Posts Tagged ‘tax’

« Older Entries

Proposed regs. provide rules for whistleblower awards

Tuesday, December 18th, 2012

originally posted on journalofaccountancy.com – December 17

The IRS issued proposed regulations for whistleblower awards under Secs. 7623(a) and (b), as well as rules governing the disclosure of return information under Sec. 6103(h) to pursue these claims (REG-141066-09). The proposed regulations provide general rules for submitting information to the IRS, definitions of key terms, rules for administrative proceedings, and criteria for determining the size of an award.

Sec. 7623(a) permits the IRS to pay awards to whistleblowers at its discretion. Any amount payable under Sec. 7623(a) is paid from the proceeds of amounts collected by reason of the information provided, and any amount collected is available for these discretionary payments.

Sec. 7623(b) provides that qualifying individuals will receive an award of at least 15%, but not more than 30%, of the collected proceeds resulting from the action that the IRS proceeded on based on the information the whistleblower provided to the IRS.

Prop. Regs. Sec. 301.7623-1 provides the general rules for submitting information on underpayments of tax or violations of tax laws and filing claims for awards. This section lists the information required to be submitted to file the claim and the people who are ineligible to claim an award. The list of ineligible claimants includes Treasury Department employees, government officials, and individuals who are required by law to disclose the information. In the preamble to the regulations, the IRS specifically requests comments on whether others should be added to the list of ineligible claimants, and whether electronic filings should be permitted, and if so, how that should be accomplished.

Prop. Regs. Sec. 301.7623-2 defines key terms, including “administrative” and “judicial” actions, “proceeds based on” information provided by an individual, “related action,” “collected proceeds,” “criminal fines” (which are excluded from collected proceeds), and “computation of collected proceeds.” The IRS is requesting comments on each of the key terms, as well as whether and how the IRS could determine any amount of collected proceeds that arise as a result of a taxpayer’s use of tax attributes such as net operating losses.

Prop. Regs. Sec. 301.7623-3 contains the rules for administrative proceedings and administrative appeals of awards under Sec. 7623(a) and Sec. 7623(b). The administrative appeal for Sec. 7623(a) is generally limited to a letter the claimant can write if he or she disagrees with the IRS’s determination letter; the administrative review process is much more thorough for Sec. 7623(b) awards. The IRS is requesting comments about whether claimants should be given additional opportunities to participate in administrative proceedings, whether additional safeguards should be adopted to further protect taxpayer return information in whistleblower administrative proceedings, and whether starting a whistleblower administrative proceeding before a final determination of tax in the underlying taxpayer action provides a meaningful benefit for whistleblowers.

Prop. Regs. Sec. 301.7623-4 generally contains the criteria the IRS will apply in determining the size of the award under Sec. 7623, which is based in part on how substantial the claimant’s contribution was in obtaining the collected proceeds and whether the claimant was involved in the act that gave rise to the proceeds. The IRS requests comments on the efficacy of the fixed percentage approach in the regulations; whether there are additional positive factors, negative factors, or planning and initiating factors useful to determine the amount of awards; the threshold determination of whether a whistleblower planned and initiated an underlying act; whether the IRS should determine and pay multiple awards in cases in which two or more independent claims relate to the same collected proceeds, or only reward the first individual to come forward; and how to apply the eligible affiliated claimant rule.

Prop Regs. Sec. 301.6103(h)(4)-1 authorizes Whistleblower Office employees to disclose return information to the extent necessary to conduct whistleblower administrative proceedings. The regulations provide, among other things, that the Whistleblower Office should use confidentiality agreements to protect from unauthorized disclosures of information disclosed to claimants. The IRS requests comments on whether the proposals strike an appropriate balance between minimizing possible redisclosures of confidential return information and providing meaningful opportunities for claimants to participate in the administrative processing of their claims.

The IRS will consider all written or electronic comments received before it issues final regulations. A public hearing will be scheduled only if one is requested by someone when he or she submits written comments. The deadline for comments or requests for a hearing is Feb. 19, 2013.

