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Imagine this scenario: The IRS may soon just do your taxes for you — and send you the bill. If this sounds farfetched, it’s not. With a new congressional “super committee” tasked with finding $1.5 trillion in cuts by November, creative ways to find additional revenue are in high demand. And allowing the IRS to prepare you taxes could be one solution. The idea has been around for a while, but has been picking up steam in recent years. In 2006, Senate Finance Committee Chairman Max Baucus (D-Mont.) argued it would close a $345 billion annual difference between what the government believes taxpayers owe them and what the IRS actually collects, which he calls the “tax gap.”
But this isn’t just an idea floated by senators and presidential advisers. While running for president, then-Sen. Barack Obama touted it during a 2007 speech at the Tax Policy Institute: “The government already collects wage and bank account information,” he said, “so there’s no reason the IRS can’t send Americans pre-filled tax forms to verify.” While the notion of allowing government to encroach on yet another aspect of our lives might sound like a hard sell, members of the Computer and Communications Industry Association (CCIA) believe this is a very real threat. InfoWars
The state of California could collect more than $1 billion a year by taxing Amazon and other online retailers if a bill approved by the Assembly becomes law. Assemblyman Charles Calderon, a Democrat from Whittier, says his legislation doesn’t impose a new sales tax, but extends one that California should already have been enforcing.
AB155 passed, 47-16, with the support of one GOP lawmaker Tuesday. It now heads to the Senate. InfoWars
WASHINGTON (Reuters) – Senate Republican Leader Mitch McConnell on Sunday rejected a proposal to scale back tax breaks for big oil firms, calling it a political maneuver. Democrats have crafted a bill to scrap certain tax deductions used by the five biggest oil companies, and potentially free up $21 billion over a decade to help ease the budget deficit. Eliminating the tax breaks has been a goal of President Barack Obama and the call by Democratic lawmakers has become louder as gasoline prices have hovered near $4 a gallon.
Republicans for their part are hammering Obama over high gasoline prices, which threaten to slow the economy just as it is beginning to pick up steam.Under pressure over energy costs, Obama announced on Saturday the expansion of domestic oil production in Alaska and the Gulf of Mexico.
The government has a problem with your new, high-mileage, low-pollution car: you aren’t paying enough in gas taxes to keep up the federal highway system. Recently, at Congress’s behest, the Congressional Budget Office studied another way to raise money; charge drivers per mile driven, rather than (or in addition to) taxing your gas. The Vehicle Mileage Tax (VMT) is meant to directly reflect some of the costs of maintaining the highways that are not a direct consequence of the gas you burn.
The technology to track where you drive and how far is now available, as well, combining things like the E-ZPass with GPS and wireless networking. The VMT is not suggested just as a way to bring in revenue, though. It is also envisioned as a way to shape human behavior. How would it work? There are a couple of implementation possibilities. The government could mandate new cars be fit with some sort of tracking and reporting device. This means it would take 15-20 years before all vehicles are outfitted. Or it could require all drivers to have their current car retrofitted with such a device, which would be a large one-time expense. These devices could serve multiple purposes, though; they could also be used to buy insurance-by-the-mile, or deliver real-time traffic information to the driver.
How real is the potential for this “user fee”, the government supplemented the Highway Trust Fund to the tune of $30 billion from 2008 to 2010. It could end up as a state-level program. Read up on state and federal laws and statues. Power Your Mind! MadOne/ Forbes
With states scrambling to find ways to generate revenue, tax-free online shopping is becoming a target increasingly being focused in the crosshairs, reports the Associated Press (AP). Billions of dollars annually are bypassing the reach of state taxing agencies after the 1992 Supreme Court ruling prohibiting a state from forcing businesses to collect sales taxes when the store has no physical site located in that state.
The exact amount of uncollected taxes from online sales is unknown but a 2009 study from the University of Tennessee estimated that it might total $10.14 billion this year, assuming total e-commerce sales of $3.49 trillion. Most sales however are from one business to another and would not be subject to the same taxes as consumer purchases are.
