Tax Docket

According to an article from the Washington Post today, taxpayers spend 7.6 billion hours and nearly $140 Billion in order to comply with the Internal Revenue Code. This is reported a few days after the release of the President’s Economic Recovery Board’s report regarding the complexity of tax code. Evidence of the increased complexity of the code cited in the report is the enlargement of the Form 1040 (form used by individual taxpayers to file taxes) Instructions from 14 to pages to 44 pages and 15,000 changes to the code since 1986.

Trying to figure out what estate tax rates will apply next year is almost as frustrating for estate planners as it is for ESPN in trying to figure out whether Brett Favre will retire or not. Georgia estate planner John J. Scroggin took the uncertainty to another level. According to the Wall Street Journal’s Financial Adviser’s Blog, he asked a group of estate planners to place bets on how Congress would handle the estate tax. The Jackpot: $200. Scroggin thinks there are three possibilities for the estate tax. “The options are a 45% tax on estates over $2 million; a 60% tax on estates over $1 million; or 60% tax on estates over $2 million.”

WSJ Financial Adviser Blog: On Estate Tax, All Bets Are…On

From Forbes, Tax Hikes Loom For Businesses (slideshow)

Taxes take the top spot on the legislative agenda when Congress returns from its summer recess in September. Lawmakers have said they’ll take up legislation to provide a boost to small businesses and to extend some expiring (or expired) tax breaks. They’re also under pressure to reduce the budget deficit. It’s got to be paid for somehow.

Here is a link to a calculator created by the Tax Foundation which will compute your 2011 income taxes under three different scenarios: (1) If Congress allows all Bust tax cuts to expire; (2) Congress Acts to extend Bush tax cuts through 2011; and (3) Congress enacts tax laws as suggested in President Obama’s budget.

On Wednesday, the Senate approved legislation which allows home buyers (first-time home buyers and home buyers purchasing home for primary residence) that signed contracts by April 30 to close by September 30 in order to still be eligible for the tax credit. The tax credit is $8,000 for first time home buyers and $6,500 for home buyers purchasing a home as their new primary residence. Congress has sent the bill to President Obama.

Reuters, Senate Agrees to Extend Home Tax Credit

New York Times, Home Buyers’ Tax Credit Extended

ABC News,Congress Approves Home Tax Credit Extension

From CNN Money’s Estate Tax in Limbo:

Several key senators have been trying to cut a deal for months. Negotiations have stalled on more than one occasion.

“We’re almost half a year away from a tax policy that a super majority of senators say they don’t support. Yet, we’re stuck,” Sen. Charles Grassley, R-Iowa, said earlier this week. “This time-sensitive issue has taken a back seat to everything else.”

Anne Mathias, director of research at Concept Capital’s Washington Research Group, thinks it’s a fair bet to assume the new exemption level will fall somewhere between $3.5 million to $5 million.

But she also said if Republicans sweep the mid-term elections, and win at least 60 seats in the Senate, they may push to extend the repeal of the tax.

When Hartnett was asked what he thinks will happen with the estate tax next year, he gave the only answer he and his colleagues can give for many estate tax questions these days: “I don’t know.”

Basically, the Senate is doing the limbo dance!

As part of an update on the Senate’s vote on an amended spending bill which includes the first time home-buyer credit closing date extension, the Wall Street Journal has reported that the extension passed in the Senate by an amendment 60-37:

Despite budget concerns, senators later approved an amendment 60-37 that would extend the time individuals have to qualify for a popular tax credit supporting home purchases. The credit is due to expire June 30. Under the amendment, pushed by Senate Majority Leader Harry Reid (D., Nev.), buyers would still have had to enter into purchase contracts by April 30 to qualify for the tax credit. But they would now be given until Sept. 30 to close the purchase.

Update: Senate Approved the Bill on June 30. See Home Sweet Home Tax Credit: Senate Agrees to Extend Closing Deadline to Sept. 30.