The regulations are proposed to apply to information submitted on or after the date the final regulations are published or to claims that are open on that date. However, Prop. Regs. Sec. 301.7623-4 is not proposed to apply to claims under Sec. 7623(a) that are open on the date the final regulations are published, so that the IRS can continue to apply consistent rules to open claims under Sec. 7623(a). The IRS also requested comments on these proposed effective dates.

Tags: , , , , , , , , ,
Posted in IRS, Taxes | No Comments »

IRS Expands Help to Struggling Taxpayers

Saturday, March 10th, 2012

From – AccountingToday.com

The Internal Revenue Service is expanding its Fresh Start initiative to help more unemployed and financially stressed taxpayers with installment agreements and relief from failure-to-file penalties.

Under the new Fresh Start provisions, which expanded on an effort that the IRS began in 2008, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. In addition, the IRS said Wednesday it is doubling the dollar threshold for taxpayers eligible for installment agreements to help more people qualify for the program.

“We have an obligation to work with taxpayers who are struggling to make ends meet,” said IRS Commissioner Doug Shulman in a statement. ”This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.”

To assist those taxpayers who are most in need, the IRS will grant a six-month grace period on failure-to-pay penalties to certain wage earners and self-employed individuals. However, the request for an extension of time to pay will result in relief from the failure-to-pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two taxpayer categories: wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year; and self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

The penalty relief is also subject to certain income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly, or not exceed $100,000 if he or she files as single or head of household. The penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

Taxpayers who meet those eligibility criteria will need to complete a new Form 1127A to seek the 2011 penalty relief. The new form is available on IRS.gov/form1127.

The failure-to-pay penalty is generally half of 1 percent per month, with an upper limit of 25 percent. Under the newly expanded Fresh Start relief, taxpayers can avoid that penalty until Oct. 15, 2012, which is six months beyond this year’s filing deadline. However, the IRS noted that it is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS is strongly encouraging taxpayers to file their returns on time by April 17 or file for an extension. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, with a 25 percent cap.

Installment Agreements
The new Fresh Start provisions will also provide more taxpayers with the ability to use streamlined installment agreements to catch up on their back taxes.

Effective immediately, the new threshold for using an installment agreement without having to supply the IRS with a financial statement has increased from $25,000 to $50,000, to reduce taxpayer burden.

Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS to stretch out the payment over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum.

Taxpayers who are seeking installment agreements of over $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $50,000 or less to take advantage of this payment option.

An installment agreement is an option for those who cannot pay their entire tax bills by the due date. While the penalties are reduced, interest continues to accrue on the outstanding balance. To qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments.

Taxpayers can set up an installment agreement with the IRS by going to the On-line Payment Agreement page on IRS.gov and following the instructions.

These changes supplement a number of efforts to help struggling taxpayers, including the “Fresh Start” program announced last year. Input from the Internal Revenue Service Advisory Council and the IRS National Taxpayer Advocate’s office contributed to the formulation of the Fresh Start program. The initiative includes a variety of changes to help individuals and businesses pay back taxes more easily and with less burden, including the issuance of fewer tax liens.

“Our goal is to help people meet their obligations and get back on their feet financially,” said Shulman.

Offers in Compromise
Under the first round of Fresh Start last year, the IRS expanded a new streamlined Offer in Compromise program to cover a larger group of struggling taxpayers. An offer-in-compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed.

The IRS said it recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place more common-sense changes to the OIC program to more closely reflect real-world situations. For example, the IRS now has more flexibility with financial analysis for determining reasonable collection potential for distressed taxpayers.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS noted that it examines the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

A series of eight short videos are available to familiarize taxpayers and practitioners with the IRS collection process. The series “Owe Taxes? Understanding IRS Collection Efforts”, is available on the IRS Web site. For more information please see, IRS Expands Help to Struggling Taxpayers at AccountingToday.com.

Tags: , , , , , , , , , , , , ,
Posted in Taxes | No Comments »

Berkshire Tax Return Could be One for the Record Books

Monday, February 27th, 2012

From – AccountingToday.com

Berkshire Hathaway chairman Warren Buffett hinted in his annual letter to shareholders that the holding company’s nearly 18,000-page tax return may merit the attention of the Guinness Book of World Records.