• Making Work Pay: The payroll "tax holiday" is still in effect for 2010. That means that workers get a tax credit of 6.2% on their earned income -- but the credit maxes out at $400 for single filers and $800 for joint filers. The credit is subject to income limits and starts phasing out at $75,000 for singles and $150,000 for joint filers. You will need to file for this credit on Schedule M.
• The Earned Income Tax Credit is a refundable credit for married couples filing jointly with 2010 earned income under $48,362 and singles with income under $43,352. Your income and family size determine the amount of the credit. (Details are in IRS Publication 596.)
• The Retirement Savings Contributions Credit is designed to help low- and moderate-income workers save for retirement. Individuals with incomes of up to $27,750 and married couples with joint incomes of up to $55,500 may qualify for a credit of up to $1,000 per person. Check out Form 8880 for the rules.
• Sales tax: You can deduct sales tax paid in 2010 if the amount was greater than the state and local income taxes you paid. In other words, you get to choose: Write off your sales taxes or write off your income taxes. If you didn't keep your sales-tax receipts, use the IRS' sales tax deduction estimator. Even if you claim the sales tax amount from the IRS tables, you can add in tax paid on vehicles or boats purchased during the year, except to the extent the sales tax rate on them is more than the general sales tax rate. If you live in a state with a high income tax, like California or New York, you will probably be better off claiming your state and local income taxes rather than sales taxes. If you live in a state with no income tax, like Florida, Texas, or Washington, be sure to take the sales tax deduction when you itemize.
• Mileage: Deducting miles driven for work or other purposes can be a huge tax break and save you significant money. Too bad the IRS cut the standard mileage deduction rates for 2010. Here are the new rules: Business mileage = 50 cents per mile (a 9 percent cut!); medical and moving = 16.5 cents per mile; and charitable = 14 cents per mile.
One last thing: The first $2,400 of unemployment benefits you receive in 2010 is no longer tax-deductible.
No More Phase-Outs for Itemized Deductions and Exemptions
For years, high-income folks have seen their write-offs for the most popular itemized deduction items (including mortgage interest, state and local income and property taxes, and charitable donations) reduced by a nasty phase-out rule. Another nasty phase-out rule reduced or eliminated personal and dependent exemption deductions. Thankfully, both phase-outs were completely repealed for 2010 as part of the Bush-era tax cuts. So you can write off the full amount of your itemized deductions and exemptions on your 2010 Form 1040 without any worries and without having to fill out phase-out worksheets to penalize yourself. More good news: the recent tax cut extension legislation repealed the phase-outs for 2011 and 2012 as well.
Liberalized Adoption Credit
For 2010, the maximum adoption credit was increased to $13,170 (up from $12,150 in 2009). In addition, the credit was made 100% refundable for the 2010 tax year (previously, it was nonrefundable). That means you'll receive a check for any leftover adoption credit after your federal income tax bill has been reduced to zero. To claim the credit, fill out Form 8839 (Qualified Adoption Expenses), and enter the credit on line 71 of Form 1040.
One-Time Break for Self-Employed Individuals
Self-employed folks can generally deduct their health insurance premiums on page 1 of Form 1040 (use line 29 for 2010). The deduction reduces their federal income tax bills, which is nice. However, the self-employed have never been allowed to deduct those premiums when calculating their self-employment tax bills on Schedule SE. Good news: for 2010 only, you can deduct health insurance premiums on line 3 of Schedule SE. So those premiums will reduce both your income tax bill and your SE tax bill. Unfortunately, this break will not be available for 2011 and beyond unless Congress extends it.
Homebuyer Credit Repayment Rules Kick In
As I explained in an earlier column, you may have to repay part or all of the credit claimed for a 2008 or 2009 home purchase with your 2010 Form 1040. In most cases, however, only those who purchased homes in 2008 will be affected. They will generally have to repay 1/15 of the credit with the 2010 Form 1040. If this rule impacts you, fill out Form 5405 (First-Time Homebuyer Credit and Repayment of the Credit), and enter the repayment amount as an addition to your tax bill on line 59 of Form 1040.
Real Estate Tax Deduction for Non-Itemizers is Gone
For 2008 and 2009, unmarried individuals who did not itemize could write off up to $500 of state and local real property taxes by claiming an increased standard deduction. Married joint-filing couples could write off up to $1,000. This add-on standard deduction deal for real estate taxes expired at the end of 2009, and it was not reinstated for 2010.
