I have sympathy for Mr. Kirk. His motive was good, his problem was he used an unqualified paid preparer. We should always report all 1099 income received. IRS matches them every year with tax returns in a program called CP-2000. Not reporting income is asking for trouble.
http://www.webcpa.com/article.cfm?ARTICLEID=30898
Washington, D.C. (March 3, 2009)
By WebCPA staff
Ron Kirk, the Obama administration’s nominee for U.S. Trade Representative, has agreed to pay $9,975 in back taxes he owed on $37,750 in speaking fees.
The former Dallas mayor routinely asked for his speaking honoraria to be donated to his alma mater, Austin College, but he made the wrong entries on his 2004-2007 tax returns for the income and charitable deductions, according to a report by the Senate Finance Committee. He explained to the committee in answers to a questionnaire that since he routinely asked for the speaking fees to be donated to Austin College, he did not think the honoraria counted as taxable income and his paid preparer agreed. However, he now plans to file amended tax returns.
His confirmation hearing is scheduled for Monday, March 9. Kirk is at least the fifth nominee for an Obama administration post to run into tax problems. Other problems have arisen with Treasury Secretary Timothy Geithner and Labor Secretary Hilda Solis, who were both confirmed. However, Health and Human Services Secretary-designate Tom Daschle and chief performance officer Nancy Killefer were forced to withdraw their nominations (see How (Expletive) Hard Is This?).
In Kirk’s case, he paid additional tax of $2,188 and additional interest of $139 last October for tax year 2006 after the IRS notified him that he had failed to report a speaking honorarium of $5,000 and dividend income of $819. The return was prepared by a paid tax preparer and filed jointly with his wife. The IRS identified the unreported income during a routine match of his Form 1099 income with the Kirks’ tax return.
Despite the tax problems, Senate Finance Committee Chairman Max Baucus, D-Mont., expressed his support. “Mayor Kirk is the right person for this job and I will work to move his nomination quickly,” he said in a statement.
Wednesday, March 4, 2009
Tuesday, March 3, 2009
California Real Estate Withholding Laws Change
http://calcpablogs.org/buzz/2009/03/03/california-real-estate-withholding-laws-change/
Assembly Bill 3078 amended California Revenue and Taxation Code secs. 18662 and 18668 withholding laws effective Jan. 1, 2009, as follows:
▸ Withholding Rates: Non-California partnerships are now subject to withholding requirements on the sale of California real property at a rate of 3 and one-third percent of sales proceeds or 9.3 percent of gain. The alternative withholding rates for the sale of California real property increased to 10.8 percent for S corps and 12.8 percent for financial S corps.
▸ Installment Sales: Buyers are required to withhold on the principal portion of each installment payment if the sale of California real property is structured as an installment sale.
In addition, withholding amounts can be collected from the withholding agent if the withholding agent fails to withhold or remit the withheld amounts. The new statute provides a clearer method for assessment and collection of unremitted withholding.
Assembly Bill 3078 amended California Revenue and Taxation Code secs. 18662 and 18668 withholding laws effective Jan. 1, 2009, as follows:
▸ Withholding Rates: Non-California partnerships are now subject to withholding requirements on the sale of California real property at a rate of 3 and one-third percent of sales proceeds or 9.3 percent of gain. The alternative withholding rates for the sale of California real property increased to 10.8 percent for S corps and 12.8 percent for financial S corps.
▸ Installment Sales: Buyers are required to withhold on the principal portion of each installment payment if the sale of California real property is structured as an installment sale.
In addition, withholding amounts can be collected from the withholding agent if the withholding agent fails to withhold or remit the withheld amounts. The new statute provides a clearer method for assessment and collection of unremitted withholding.
IRS to Push 1099-MISC Compliance
http://www.webcpa.com/article.cfm?articleid=30892
Washington, D.C. (March 2, 2009)
By WebCPA staff
The Internal Revenue Service could be doing more to encourage businesses to report miscellaneous income payments on 1099-MISC forms, according to a new report.
While businesses reported about $6 trillion worth of such payments in 2006, the Government Accountability Office estimates that even a small share of payers that fail to submit the 1099-MISCs could result in billions of dollars in unreported payments on the payees’ tax returns. Data from the IRS suggests that payees are more likely to report such income on their tax returns if the IRS receives the payers’ information returns.
The IRS does not know to what extent payers fail to submit the required 1099-MISCs, but various sources point to the possibility of a significant problem. For tax year 2005, 8 percent of the approximately 50 million small businesses with assets under $10 million submitted 1099-MISCs, but the IRS does not know how many of the other 92 percent were required to report payments but did not.