Referring to the people who work with the operating managers, he noted, “Equally important, however, are the 23 men and women who work with me at our corporate office (all on one floor, which is the way we intend to keep it!). This group efficiently deals with a multitude of SEC and other regulatory requirements and files a 17,839-page Federal income tax return—hello, Guinness!—as well as state and foreign returns.”

Even at that length, though, Berkshire’s tax return would be dwarfed by General Electric’s, which reportedly runs about 57,000 pages, so it probably won’t end up in the record books, for this year at least.

Buffett’s tax policies have generated considerable attention in the past year after he wrote a New York Times editorial calling for changes in the Tax Code to tax the “super-rich” at a higher rate to ensure they don’t pay a lower tax rate than their secretaries (see Buffett Says Tax Code is ‘Coddling the Super-Rich’). The editorial led to the “so-called” Buffett Rule, which President Obama cited in his State of the Union address and included in his 2013 budget plan. However, Buffett has also been criticized for the disputes that his company has gotten into with the Internal Revenue Service over the back taxes that the IRS says it owes.

“Investing is often described as the process of laying out money now in the expectation of receiving more money in the future,” Buffett wrote in his shareholder letter Saturday. “At Berkshire we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power—after taxes have been paid on nominal gains—in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.” For more information please see Berkshire Tax Return Could be One for the Record Books on AccountingToday.com.

Tags: , , , , , , , , , , ,
Posted in Taxes | No Comments »

Reid, Boehner spar over payroll tax

Monday, February 6th, 2012

From – The Hill

Senate Democratic leaders said Friday they were crafting a backup plan to extend the payroll tax cut for an entire year, in case the conference committee tasked with coming up with a deal falls short.

In a conference call, Senate Majority Leader Harry Reid accused congressional Republicans of gumming up the works on the payroll tax by trying to tack unrelated issues on to an extension.

“I have great confidence in our conferees, but I’m not going to stand by when the GOP slows the process,” the Nevada Democrat said.

Reid’s comments come as Democrats and Republicans on the conference committee, which includes 20 lawmakers, are widely seen to still be far apart on a variety of issues — including, perhaps most importantly, how to pay for whatever package they develop.

The statements also drew a quick rebuke from House Speaker John Boehner, with the Ohio Republican noting that the Senate has yet to pass its own full-year extension of the tax break, which would affect some 160 million Americans.

“It would seem those energies could be better directed toward the conference negotiations themselves, in which Senate Democrats have not actually presented a full plan,” Boehner said in a Friday statement. “You can’t have a ‘backup plan’ if you haven’t offered anything to back up.”

The House passed a yearlong extension in December, but it incorporated items that Democrats oppose and that Reid was presumably referencing with his Friday comments, including a delay of industrial boiler regulations and certain reforms to the federal unemployment insurance system.

GOP conferees would like to see some of those items tucked into a package extending the payroll tax cut for a full year.

The Senate passed a two-month extension of the tax break after being unable to pass a full year of the cut. House Republicans, after taking a political pounding, eventually accepted that idea, leading to the current conference committee.

In addition to the payroll tax cut, unemployment benefits for millions of Americans will also expire if lawmakers don’t act by Feb. 29, and doctors treating Medicare patients would see a 27 percent cut in their reimbursement rate.

For the most part, conferees have said they want to see those three items extended for a full year.

But the conference committee, which will meet again on Tuesday, has also spent much of its time discussing issues in other areas, such as the Keystone XL oil sands pipeline and expired tax provisions.

The two sides also have separate visions on how to pay for any extension, as illustrated by the Friday statements from Reid and Boehner.

Reid reiterated that a surtax on millionaires could be used to pay for the tax relief, an idea embraced by other Democrats but that has failed to make it out of the Senate on multiple occasions.

Boehner, meanwhile, noted that a federal pay freeze, one of the GOP’s preferred offsets, easily passed the House this week. FOr more information please see, Reid, Boehner spar over payroll tax on The Hill.

Tags: , , , , , , ,
Posted in Taxes | No Comments »

IRS Issues Private Letter Ruling on Breakfast Cereals

Tuesday, January 24th, 2012

From – Accounting Today


The Internal Revenue Service has provided cereal maker Ralcorp Holdings with a private letter ruling related to the tax implications of the separation of its Post cereals business.