Deductions for Sales Taxes on New Vehicle Purchases Are Gone
The 2009 Stimulus Act created a temporary write-off for non-itemizers who paid state and local sales taxes on new vehicles purchased between 2/17/09 and 12/31/09. The write-off came in the form of an additional standard deduction allowance. Similarly, itemizers were allowed to claim an extra itemized deduction for such taxes. Both breaks lapsed at the end of 2009, and they were not reinstated for 2010.
Break for Unemployment Benefits Is Gone
In 2009, the first $2,400 of unemployment benefits was federal-income-tax-free. This break was not continued for 2010. Therefore, 100% of 2010 unemployment benefits generally must be reported as income on Form 1040 (use line 19).
Your Tax Preparer Might E-File Your Return This Time
Over the last few years, Congress has made tax-law changes that place increasing pressure on professional return preparers to electronically file more and more returns. As a result, your preparer might be forced to e-file your 2010 Form 1040 even if your returns for earlier years have always been done on paper. Get used to it. SmartMoney
In a lump-of-coal announcement on the eve of Christmas Eve, the IRS announced that, due to last-minute maneuvering on Capitol Hill, the agency won't be ready to process more than 50 million returns until mid- to late-February. Since most returns demand refunds from the IRS, the delay means millions of taxpayers will have to wait to get their money back.
When Congress okayed a big tax bill last week, attention focused on the extension of the Bush tax cuts, a payroll tax holiday and restoration of the federal estate tax. But at the IRS, there was plenty of angst about a group of retroactive tax changes that affect the 2010 returns. The agency is scrambling to make changes to forms and reprogram computers. But on Dec. 23, the agency admitted that it won't be ready on time to accept returns affected by the changes.
Who is affected?
The delay applies to all 50 million or so taxpayers who itemize deductions. Since Congress restored the opportunity for taxpayers to choose between deducting state income taxes or state sales tax, the IRS has to revise the Schedule A — the form used by itemizers. It won't be ready to go until mid-February at the earliest.
Millions of non-itemizers will be impacted, too — those who can claim the $250 deduction available to teachers and teachers' aides who spend money for classroom supplies or the deduction for up to $4,000 of qualified college costs. These "above-the-line" deductions expired at the end of 2009 but were reinstated retroactively by the legislation President Obama signed December 17. If you are among the two-thirds of taxpayers who claim the standard deduction rather than itemizing — and you don't benefit from the above-the-line write offs mentioned above — then you can file as soon as you have your W-2 wage reporting form and any other tax paperwork you need. If you file by mid-January, you should have your refund long before the IRS opens the filing season for taxpayers affected by the delay.
If you are affected, your best bet is to gather necessary information and forms as they arrive, so you can be ready to file as soon as the IRS gives the go-ahead.
1. Failure to report all taxable income. The IRS receives copies of all 1099s and W-2s that you receive during a year, so make sure that you report all required income on your tax return. The IRS computers are pretty good at matching these forms received with the income shown on your return. A mismatch sends up a red flag and causes the IRS computers to spit out a bill. If you receive a 1099 for income that isn't yours or the income listed is incorrect, get the issuer to file a corrected form with the IRS.
2. Returns claiming the home-buyer credit. First-time homebuyers and longtime homeowners who claimed the homebuyer credit should be prepared for IRS scrutiny. Make sure you submit proper documentation when taking this credit. First-time homebuyers have to attach a copy of their settlement statement to the return, and longtime homeowners should also attach documents showing prior ownership of a home, including records of property tax and insurance coverage. All claims for this credit are being screened. As of May 2010, more than 260,000 returns had been selected for correspondence audits (examinations done by mail rather than face-to-face) because filers did not attach the necessary documents to their tax returns. And those numbers will continue to grow.
3. Claiming large charitable deductions. This comes up again and again because the IRS has found abuse on audit, especially with those taking larger deductions. We all know that charitable contributions are a great write-off and help you to feel all warm and fuzzy inside. However, if your charitable deductions are disproportionately large compared to your income, it raises a red flag. That's because the IRS can tell what the average charitable donation is for a person in your tax bracket. Also, if you don't get an appraisal for donations of valuable property or if you fail to file Form 8283 for donations over $500, the chances of audit increase. Be sure you keep all your supporting documents, including receipts for cash and property contributions made during the year, and abide by the documentation rules. And attach Form 8283 if required.