Many business payments, such as payments to corporations, are not subject to 1099-MISC reporting. If even a small share of the businesses that did not submit a 1099-MISC should have, millions of 1099-MISCs could be missing with significant amounts of unpaid taxes by payees. The GAO’s prior work in 2003 also found significant 1099-MISC payer noncompliance by some federal agencies.
The GAO recommended that Congress should consider requiring payers to report payments to corporations on the 1099-MISC form. The GAO also recommended that the IRS should research the extent of payer noncompliance and the reasons for it, identify common reporting errors, and provide more guidance about 1099-MISC requirements. The IRS agreed with most of the recommendations. However, it disagreed with the suggestion of adding a tax return checkbox asking if payers have submitted the required 1099-MISCs and adding a chart to help payers navigate the detailed instructions for the form.
Washington, D.C. (March 2, 2009)
By WebCPA staff
The Internal Revenue Service could be doing more to encourage businesses to report miscellaneous income payments on 1099-MISC forms, according to a new report.
While businesses reported about $6 trillion worth of such payments in 2006, the Government Accountability Office estimates that even a small share of payers that fail to submit the 1099-MISCs could result in billions of dollars in unreported payments on the payees’ tax returns. Data from the IRS suggests that payees are more likely to report such income on their tax returns if the IRS receives the payers’ information returns.
The IRS does not know to what extent payers fail to submit the required 1099-MISCs, but various sources point to the possibility of a significant problem. For tax year 2005, 8 percent of the approximately 50 million small businesses with assets under $10 million submitted 1099-MISCs, but the IRS does not know how many of the other 92 percent were required to report payments but did not.
Many business payments, such as payments to corporations, are not subject to 1099-MISC reporting. If even a small share of the businesses that did not submit a 1099-MISC should have, millions of 1099-MISCs could be missing with significant amounts of unpaid taxes by payees. The GAO’s prior work in 2003 also found significant 1099-MISC payer noncompliance by some federal agencies.
The GAO recommended that Congress should consider requiring payers to report payments to corporations on the 1099-MISC form. The GAO also recommended that the IRS should research the extent of payer noncompliance and the reasons for it, identify common reporting errors, and provide more guidance about 1099-MISC requirements. The IRS agreed with most of the recommendations. However, it disagreed with the suggestion of adding a tax return checkbox asking if payers have submitted the required 1099-MISCs and adding a chart to help payers navigate the detailed instructions for the form.
Thursday, February 26, 2009
CA Home Buyer Credit
http://www.buildingonline.com/news/viewnews.pl?id=7921&subcategory=192
A brief summary of what SB 15XX, Senator Roy Ashburn (R- Bakersfield), authorizes:
▸ A tax credit of up to $10,000 credit (5% of home price or $10k, whichever is less) for the purchase of a newly constructed, previously unoccupied home.
▸ Available March 1, 2009 and good until March 2010, or when funding authority runs out – whichever comes first ($100 million was allocated to program).
▸ Allocated by the state's Franchise Tax Board on a first-come, first-served basis (details still to be worked out).
▸ Paid out to home purchasers over three tax years in equal amounts (i.e. $3300 for 2009, $3300 for 2010, etc.) • Purchasers must reside in the home for at least two years.
▸ There are no income limitations that have to be met by purchasers.
▸ There is no first-time homebuyer requirement.
▸ There is no repayment requirement (unless the purchaser sells, rents out, etc before 2 years expire).
A brief summary of what SB 15XX, Senator Roy Ashburn (R- Bakersfield), authorizes:
▸ A tax credit of up to $10,000 credit (5% of home price or $10k, whichever is less) for the purchase of a newly constructed, previously unoccupied home.
▸ Available March 1, 2009 and good until March 2010, or when funding authority runs out – whichever comes first ($100 million was allocated to program).
▸ Allocated by the state's Franchise Tax Board on a first-come, first-served basis (details still to be worked out).
▸ Paid out to home purchasers over three tax years in equal amounts (i.e. $3300 for 2009, $3300 for 2010, etc.) • Purchasers must reside in the home for at least two years.
▸ There are no income limitations that have to be met by purchasers.
▸ There is no first-time homebuyer requirement.
▸ There is no repayment requirement (unless the purchaser sells, rents out, etc before 2 years expire).