Ralcorp said Friday that the IRS ruling confirmed the tax-free nature of the distribution of at least 80 percent of the outstanding shares of common stock of Post Holdings, Inc. to Ralcorp shareholders and related transactions.

Based on certain facts, assumptions, representations and undertakings set forth in the ruling, the ruling concludes that for U.S. federal income tax purposes, the separation of the Post cereals business will qualify as a tax-free distribution to Ralcorp and to the holders of common shares of Ralcorp (except in respect of cash received in lieu of fractional shares).

Ralcorp also said that subject to the consummation of the separation, the common stock of Post Holdings, Inc. has been approved for listing on the New York Stock Exchange under the symbol “POST.”

In connection with the separation, Ralcorp anticipates receiving approximately $900 million from the Post spin-off. The Ralcorp board intends to use the proceeds to reduce its debt, aggressively pursue private-brand acquisitions and pursue additional share repurchases under the company’s remaining share repurchase authorization of approximately five million shares. In addition, Ralcorp said it expects to retain up to 20 percent of the outstanding shares of Post.

Ralcorp had announced last week that its board approved the separation of Post, subject to the satisfaction or waiver of certain conditions including, but not limited to, the Registration Statement on Form 10 (the “Form 10″) for Post common stock being cleared by the Securities and Exchange Commission, the receipt of an opinion of tax counsel, the completion of related financing transactions, and the other conditions summarized in the preliminary form of information statement included in Amendment No. 3 to the Form 10 filed by Post with the SEC. The transaction does not require approval from Ralcorp shareholders.

Amendment No. 3 to the Form 10 includes as Exhibit 2.1, a preliminary form of the Separation and Distribution Agreement, including the closing conditions. The filings are available at www.sec.gov. For more information please see, IRS Issues Private Letter Ruling on Breakfast Cereals on Accounting Today.

Tags: , , , , , , ,
Posted in Taxes, law | No Comments »

IRS Announces New Voluntary Worker Classification Settlement Program

Tuesday, December 20th, 2011
WASHINGTON – The Internal Revenue Service today launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.

This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities.

“This settlement program provides certainty and relief to employers in an important area,” said IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.

To be eligible, an applicant must:

  • Consistently have treated the workers in the past as nonemployees,
  • Have filed all required Forms 1099 for the workers for the previous three years
  • Not currently be under audit by the IRS
  • Not currently be under audit by the Department of Labor or a state agency concerning the classification of these workers

Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

Tags: , , , , , , , ,
Posted in Small Business, Taxes | No Comments »

Senate Democrats Offer Smaller Surcharge in Payroll Tax Plan

Thursday, December 8th, 2011

From Bloomberg news

Democrats in the U.S. Senate will seek another vote on a payroll tax cut for workers this week in an attempt to pressure more Republicans to support an extension into 2012.

Legislation proposed by Senate Democrats yesterday would cut the payroll tax paid by employees to 3.1 percent next year from the current 4.2 percent. The $185 billion cost would be covered by a 1.9 percent surtax on annual incomes exceeding $1 million and by raising the fees charged to lenders by government-owned mortgage giants Fannie Mae (FNMA) and Freddie Mac.

The proposal was sponsored by Senator Robert Casey, a Pennsylvania Democrat who is facing a tough race for re-election next year.

The measure nods at concerns Republicans have raised about how to pay for the extension’s cost. The plan reduced the millionaire surtax rate from 3.25 percent to 1.9 percent and incorporated ideas that were raised during negotiations of the bipartisan congressional supercommittee. The proposal also trims the cost by eliminating a proposed payroll tax cut for employers.

Republicans said they were still unlikely to back the plan.

“This was not a compromise,” Minority Leader Mitch McConnell of Kentucky said today on the Senate floor. “This was nothing more than a bill designed to fail.”

Republican Support Needed

Democrats control 53 seats in the Senate and would need the support of at least a few Republicans to secure the 60 votes that will be necessary for passage. Senator Susan Collins of Maine was the only Republican to support advancing a Democratic payroll tax cut proposal last week. Three members of the Democratic caucus opposed the measure, which didn’t clear the 60-vote threshold.