4. Home office deduction. The IRS is always very interested in this deduction, primarily because it has a pretty high adjustment rate on audit. This is because history has shown that many people who claim a home office don't meet all the requirements for properly taking the deduction, and others may overstate the benefit. If you qualify, you can deduct a percentage of your rent, real estate taxes, utilities, phone bills, insurance, and other costs that are properly allocated to the home office. That's a great deal. However, in order to take this write-off, the space must be used exclusively and on a regular basis as your principal place of business. That makes it difficult to claim a guest bedroom or children's playroom as a home office, even if you also use the space to conduct your work. Exclusive use means a specific area of the home is used only for trade or business, not also where the family watches TV at night. Don't be afraid to take the home-office deduction if you're otherwise entitled to it. Risk of audit should not keep you from taking legitimate deductions. If you have it and can prove it, then use it.
5. Business meals, travel and entertainment. Schedule C is a treasure trove of tax deductions for self-employeds. But it's also a gold mine for IRS agents, who know from past experience that self-employeds tend to claim excessive deductions. Most under-reporting of income and overstating of deductions are done by those who are self-employed. And the IRS looks at both higher-grossing sole proprietorships as well as smaller ones.
6. Claiming 100% business use of vehicle. Another area that is ripe for IRS review is use of a business vehicle. When you depreciate a car, you have to list on Form 4562 what percentage of its use during the year was for business. Claiming 100% business use for an automobile on Schedule C is red meat for IRS agents. They know that it's extremely rare that an individual actually uses a vehicle 100% of the time for business, especially if no other vehicle is available for personal use. IRS agents are trained to focus on this issue and will closely scrutinize your records. Make sure you keep very detailed mileage logs and precise calendar entries for the purpose of every road trip. Sloppy recordkeeping makes it easy for the revenue agent to disallow your deduction. As a reminder, even if you use the IRS' standard mileage rate to deduct your business vehicle costs, ensure that you are not also claiming actual expenses for maintenance, insurance and other out-of-pocket costs. The IRS has found filer noncompliance in this area as well and will look for this.
7. Claiming a loss for a hobby activity. Your chances of "winning" the audit lottery increase if you have wage income and file a Schedule C with large losses. And, if your Schedule C loss-generating activity sounds like a hobby -- horse breeding, car racing and such -- the IRS pays even more attention. It's issued guidelines to its agents on how to sniff out those who improperly deduct hobby losses. Large Schedule C losses are audit bait, but reporting losses from activities in which it looks like you might be having a good time is just asking for IRS scrutiny.
8. Cash businesses. Small business owners, especially those in cash-intensive businesses -- taxi drivers, car washes, bars, hair salons, restaurants and the like -- are an easy target for IRS auditors. The agency is well aware that those who primarily receive cash in their business are less likely to accurately report all of their taxable income. The IRS wants to narrow the tax gap, and history has shown that cash-based businesses are a good source of audit adjustments. It has a new guide for agents to use when auditing cash intensive businesses, telling how to interview owners and noting various indicators of unreported income.
9. Failure to report a foreign bank account. The IRS is intensely interested in people with offshore accounts, especially those in tax havens. U.S. tax authorities have had some recent success in trying to get foreign banks (such as UBS in Switzerland) to disclose information on U.S. account holders. Also, the IRS had a voluntary compliance program where people came in and reported their foreign bank accounts and foreign assets in exchange for lesser penalties than they would have otherwise been subject to. The IRS has learned a lot from these probes.
10. Engaging in currency transactions. The IRS gets many reports of cash transactions in excess of $10,000 involving banks, casinos, car dealers and other businesses, plus suspicious activity reports from banks and disclosures of foreign accounts. A recent report by Treasury inspectors concluded that these currency transaction reports are a valuable source of audit leads for sniffing out unreported income. The IRS agreed and it will make greater use of these forms in its audit process. So if you are a person who makes large cash purchases or deposits, be prepared for IRS scrutiny. Also, beware that banks and other institutions file reports on suspicious activities that appear to avoid the currency transaction rules (such as persons depositing $9,500 cash one day and an additional $9,500 cash two days later).
