov or by calling EFTPS Customer Service at (800) 555-4477.
Some businesses paying a minimal amount of tax may make their payments with the related tax return, instead of using EFTPS. More details regarding taxes required to be deposited using EFTPS, dollar thresholds and other specific requirements are in the proposed regulations.
http://www.webcpa.com/news/IRS-Expands-Use-Electronic-Payments-55301-1.html
Washington, D.C. (August 19, 2010)
By WebCPA Staff
The Internal Revenue Service issued proposed regulations on Thursday to significantly increase the number of electronic transactions between taxpayers and the federal government.
In accordance with a Financial Management Service initiative announced in April of this year, the proposed regulations (REG 153340-09) would eliminate the rules for making federal tax deposits by paper coupon because the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010. The proposed regulations generally maintain the existing rules for depositing federal taxes through the Electronic Federal Tax Payment System.
Using EFTPS to make federal tax deposits provides substantial benefits to both taxpayers and the government, the IRS noted. EFTPS users can make tax payments 24 hours a day, seven days a week from home or the office.
Deposits can be made online with a computer or by telephone. EFTPS also significantly reduces payment-related errors that could result in a penalty. The system helps taxpayers schedule dates to make payments even when they are out of town or on vacation when a payment is due. EFTPS business users can schedule payments up to 120 days in advance of the desired payment date.
Information on EFTPS, including how to enroll, can be found at www.eftps.gov or by calling EFTPS Customer Service at (800) 555-4477.
Some businesses paying a minimal amount of tax may make their payments with the related tax return, instead of using EFTPS. More details regarding taxes required to be deposited using EFTPS, dollar thresholds and other specific requirements are in the proposed regulations.
Tuesday, August 17, 2010
New California tax rate and law
The FTB has announced changes in the 2010 tax rate schedules, return filing thresholds, standard deduction, phaseout of itemized deductions, personal exemptions, phaseout of personal exemptions, various credit changes and the AMT exemption. You can view all of these changes at http://www.ftb.ca.gov/forms/2010_California_Tax_Rates_and_Exemptions.shtml
On 8/13/2010, Governor Schwarzenegger signed AB 2177, effective 1/1/2011 through 12/31/2017. This bill authorizes the FTB to issue regulations authorizing electronic communications with taxpayers and representatives (both sending and receiving) for personal and corporation income tax matters after receiving the taxpayer's consent. This would include sending notices, statements, bills, protests, and other communications to a taxpayer's secure mailbox on the FTB's website. You can read the bill at http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_2151-2200/ab_2177_bill_20100813_chaptered.pdf
On 8/13/2010, Governor Schwarzenegger signed AB 2177, effective 1/1/2011 through 12/31/2017. This bill authorizes the FTB to issue regulations authorizing electronic communications with taxpayers and representatives (both sending and receiving) for personal and corporation income tax matters after receiving the taxpayer's consent. This would include sending notices, statements, bills, protests, and other communications to a taxpayer's secure mailbox on the FTB's website. You can read the bill at http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_2151-2200/ab_2177_bill_20100813_chaptered.pdf
Saturday, August 14, 2010
Monday, August 2, 2010
Congress and Estate-Tax Revisions
http://finance.yahoo.com/news/Congress-and-EstateTax-wallstreet-1603551094.html?x=0
Tom Herman, On Sunday August 1, 2010, 1:03 am EDT
Q: Who in Congress are the key leadership players on revising the estate tax? Is this a separate issue or part of overall tax reform? Is it possible they will deal with this prior to their August recess?
A: Among the major players are Senate Majority Leader Harry Reid, a Nevada Democrat, and Sen. Max Baucus (D., Mont.), who heads the Senate Finance Committee, which oversees tax legislation.
Others include Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee; Sen. Jon Kyl (R., Ariz.); and Sen. Blanche Lincoln (D., Ark.)
The main focus is on the Senate since the House already has approved estate-tax legislation. Among the key players in the House: Speaker Nancy Pelosi, a Democrat from California, and Democratic Rep. Sandy Levin of Michigan, chairman of the powerful Ways and Means Committee. Rep. Dave Camp of Michigan is the ranking Republican on the Ways and Means Committee.