Collins said she backed the Democratic bill last week to “send a signal” that lawmakers can “no longer continue to have these completely partisan votes where each side knows that it’s not going to succeed and it’s really political theater.”

She said she would join Senator Claire McCaskill, a Missouri Democrat, to offer alternative legislation today. That proposal would continue the 4.2 percent payroll tax for workers in 2012 and expand it to employers, according to a summary of the measure. It also would extend several other tax breaks that expire at the end of the year, including those for research and development and bonus depreciation.

Republicans aren’t likely to back the Collins-McCaskill measure because it includes a 2 percent surtax on income exceeding $1 million. Taxpayers who report business income on their individual returns would be exempt from the surtax.

Dec. 31 Deadline

Unless Congress acts, the current two-percentage-point reduction — from 6.2 percent to 4.2 percent — in the employee portion of the Social Security payroll tax will expire Dec. 31. Mark Zandi, chief economist at Moody’s Analytics, has said that failure to extend the payroll tax cut into 2012 could shave one- half of one percentage point from U.S. gross domestic product next year.

“Raising taxes by $1,000 next month will have an immediate negative impact on the economy,” Senate Majority Leader Harry Reid, a Nevada Democrat, said on the Senate floor yesterday. “We all know Congress can’t afford to play chicken with this economy.”

President Barack Obama said Republicans would be “leaving 1.3 million Americans out in the cold” next month if they allow the payroll tax cut to lapse.

‘Important Insurance’

“It’s important insurance for them against the unexpected,” Obama told reporters yesterday. “It will spur spending. It will spur hiring and it’s the right thing to do.”

Republican leaders indicated it was unlikely that they could support the proposal. “The only thing bipartisan about adding a tax hike on job creators is the opposition,” said Don Stewart, a spokesman for McConnell.

Senate Minority Whip Jon Kyl, an Arizona Republican, said he doesn’t think the Democratic plan will gain any more votes from his party than it did last week.

“I don’t think it’s different enough to make a significant difference,” he said. “It wouldn’t be enough to get my support.

Senator Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, criticized the surtax proposal in an e-mail, calling it a ‘‘permanent tax hike on small businesses to pay for temporary one-year tax policy.’’

10-Year Surtax

In response to criticism that Democrats were using a permanent tax increase for high earners to offset a temporary payroll tax cut, the legislation proposed yesterday would end the surtax in 10 years.

It also proposes means-testing eligibility for unemployment compensation and food stamps, a provision Republicans included in their plan. Democrats wouldn’t require high earners to pay higher Medicare premiums, as Republicans had earlier proposed.

The plan would require Fannie Mae and Freddie Mac (FMCC) to raise their guarantee fees by at least 12.5 basis points while allowing the director of the Federal Housing Finance Agency to determine the details. The higher fees would raise $38.1 billion, according to Casey’s summary.

House Republicans plan to propose legislation in coming days that would extend the 4.2 percent payroll tax rate for one year for employees. House lawmakers will seek to avoid cuts to physician reimbursements by Medicare and address expanded unemployment benefits that are set to expire at the end of the year. The Republican plan also is expected to include language expediting construction of the Keystone XL pipeline from Canada as well as an Environmental Protection Agency proposal to limit emissions for industrial boilers.

Romney Backs Extension

On the Republican presidential campaign trail, former Massachusetts governor Mitt Romney told a radio talk show yesterday that he supports a one-year extension, marking a shift from October when he appeared to reject the idea.

‘‘I would like to see the payroll tax cut extended just because I know that working families are really feeling the pinch right now,” Romney said yesterday on Michael Medved’s radio show. “Middle-class Americans are having a hard time.”

At an Oct. 10 Republican presidential debate hosted by Bloomberg LP and the Washington Post in Hanover, New Hampshire, Romney had said he didn’t want “temporary little Band-Aids” for the tax code. “I want to fundamentally restructure America’s foundation economically,” he said then.

Another contender for the Republican nomination, former House Speaker Newt Gingrich, has consistently supported continuation of the payroll tax cut.

“I am against tax increases in the middle of a depression,” Gingrich told Bloomberg Television in September. “We should extend tax cuts for working Americans just as I would extend the Bush tax cuts” for the wealthiest taxpayers.