11. Math errors. One of the biggest reasons that people receive a letter from the IRS is because of mathematical mistakes they make on their tax returns. If you make an error in your favor, you are going to hear from the tax man, and there is a greater risk of the IRS pulling the whole return for audit. So take time to ensure all your calculations are correct. Even though math errors may not lead to a full-blown audit, it's always best to remain under the radar of IRS computers.
12. Taking higher-than-average deductions. If deductions on your return are disproportionately large compared to your income, the IRS audit formulas take this into account when selecting returns for examination. Screeners then pull the most questionable returns for review. But if you've got the proper documentation for your deduction, don't be scared to claim it. There's no reason to ever pay the IRS more tax than you actually owe.
1. Smaller Deductions for Business and Medical Mileage You can't write off the cost of a daily commute by car, but you can deduct other work-related mileage you're not reimbursed for. This year, for example, you'd get 50 cents a mile for driving from, say, Boston to New York City and back for a trade show. That's five cents less per mile than you'd have gotten for the same trip in 2009. At 16.5 cents a mile, the deduction for operating your car for medical reasons is 7.5 cents less than last year. However, driving for charitable purposes is still deductible at 14 cents per mile, just like last year.
2. Better Limits on Deductions for Property Damage or Loss Due to Theft For damaged or stolen property to be deductible, the loss amount must now only exceed $100, compared with $500 in 2009. The "10% of AGI" rule still generally applies though. Remember, AGI is the sum of all your income - such as wages, interest and alimony received - minus certain adjustments, such as IRA contributions, student loan interest you've paid and moving expenses.
3. Deduction for Taxes and Fees on New Motor Vehicle Purchases Did you buy a new car, light truck, motor home or motorcycle between February 17 and December 31 of 2009? If so, in 2010 you can deduct state, local, and excise taxes related to the purchase. If your state has no sales tax, you can instead deduct other taxes or fees the purchase generated. A neat feature of this deduction is you can use it to increase your standard deduction or take it as a regular itemized deduction, whichever works out best for you.
There are a couple limitations to know about. First, the deduction is only good on up to $49,500 of the purchase price. Second, it's phased out at certain levels of modified adjusted gross income (MAGI) - between $250,000 and $260,000 for joint filers and from $125,000 to $135,000 for other taxpayers. MAGI is your AGI plus certain deductions such as those for student loans, IRA contributions and higher education costs.
4. Bigger Deductions for Long-Term Care (LTC) Insurance Premiums IRS rules allow LTC insurance policy owners to deduct more of their premiums in 2010 than in 2009. For example, those ages 51 to 60 can claim up to $1,230 in LTC insurance premiums this year, compared with $1,190 last year - about a 3% increase. Similar increases have been approved for other age groups as well: 40 and under, 41-50, 61-70 and 71 or over. At $330, the deduction is smallest for the 40-and-under age group. It rises progressively to a maximum of $4,110 for those ages 71 or over.
MIAMI (Reuters) - Actor Wesley Snipes was ordered on Friday to start serving a three-year prison sentence for failing to file income tax returns by a federal judge who rejected the Hollywood star's bid for a new trial.
It was not clear when or where Snipes would begin serving his time behind bars, however. His lawyer, Daniel Meachum, has said he would appeal if a new trial was denied. "Wesley is very disappointed but staying strong and positive," the newspaper quoted Meachum as saying. Snipes had already lost his appeal of the prison sentence stemming from his 2008 conviction in Hodges' Ocala, Florida, court on three counts of "willful failure to file tax returns" for 1999 through 2001. Snipes was found not guilty of five other counts in the high-profile felony tax case.
Wesley Snipes as Shadow Henderson in Mo Better Blues
At his sentencing, prosecutors said Snipes, a resident of Windermere, Florida, had earned more than $38 million since 1999 but had filed no tax returns or paid any taxes through October 2006. Although he is best known for his roles in action films, Snipes has also had critical success in comedies like "White Men Can't Jump" in 1992. He played the lead in director Spike Lee's interracial drama "Jungle Fever" in 1991 and also played the jazz saxophonist in Lee's "Mo' Better Blues" in 1990.