Democrats' Budget
President Barack Obama presented his budget for fiscal 2010, including about $318 billion in tax increases mainly targeted at the wealthy. Capital gains will be taxed at 20% for taxpayers whose adjusted gross income is more than $250,000.
http://www.cnn.com/video/#/video/podcasts/ac360/site/2009/02/26/cooper.podcast.wednesday.cnn
CNN's Anderson Cooper has a very good analysis of the new Democratic budget proposal, increasing discretionary expenditures by some 8%, with over 8,000 pork projects.
http://www.mercurynews.com/news/ci_11788298
Administration officials said the president would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket of 35 percent and many of those in the 33 percent bracket — roughly speaking, starting at $250,000 in annual income for a married couple.
Under existing law, the tax benefit of itemizing deductions rises with a taxpayer's marginal tax bracket (the bracket that applies to the last dollar of income). For example, $10,000 in itemized deductions reduces tax liability by $3,500 for someone in the 35 percent bracket.
Obama would allow a saving of only $2,800 — as if the person were in the 28 percent bracket. A White House official said it's unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions.
http://online.wsj.com/article/SB123561551065378405.html
Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can't possibly raise enough revenue to fund Mr. Obama's new spending ambitions.
Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%." Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.
Note that federal income taxes are already "progressive" with a 35% top marginal rate, and that Mr. Obama is (so far) proposing to raise it only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He'd also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won't come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need.
http://www.cnn.com/video/#/video/podcasts/ac360/site/2009/02/26/cooper.podcast.wednesday.cnn
CNN's Anderson Cooper has a very good analysis of the new Democratic budget proposal, increasing discretionary expenditures by some 8%, with over 8,000 pork projects.
http://www.mercurynews.com/news/ci_11788298
Administration officials said the president would propose to reduce the value of itemized tax deductions for everyone in the top income tax bracket of 35 percent and many of those in the 33 percent bracket — roughly speaking, starting at $250,000 in annual income for a married couple.
Under existing law, the tax benefit of itemizing deductions rises with a taxpayer's marginal tax bracket (the bracket that applies to the last dollar of income). For example, $10,000 in itemized deductions reduces tax liability by $3,500 for someone in the 35 percent bracket.
Obama would allow a saving of only $2,800 — as if the person were in the 28 percent bracket. A White House official said it's unfair for high-income people to get a bigger tax break than middle-income people for claiming the same deductions or making the same charitable contributions.
http://online.wsj.com/article/SB123561551065378405.html
Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can't possibly raise enough revenue to fund Mr. Obama's new spending ambitions.
Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%." Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.
Note that federal income taxes are already "progressive" with a 35% top marginal rate, and that Mr. Obama is (so far) proposing to raise it only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He'd also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won't come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need.
Wednesday, February 25, 2009
Monday, February 23, 2009
IRS calls for tax simplification
IRS National Taxpayer Advocate Nina E. Olson urged Congress to simplify the U.S. Tax Code and recommended measures to reduce the burden on taxpayers who are struggling to pay their bills.
Olson advanced a simplification plan organized around six core principles:
1. The tax system should not entrap taxpayers.
2. The tax laws should be simple enough to allow most taxpayers to prepare their own returns without help, permit taxpayers to compute their tax liabilities on a single form, and let IRS telephone assistors fully and accurately answer taxpayer questions.
3. The tax laws should anticipate the largest areas of noncompliance and minimize the opportunities for such noncompliance.
4. The tax laws should provide some choices, but not too many.
5. Refundable credits provided by the law should be easier to administer.
6. The tax system should incorporate a periodic review of the Tax Code, which Olson calls a "sanity check."
Olson cited the Alternative Minimum Tax as one example of complexity. "Although it was originally conceived to prevent wealthy taxpayers from escaping tax liability through the use of tax-avoidance transactions, 77 percent of the additional income subject to tax under the AMT today is attributable to the disallowance of deductions otherwise allowed for state and local taxes and personal and dependency exemptions," she declared.
"Few people think of having children or living in a high-tax state as a tax-avoidance maneuver, but under the unique logic of the AMT, that is essentially how those actions are treated," she noted.
To read the entire article, go to http://www.webcpa.com/article.cfm?articleid=30658.
Olson advanced a simplification plan organized around six core principles:
1. The tax system should not entrap taxpayers.
2. The tax laws should be simple enough to allow most taxpayers to prepare their own returns without help, permit taxpayers to compute their tax liabilities on a single form, and let IRS telephone assistors fully and accurately answer taxpayer questions.
3. The tax laws should anticipate the largest areas of noncompliance and minimize the opportunities for such noncompliance.
