Smart TaxesSmart Taxes

Treasury secretary explains why administration favors lowering rates while eliminating deductions and credits.

By Teresa Mears Jan 28, 2011 1:38PM

This article is by David Wessel of The Wall Street Journal.

 

In his State of the Union address, President Barack Obama called on Congress to embark on a major revamp of corporate taxes: "[S]implify the system. Get rid of the loopholes. And use the savings to lower the corporate tax rate for the first time in 25 years -- without adding to our deficit."

 

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On Wednesday, Treasury Secretary Timothy Geithner talked to The Wall Street Journal's David Wessel about the initiative. Geithner emphasized the administration's insistence on offsetting the corporate rate, now 35%, by eliminating deductions, credits and incentives.

 

Raising more revenue from businesses in light of global competition "isn't realistic," he said. But, given the deficit, "We can't raise taxes on individuals to lower business taxes."

 

Governor's plan to extend temporary sales and income taxes draws support, though voters don't want to pay more for prisons.

By Teresa Mears Jan 27, 2011 7:08PM

This article is by Juliet Williams of The Associated Press.

 

A majority of California voters agree with Gov. Jerry Brown's approach to closing the state's $25.4 billion budget deficit over the next year and a half, including his plan to hold a special election to extend temporary sales, vehicle and income taxes, according to a poll released Wednesday.

 

Six in 10 likely voters told the Public Policy Institute of California they are willing to pay higher taxes to support schools, and a majority also would pay more for universities. But voters overwhelmingly oppose paying more for California's overcrowded prison system, which they incorrectly think accounts for the largest share of state spending.

 

President Obama's proposal for tax reform and a simplified tax code will run into trouble once talk turns to ending specific tax benefits.

By Teresa Mears Jan 26, 2011 4:04PM

This article is by Stephen Ohlemacher of The Associated Press.

 

President Barack Obama's call to lower corporate tax rates is popular among business leaders and lawmakers from both parties. That support, however, won't be easy to maintain if the president ever gets specific about how to pay for the lower taxes.

Obama said in his State of the Union address that he wants to close corporate tax loopholes and use the additional revenue to lower corporate tax rates for the first time in 25 years -- without adding to the budget deficit. The top corporate tax rate is 35%, among the highest in the industrialized world. However, federal tax laws are filled with so many credits, deductions and exemptions that few companies pay the top rate.

 

"Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries," Obama said in his speech Tuesday night. "Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense. It has to change."

 

Meanwhile, key congressional Republicans said Wednesday that tax reform shouldn't be limited to corporate taxes -- individual income taxes should also be revamped.

 

Agency wins court case after arguing that CPA used ploy to avoid payroll taxes.

By Teresa Mears Jan 25, 2011 5:07PM

This post is by Laura Saunders of The Wall Street Journal.

 

There's a saying: Pigs get fed and hogs get slaughtered. The Internal Revenue Service surely hopes that includes tax hogs.

 

That is the message of a recent U.S. district court case won by the IRS against David Watson, a CPA in West Des Moines, Iowa. At issue: a common tax-cutting maneuver available to the owners of millions of closely held businesses.

 

The case, David E. Watson P.C. v. U.S., revolved around Watson's low pay as the sole owner and shareholder of a so-called S Corporation. Such companies, often called "Sub-Ss" after the subchapter of the tax code governing them, is a popular choice of entity for private firms. Unlike C corporations, Sub-Ss have no more than 100 shareholders, and they pass profits to owners without an extra layer of tax. There are nearly 4 million Sub-Ss in the U.S. today.

 

Not content to simply appear on YouTube, the IRS has created a smartphone app.

By Kay Bell Jan 24, 2011 3:49PM

You've found the perfect pair of shoes but aren't sure you can afford them. You're waiting for your tax refund to show up in your account before you use your debit card.

 

No worries! Whip out your smartphone, click on the new IRS2Go app to find out the exact status of your refund.

 

Yep, the IRS is the hot, happening, technology embracing federal agency.

Really!

 

IRS Commissioner Douglas Shulman announced today that the agency has its own smartphone app, free in both iPhone and Android iterations.

 

Agency won't send flowers or chocolate, but it will be ready to process your return Feb. 14.

By Kay Bell Jan 21, 2011 12:52PM

If you itemize deductions and have been wondering when the Internal Revenue Service will get to your tax return, put a big red circle around Feb. 14 on your calendar.

 

Yep, the tax man has a Valentine's Day gift for those folks whose returns are on processing hold because of December 2010 changes to tax laws.

 

Those late-year tax law tweaks meant the IRS had to update its computer systems. Affected returns mostly claim itemized deductions on Schedule A, as well as income adjustments (often referred to as above-the-line deductions) found directly on Form 1040 or 1040A for higher education tuition and fees (which also requires Form 8917) and educator expenses.

 

Making the tax code less complex would mean creating new groups of winners and losers. Does Congress have the guts?

By Teresa Mears Jan 20, 2011 3:51PM

This article is by Stephen Ohlemacher of The Associated Press.

 

Nine in 10 Americans will find the maze of credits, deductions and exemptions on their tax forms so confusing and difficult that they'll hire someone or turn to special computer software to fill out their returns. Even the commissioner of the Internal Revenue Service says he pays someone to do his taxes.

President Barack Obama and key lawmakers from both political parties say it's time for a serious national discussion about making the tax code simpler and fairer. It's going to be a long talk, one that could last years. Why? Because every deduction, exemption and credit, every layer of complexity, is important to somebody, in some cases millions of somebodies.

 

"That's what the tax code is now, it's a whole set of winners and losers," said Howard Gleckman, a fellow at the Urban Institute and editor of TaxVox, a blog on tax issues. "If you reform it, you're going to create new winners and new losers, and the losers always scream much louder than the winners cheer."

 

There is a lot of political support on Capitol Hill for simplifying the tax code. But in the new era of divided government, it is unclear whether Obama has the ability, or the political will, to steer such a massive piece of legislation through a Republican-controlled House and a deeply divided Senate.

 

TurboTax's mobile tax program works with iPhone or Android if you use form 1040EZ.

By Teresa Mears Jan 19, 2011 5:32PM

If you can buy coffee with your phone, why can't you file your taxes?

 

You can, if your financial life is simple.

 

TurboTax has rolled out the first tax-filing app for smart phones, SnapTax, which can be used by anyone filing a 1040EZ return. About 2,000 Californians used the program to file their state returns last year.

 

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