A listing for Snipes already posted on the Federal Bureau of Prisons website says his prisoner ID or registration number as 43355-018, his location is "in transit" and his release date is "unknown."
1. Charitable Donations Filers who are on the edge of being able to itemize their deductions for the year should consider making a donation of either cash or property to a qualified charity before the year is out. This can be especially beneficial if the filer has a piece of property of some value that he or she wishes to dispose of, such as an extra car or recreational vehicle. These can provide a substantial deduction that can increase your refund by hundreds (or even thousands) of dollars.
2. Retirement Plan Contributions Those who need to reduce their taxable income for the year should make the maximum allowable contributions to their traditional, deductible retirement plans. In some cases, such as small business owners and those who make the maximum allowable lump-sum contribution to their plans for the year, this deduction can be fairly large.
3. Education Expenses Parents who pay tuition for their kids' higher education are usually eligible for education tax credits of some sort. Those who must deplete their savings for this reason should take care to record the amounts paid for their tax records. The credits for these expenses can reduce a parent's tax bill by thousands of dollars, depending upon the circumstances.
4. Organization As rudimentary as this may sound, good record keeping is essential to maximizing your tax deductions. Make sure that you record every charitable contribution, every above-the-line deduction and anything else that can increase your income tax refund for the year. Keep copies of all receipts and other documentation that proves your transactions, as the IRS now requires this in order to accept these deductions on every return. Those who fail to do so invite a negative adjustment to their tax returns if they should become subject to an audit.
5. Miscellaneous Deductions Many taxpayers may be surprised when they discover that certain kinds of expenses or losses can be deducted on their tax returns. Gambling losses are deductible, though only on par with winnings, and investment expenses (such as IRA custodial fees and margin interest) are only deductible if they exceed a certain percentage of your adjusted gross income (AGI).
6. Capital Losses This could be a good time to cut your losses in the market, if you are a short-term investor. Swap out losing stocks or bonds for similar holdings that offer potential gains and realize the losses on your return. These can provide a maximum reduction of $3,000 of your reportable income, or reduce your reported income by more, if you have large reportable gains that you can write your losses against this year. And reduced income can translate into a larger refund, in most cases.
If you get an E-mail from the IRS asking you to visit a website because of a problem with your tax return, ignore it: It's a scam.
Reports of this kind of "phishing fraud" have popped up throughout the country in recent weeks, according to computer security company McAfee. The company reports that about a month ago, a series of fraudulent websites were created and they're now being used to trick people into sharing personal information online. Consumers who use the IRS's online payment system appear to be most at risk, McAfee reports.
How can you tell the difference? The real IRS never asks for this kind of personal information over the phone, by letter, or in an E-mail, Botkin says. That means taxpayers should always be wary when approached by anyone claiming to represent the IRS, and should never share information on a website that they are directed to by an E-mail message.
6 Ways to keep your identity safe.
1. Securely dispose of mail. Have you ever heard of Dumpster diving? Thieves love to dive into dumpsters and discover unshredded documents containing sensitive information they can use for their nefarious identity thieving deeds. That's why it's important for you to shred everything with a cross-cut shredder, which chops paper and plastic into little pieces, making a document nearly impossible to put it back together. We are all usually acutely aware of how to cancel a credit card, but then we take that card and toss in the trash. Shred everything. 2. Opt out of junk mail. OptOutPrescreen.com is a website set up by the credit reporting industry to let you opt-out of firm offers of credit. By signing up and opting out, you will not receive unsolicited offers of credit, such as new credit cards, and you'll reduce one of the most common ways your identity could be stolen: through your mailbox. This doesn't stop your current credit card company from sending you offers; it only stops "unsolicited" offers. To do that, call your credit card company and ask to opt out of their internal marketing campaigns. If you want to stop other forms of junk mail, this PrivacyRights.org page has a lot of great tips.