For more information please see Senate Democrats Offer Smaller Surcharge in Payroll Tax Plan at www.bloomberg.com .

Tags: , , , , , ,
Posted in Taxes | No Comments »

Senators Introduce Online Sales Tax Bill

Tuesday, November 15th, 2011

From www.accountingtoday.com

A bipartisan group of 10 senators introduced legislation Wednesday that would give states the option to collect the sales taxes they are owed under current law from out-of-state businesses, rather than rely on consumers to pay those taxes to the states.

The bill, known as the Marketplace Fairness Act, would give states the option to collect sales and use tax revenues from out-of-state sellers through a new, simplified tax system. Among the senators sponsoring the bill are Lamar Alexander, R-Tenn., Dick Durbin, D-Ill., and Mike Enzi, R-Wyo.

The bill resembles another piece of legislation, the Main Street Fairness Act, which was introduced in July by Durbin and several other Democratic lawmakers, but now includes support from some key Republicans and conservative groups (see Congress Introduces Bill to Collect Online Sales Taxes).

Like the earlier bill, it relies on the Streamlined Sales and Use Tax Agreement that is already in use by 24 states. However, the emphasis with the new bill is on the fact that it would not impose any new taxes, but merely collect taxes that are already owed, and it gives states the option not to collect the sales taxes, preserving states’ rights.

“This legislation would give states the ability to close the online sales-tax loophole, created when out-of-state sellers don’t collect, and purchasers don’t pay, the state sales tax—even though they still owe it,” Alexander said in a statement. “The legislation addresses a states’ rights issue: preserving the right of states to collect—or to decide not to collect—taxes that are already owed under state law.”

The legislation would streamline the country’s more than 7,500 diverse sales tax jurisdictions and provide two options by which states could begin collecting sales taxes from online and catalog purchases.

States that voluntarily become member states of the Streamlined Sales and Use Tax Agreement, or SSUTA, would be able to require remote sellers to collect and remit sales and use taxes after 90 days.

The agreement would help harmonize states sales and use tax rules, bring uniformity to the definitions of items in the sales tax base, reduce the paperwork burden on retailers, and incorporate new technology to modernize administrative procedures.

States that do not wish to become members of SSUTA would be allowed to collect the taxes only if they adopt certain minimum simplification requirements and provide sellers with additional notices on the collection requirements.

“For over a decade, Congress has been debating how to best allow states to collect sales taxes from online retailers in a way that puts Main Street businesses on a level playing field with online retailers,” said Enzi. “This bill empowers states to make the decision themselves. If they choose to collect already existing sales taxes on all purchases, regardless of whether the sale was online or in store, they can. If they want to keep things the way they are, it’s a state’s choice.”

Enzi read a letter from Amazon.com supporting the bill. Amazon also released a statement conforming its support. “Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers, and the states to get this bi-partisan legislation passed,” said Amazon vice president of global public policy Paul Misener. “It’s a win-win resolution—and as analysts have noted, Amazon offers customers the best prices with or without sales tax.”

Alexander noted that a version of the legislation introduced in the House has also won the support of the American Conservative Union.

The legislation exempts sellers who make less than $500,000 in total remote sales in the year preceding the sale to qualify for an exemption and not be required to collect the tax.

“Most small business people don’t want a government handout,” said Durbin. “They don’t want special treatment. They just want to be able to compete fairly against other businesses. That’s why I have worked with Senators Enzi and Alexander to introduce the Marketplace Fairness Act—a bipartisan bill to level the playing field for local main street businesses.”

Senators Tim Johnson, D-S.D., John Boozman, R-Ark., Jack Reed, D-R.I., Roy Blunt, R-Mo., Sheldon Whitehouse, D-R.I., Bob Corker, R-Tenn., and Mark Pryor, D-Ark., are also co-sponsors of the legislation.

Under the Supreme Court’s 1992 Quill decision, retailers are only required to collect sales tax in the states where they also have a physical presence, also known as nexus, while consumers are required to report to state tax departments any sales taxes they owe for online purchases. As a result, local retailers are at a competitive disadvantage because they must collect sales taxes at the point of sale while out-of-state retailers, including many large online and catalog retailers, in effect give their customers a discount by collecting no state or local sales taxes.