On your question about timing: Nobody knows when Congress will act, or whether this tax will be dealt with as part of some wide-ranging legislation. It's possible that the Senate might reach agreement in coming weeks. But lawmakers might wait to tackle the issue until after the November elections.
Congress might be unable to reach any agreement this year, some analysts note. If Congress takes no action, the estate tax, which expired at the end of last year, will return next year with a basic exemption of $1 million and a top rate of 55% on the largest estates. (Transfers between spouses typically are tax-free.) For 2009, the basic exemption was $3.5 million, and the top rate was 45%.
Here's a recent development that bears watching: Sens. Kyl and Lincoln introduced a bill that would set the top estate-tax rate permanently at 35%. It also would set the exemption amount at $5 million, phased in over 10 years and indexed for inflation.
And it would restore what's known as "stepped-up basis" for inherited assets that have gone up in value. Essentially, it means stocks, bonds and other assets you inherit typically would be valued on the date of death of your benefactor, instead of what that person originally paid for them.
That's important for calculating capital-gains taxes when you eventually sell those assets.
Write to Tom Herman at tom.herman@wsj.com
Here is a link to Senator Kyl's web site on the proposed bill, http://kyl.senate.gov/record.cfm?id=326353
Senator Lincoln's press release is at http://lincoln.senate.gov/newsroom/2010-7-14-1.cfm
H.R. 5297 is at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h5297pcs.txt.pdf
CNN Money recently has an articled, titled "Estate tax in limbo". Read it at http://money.cnn.com/2010/06/18/pf/taxes/estate_tax/index.htm
Tom Herman, On Sunday August 1, 2010, 1:03 am EDT
Q: Who in Congress are the key leadership players on revising the estate tax? Is this a separate issue or part of overall tax reform? Is it possible they will deal with this prior to their August recess?
A: Among the major players are Senate Majority Leader Harry Reid, a Nevada Democrat, and Sen. Max Baucus (D., Mont.), who heads the Senate Finance Committee, which oversees tax legislation.
Others include Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee; Sen. Jon Kyl (R., Ariz.); and Sen. Blanche Lincoln (D., Ark.)
The main focus is on the Senate since the House already has approved estate-tax legislation. Among the key players in the House: Speaker Nancy Pelosi, a Democrat from California, and Democratic Rep. Sandy Levin of Michigan, chairman of the powerful Ways and Means Committee. Rep. Dave Camp of Michigan is the ranking Republican on the Ways and Means Committee.
On your question about timing: Nobody knows when Congress will act, or whether this tax will be dealt with as part of some wide-ranging legislation. It's possible that the Senate might reach agreement in coming weeks. But lawmakers might wait to tackle the issue until after the November elections.
Congress might be unable to reach any agreement this year, some analysts note. If Congress takes no action, the estate tax, which expired at the end of last year, will return next year with a basic exemption of $1 million and a top rate of 55% on the largest estates. (Transfers between spouses typically are tax-free.) For 2009, the basic exemption was $3.5 million, and the top rate was 45%.
Here's a recent development that bears watching: Sens. Kyl and Lincoln introduced a bill that would set the top estate-tax rate permanently at 35%. It also would set the exemption amount at $5 million, phased in over 10 years and indexed for inflation.
And it would restore what's known as "stepped-up basis" for inherited assets that have gone up in value. Essentially, it means stocks, bonds and other assets you inherit typically would be valued on the date of death of your benefactor, instead of what that person originally paid for them.
That's important for calculating capital-gains taxes when you eventually sell those assets.
Write to Tom Herman at tom.herman@wsj.com
Here is a link to Senator Kyl's web site on the proposed bill, http://kyl.senate.gov/record.cfm?id=326353
Senator Lincoln's press release is at http://lincoln.senate.gov/newsroom/2010-7-14-1.cfm
H.R. 5297 is at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h5297pcs.txt.pdf
CNN Money recently has an articled, titled "Estate tax in limbo". Read it at http://money.cnn.com/2010/06/18/pf/taxes/estate_tax/index.htm
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