3. Use a P.O. box. A post office box is a great way to add a layer of anonymity to your everyday activities and get the added benefit of securing your mail, if your mail isn't behind lock-and-key. Many people use their P.O. box as their permanent address for accounts that permit it, which makes it harder for an identity thief to discover your name and your actual address, since most of your documents will list your P.O. box. If your mailbox doesn't have a lock, you might want to get a P.O. box simply because they are more secure (or buy a lockable mail box). P.O. boxes vary in size, are accessible around the clock, and can be very cheap. The U.S. Postal Service has this page to help you find out rates in your area.
4. Review your credit reports. Remember to review your credit report annually. If you are the victim of identity theft, you want to detect it as early as possible so you can limit the damage. By reviewing your reports every year, you can catch suspicious accounts and new addresses listed, both signs of identity theft, as quickly as possible. It's also a good idea to review your reports for honest errors as well. Fixing them can often take several weeks, if not months, so you want to fix them as they appear.
5. Use fraud alerts. You can call any of the credit bureaus and put a fraud alert on your account. Once you call on a credit bureau, it will notify the other two and the fraud alert will be active at those bureaus as well. The fraud alert warns a potential creditor to do additional due diligence before extending credit. The idea is that credit reports with a fraud alert have already been compromised, so the creditor should do extra work to ensure that they are giving credit to the right person. The bureau isn't required to do this, but they probably will because ultimately, they could lose money.
6. Credit score monitoring. Some say credit score monitoring isn't necessary, certainly not one with a monthly fee, but you can use free credit score monitoring from Credit Karma as an early detection sensor for fraud. Credit Krama doesn't give you a the official FICO score--it's a TransUnion credit score using TransUnion data--but if you notice unexplained changes in your score, it might be a sign that someone is stealing your credit. With these techniques, you can do what many of the monthly identity theft monitoring and protection providers do, without the monthly fees. This also has the added benefit of reducing your junk mail, which is a boon to you and the environment, and helping you sleep better at night knowing your information isn't floating around for someone to steal.US news.
Toni Braxton is singing the blues.
The singer, 43, has filed for Chapter 7 bankruptcy again, claiming she owes between $10 and $50 million in unpaid debts.
According to TMZ, Braxton lists numerous creditors to whom she thinks she may owe money, including AT&T, The Four Seasons Hotels, Tiffany & Co., Orkin Pest Control, The Internal Revenue Service and Mesa Air Conditioning, among others.
Braxton also claims she may owe money to the City of L.A. Parking Violations Bureau -- and the DMV in both California and Nevada. She says she's unable to cover the costs because she is only worth between $1 and $10 million. Braxton previously filed for bankruptcy in 1998. This past March, she was slapped with a $400,000 federal tax lien.TMZ.
Sometimes, despite objections from the IRS, taxpayers get to write off the darndest things. Here are our favorites.
Okay, admit it: As you've struggled with your tax return, trying to come up with some extra deductions to pump up your refund or reduce what you owe Uncle Sam, you've taken a few flights of fancy. "Can I claim a deduction for all those blood donations at the Red Cross?" Nope. "How about a charitable contribution for all the time I donate to the church?" No, again. "Can I count the wedding gift for my boss's daughter as an employee business expense?" Come on!
On the other hand, over the years your fellow taxpayers have successfully claimed write-offs for many things that most of us wouldn't dream of taking. Here's our list of what we think are among the most imaginative deductions allowed, ranging from cat food to a casualty loss for a vehicle totaled by a drunk driver:
1. A "significant other. 2. A private airplane. 3. Cat food. 4. Moving the family pet. 5. Body oil 6. Restitution in a fraud case. 7. Wrecking a car while driving drunk. 8. Free beer. 9. A business meeting in Bermuda. 10. Baby-sitting fees. 11. Landscaping. 12. Swimming pool.
The so-called Bush tax cuts are scheduled to expire at the end of the year. Although some of the cuts retain bipartisan support in Congress and may yet be extended, as of now, Washington has some severe changes in store for you and your family. [Click here to check savings products and rates in your area.]
Higher Tax Rates for All
You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone -- not just a sliver of the wealthiest Americans. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%. Just a few months ago, it seemed like a safe bet that Congress would make a fix to keep the existing 10%, 15%, 25% and 28% rate brackets to help out lower and middle-income folks. That bet is now looking iffy.