4. The tax laws should provide some choices, but not too many.
5. Refundable credits provided by the law should be easier to administer.
6. The tax system should incorporate a periodic review of the Tax Code, which Olson calls a "sanity check."
Olson cited the Alternative Minimum Tax as one example of complexity. "Although it was originally conceived to prevent wealthy taxpayers from escaping tax liability through the use of tax-avoidance transactions, 77 percent of the additional income subject to tax under the AMT today is attributable to the disallowance of deductions otherwise allowed for state and local taxes and personal and dependency exemptions," she declared.
"Few people think of having children or living in a high-tax state as a tax-avoidance maneuver, but under the unique logic of the AMT, that is essentially how those actions are treated," she noted.
To read the entire article, go to http://www.webcpa.com/article.cfm?articleid=30658.
Saturday, February 14, 2009
Obama Stimulus Plan
Click on this PDF file from CCH, requires Adobe Acrobat Reader:
http://tax.cchgroup.com/Legislation/House-Senate-Recovery-Act-2009.pdf
And here's another article from Yahoo:
http://finance.yahoo.com/taxes/article/106600/Stimulating-Work
An overview of the stimulus package, where the money goes:
http://accounting.smartpros.com/x65480.xml
To read the law, click here.
http://tax.cchgroup.com/Legislation/House-Senate-Recovery-Act-2009.pdf
And here's another article from Yahoo:
http://finance.yahoo.com/taxes/article/106600/Stimulating-Work
An overview of the stimulus package, where the money goes:
http://accounting.smartpros.com/x65480.xml
To read the law, click here.
Tuesday, February 10, 2009
Friday, February 6, 2009
Labor Secretary nominee's tax problem
http://www.webcpa.com/article.cfm?articleid=30706
Washington, D.C. (Feb. 6, 2009)
By WebCPA staff
In the latest sign of tax trouble in the Obama cabinet, Labor Secretary-designate Hilda Solis’ husband had tax liens filed against him.
Confirmation hearings for Rep. Solis, D-Calif., were delayed after news of the tax problems surfaced. The White House admitted to the latest tax snafu after USA Today discovered 15 tax liens dating back to 1993 from the State of California and Los Angeles County totaling $7,630, some of which have since been paid. The tax liens had been filed against Solis’s husband, Sam H. Sayyad, and his business, Sam’s Foreign and Domestic Auto Center. Sayyad paid $6,400 this week to settle the outstanding tax liens, but still plans to appeal them.
Solis is the fourth nominee to the Obama administration to face tax questions in recent weeks. Earlier this week, former Senate Majority Leader Tom Daschle withdrew his nomination for secretary of Health and Human Services after he was forced to pay $140,000 in taxes and interest, mainly for the use of a car and driver provided by a private equity firm between 2005 and 2007 (see Daschle Bows Out After Tax Problems).
Treasury Secretary Timothy Geithner also needed to pay over $42,000 in taxes, interest and penalties for self-employment taxes that he owed from work he did between 2001 and 2004 for the International Monetary Fund (see Geithner Admits Back Tax Problems).
A third nominee, Nancy Killefer, was forced to withdraw after being named to the new post of chief performance officer. The Associated Press discovered a 2005 tax lien for $946.69 filed by the District of Columbia on her home for failure to pay unemployment compensation tax on household help.
Washington, D.C. (Feb. 6, 2009)
By WebCPA staff
In the latest sign of tax trouble in the Obama cabinet, Labor Secretary-designate Hilda Solis’ husband had tax liens filed against him.
Confirmation hearings for Rep. Solis, D-Calif., were delayed after news of the tax problems surfaced. The White House admitted to the latest tax snafu after USA Today discovered 15 tax liens dating back to 1993 from the State of California and Los Angeles County totaling $7,630, some of which have since been paid. The tax liens had been filed against Solis’s husband, Sam H. Sayyad, and his business, Sam’s Foreign and Domestic Auto Center. Sayyad paid $6,400 this week to settle the outstanding tax liens, but still plans to appeal them.
Solis is the fourth nominee to the Obama administration to face tax questions in recent weeks. Earlier this week, former Senate Majority Leader Tom Daschle withdrew his nomination for secretary of Health and Human Services after he was forced to pay $140,000 in taxes and interest, mainly for the use of a car and driver provided by a private equity firm between 2005 and 2007 (see Daschle Bows Out After Tax Problems).
Treasury Secretary Timothy Geithner also needed to pay over $42,000 in taxes, interest and penalties for self-employment taxes that he owed from work he did between 2001 and 2004 for the International Monetary Fund (see Geithner Admits Back Tax Problems).
A third nominee, Nancy Killefer, was forced to withdraw after being named to the new post of chief performance officer. The Associated Press discovered a 2005 tax lien for $946.69 filed by the District of Columbia on her home for failure to pay unemployment compensation tax on household help.
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