Just before the next season of MTV’s The Jersey Shore premieres, one of the show’s cast member’s Snooki took some time to vent about the new federal health care law which imposes a tax on tanning beds. As reported by CNN’s Marquee Blog, Snooks, in the show’s 10 minute preview stated that,

“I don’t go tanning tanning anymore, because Obama put a 10 percent tax on tanning. I feel like he did that intentionally for us. McCain would never put a 10 percent tax on tanning. Because he’s pale and he would probably want to be tan.”

McCain responded via tweet “@Sn00ki u r right, I would never tax your tanning bed! Pres Obama’s tax/spend policy is quite The Situation but I do rec wearing sunscreen!”

Here is a previous post about the tanning tax Tax on Tans Coming Soon: Fist Pumps Will Remain Tax Free

On Wednesday, The Hill reported that Sen. Chuck Schumer (D-N.Y.) introduced a bill that places an $0.25 excise tax on companies that transfer domestic service calls to foreign call centers:

“If we want to put a stop to the outsourcing of American jobs, than we need to provide incentives for American companies to keep American jobs here,” Schumer said in prepared remarks. “This bill will not only serve to maintain call center jobs currently in the United States, but also provide a reason for companies that have already outsourced jobs to bring them back.”
Under the bill, companies would incur a $0.25 excise tax for any domestic customer service call that is transferred overseas.

Companies must also disclose to the caller that their call is being transferred overseas and name which country is receiving the call.

The Internal Revenue Service has released IR-2010-69 which encourages small businesses to take advantage of tax incentives included in recently enacted federal legislation. The release, in recognition of National Small Business Week, includes a summary of a variety of tax-saving opportunities as well as resources. Summaries and links to resources are provided below:

Health Care Tax Credit

The Affordable Care Act is designed to encourage small employers to offer health insurance coverage for the first time or maintain existing coverage. The Credit is generally available to small employers that pay at least half the cost of single coverage for employees in 2010.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers. The maximum credit goes to smaller employers ­­–– those with 10 or fewer full-time equivalent (FTE) employees ––­­ paying annual average wages of $25,000 or less. The credit is completely phased out for employers with more than 25 FTEs or with average wages of more than $50,000.

Step-by-Step Guide

Answers to Frequently Asked Questions

Benefits for Hiring and Retaining Recently Unemployed

Employers who hire unemployed workers this year (after Feb. 3 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive. This in effect exempts them from the employer’s share of Social Security tax on wages paid to these workers after March 18. Further, if the qualified employee is retained for at least a year and whose wages did not significantly decrease in the second half of the year, a qualifying business may claim a new hire retention credit up to $1,000 on their tax return.

Form W-11 – fulfills required signed statement regarding eligibility

Answers to Frequently Asked Questions

Work Opportunity Tax Credit

This credit offers tax savings to business that hire employees belonging to various target groups. Groups include: people ages 18 to 39 living in designated communities in certain states and D.C., recipients of various types of public assistance, certain veterans, ex-felons, and certain youth workers.

Instructions for Form 8850

Form 8850- filing with state workforce agency within 28 days after eligible worker begins work

An eligible employer can claim both the WOTC and the new hire retention credit for the same employee. However, an employer may not claim both the payroll tax exemption and the WOTC for the same employee. Therefore, any employer that chooses to apply the exemption to wages paid to a qualified employee may not receive the WOTC on any wages paid to that employee during the one-year period beginning on the employee’s hiring date.

Gain Exclusion on Sale of Certain Small Business Stock

Investors in qualified small business stock can exclude 75 percent of the gain upon sale of stock if acquired after Feb 17, 2009 and before Jan. 1, 2011 and is held for more than five years. If acquired prior to these dates, the exclusion rate generally remains at 50 percent.

COBRA Credit

Employers that provide the 65 percent COBRA premium subsidy to eligible former employees can claim credit for this subsidy on their quarterly or annual payroll tax returns. To help avoid imposing an unnecessary cash-flow burden, affected employers can reduce their payroll tax deposits by the amount of the credit.

Form 941 Instructions

Form 941

Other Resources:

Small Business and Self-Employed Tax Center

HIRE Act Video (English)

Small Business Health Care Tax Credit Video (English)