Higher Capital Gains and Dividends Taxes for All
Right now, the maximum federal rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains will increase to 20%. The maximum rate on dividends will skyrocket to 39.6% unless action is taken to limit the rate to 20%, as the president has repeatedly promised. Plan on 39.6%, and hope I'm wrong.
Right now, an unbeatable 0% rate applies to long-term gains and dividends collected by folks in lowest two rate brackets of 10% and 15%. Starting next year, those folks will pay 10% on long-term gains and 15% and 28% on dividends (compared with 0% now) unless a change is made. Otherwise, taxes on long-term gains and dividends will go up for everyone.
Return of the Marriage Penalty
Right now, the standard deduction for married joint-filing couples is double the amount for singles. For this, we can thank the Bush tax cuts, which included several provisions to ease the so-called marriage penalty. The penalty can force a married couple to pay more in taxes than when they were single. Starting next year, the joint-filer standard deduction will fall back to about 167% of the amount for singles unless Congress takes action and the president approves. We don't know if that will happen. If not, lots of lower and middle-income couples will face higher tax bills.
Return of Phase-Out Rule for Itemized Deductions
Before the Bush tax cuts, a nasty phase-out rule could eliminate up to 80% of a higher-income individual's itemized deductions for mortgage interest, state and local taxes, and charitable donations. The rule was gradually eased and finally eliminated this year. Next year, it will be back in full force unless Congress takes action -- which is unlikely. So if you itemize and have adjusted gross income above about $170,000 ($85,000 if you use married filing separate status), be ready for this phase-out rule to take a toll.
Return of Phase-Out Rule for Personal Exemptions
Before the Bush tax cuts, another nasty phase-out rule could eliminate some or all of a higher-income individual's personal exemption deductions. The rule was gradually cut back and finally eliminated this year. But it will be back with a vengeance next year unless Congress blocks it. So be ready for another tax hike if your adjusted gross income exceeds about $252,000 if you file jointly; about $168,000 if you're single; about $210,000 if you're a head of household; or about $126,000 if you use married filing separate status. (For 2010, personal exemption deductions are $3,650 each, and they will be about the same next year.)
The Bottom Line
The Bush tax cuts don't just offer tax relief to the wealthiest Americans. They offer it to just about anyone who pays federal income taxes. Their scheduled demise next year will raise the tax bill of nearly every taxpayer, unless Congress makes changes and the president jumps on board. SmartMoney.
ALBUQUERQUE, N.M. – Determined to energize dispirited Democrats, President Barack Obama told New Mexico voters on Tuesday that Republicans would reverse the progress he's made on education reform and student aid. Addressing a small group in an Albuquerque family's front yard, Obama shifted from his recent focus on the economy, which has run headlong into the grim reality of continued high unemployment. Instead, five weeks ahead of midterm elections that could turn into a Democratic bloodletting, the president told voters to think about education when they head to the polls.
President Barack Obama meets with Andy and Etta Cavalier at their home in Albuquerque, N.M., Tuesday.
"Nothing's going to be more important in terms of our long-term success." Obama argued that Republicans would cut education spending to pay for tax cuts for the rich. What do you think bout our current situation with the economy, education, and the job Obama is doing up to this point. Please share your thought. MadOne.
Article I, § 8, Clause 1 grants to the Congress the power to impose taxes, but requires excise taxes to be geographically uniform. The Constitution states that all direct taxes are required to be apportioned among the states according to population. This basically refers to a tax on property, such as a tax based on the value of land, as well as a capitation. Article I, § 8, Clause 1 grants to the Congress the power to impose taxes, but requires excise taxes to be geographically uniform
The Constitution states that all direct taxes are required to be apportioned among the states according to population. This basically refers to a tax on property, such as a tax based on the value of land, as well as a capitation.
To raise revenue to fund the Civil War, the income tax was introduced in the United States with the Revenue Act of 1861. It was a flat tax of 3% on annual income above $800. The following year, this was replaced with a graduated tax of 3-5% on income above $600 in the Revenue Act of 1862, which specified a termination of income taxation in 1866.
Since the ratification of the Sixteenth Amendment, it is immaterial with respect to income taxes, whether the tax is a direct or indirect tax.