As with the earlier bill introduced by Durbin, eBay registered its objection, however. “This is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors,” said eBay vice president for government relations and deputy general counsel Tod Cohen. “It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.”

Alexander predicted on the Senate floor that the legislation ultimately would be passed. “This problem’s been there for a long time,” he said. “It’s had the opposition of conservatives worried about taxes. It’s had the opposition of Amazon and other online sellers. The Supreme Court said 20 years ago that it was too complicated for out-of-state vendors to figure out how to collect sales taxes when something is purchased and sent to the state, which is what the Main Street seller does, and maybe that was true 20 years ago. But the Supreme Court said 20 years ago, it invited us in Congress to solve this problem, and Senator Enzi and Senator Durbin with this legislation in my opinion have solved the problem, and this is going to happen. I’m not presumptuous enough to predict what the United States Congress will do and what the President will sign, but I think I’ve been around long enough, and I’ve watched Congress enough to say this is going to happen. And if I were a governor, or I were an online retailer, or I were a catalog retailer, I would make my plans to conduct my business in this way.” For more information please see Senators Introduce Online Sales Tax Bill at www.accountingtoday.com.

Tags: , , , , , , , , ,
Posted in Taxes | No Comments »

IRS Wrongly Demanded Repayments of First-Time Homebuyer Tax Credit

Friday, October 14th, 2011

From-www.accountingtoday.com

The Internal Revenue Service mistakenly sent notices to approximately 80,000 taxpayers telling them they needed to repay the First-Time Homebuyer Tax Credit. A new report by the Treasury Inspector General for Tax Administration found that 27,728 taxpayers were notified they had a repayment obligation even though they had purchased their homes in 2009, when there was no repayment obligation. In addition, the information provided by a vendor hired by the IRS to use third-party data to identify individuals who may have disposed of their principal residences was unreliable, resulting in 53,558 individuals who incorrectly received notices to repay the Homebuyer Credit.

The First-Time Homebuyer Tax Credit was a program aimed at stimulating the housing industry. While it helped prop up the industry, especially in the wake of the mortgage crisis, the quick ramp-up and shifting requirements left the IRS issuing the tax credits to thousands of taxpayers who did not fit the qualifications, including minors. The IRS was then forced to demand repayments of the tax credits that had been issued incorrectly, as well as from homeowners who fit into the various recapture provisions if they didn’t hold onto their homes long enough.

The TIGTA report found that the IRS is having difficulty determining which taxpayers have to repay the First-Time Homebuyer Credit. The report acknowledged that the IRS accurately issued the vast majority of the notices, over 5.2 million, informing taxpayers of the need to repay the credit.

However, at the same time, the IRS did not send notices or sent incorrect notices to 61,427 households due to programming errors or incorrect information on the tax accounts. Of those 61,427 households, 12,495 individuals were notified that they did not have to repay the Homebuyer Credit, when in fact they did have a repayment obligation; 27,728 taxpayers were notified that they had a repayment obligation despite having purchased their home in 2009 (only 2008 purchases have a repayment obligation); 2,152 individuals who bought their house in 2008 were incorrectly notified that they did not have a repayment obligation unless they sold their house; 18,220 did not receive a notice reminding them of their repayment requirement; and 832 deceased individuals may have been sent an incorrect notice regarding repayment.

“The IRS processed the vast majority of Homebuyer Credit Claims accurately,” said TIGTA Inspector General J. Russell George in a statement. “However, IRS officials still need to eliminate the programming errors that resulted in thousands of taxpayers being misinformed about their repayment status.”

The Homebuyer Credit was created by Congress in 2008 to help stimulate the housing industry by encouraging people to purchase their first homes. Subsequent legislation in 2009 and 2010 revised, extended and expanded the Homebuyer Credit in an attempt to help boost a sluggish real estate market. The Homebuyer Credit was a refundable credit that could result in a tax refund when the credit exceeded the tax liability, even if no income tax was withheld or paid.

Each of the laws with Homebuyer Credit provisions contained different credit amounts, qualification requirements and repayment requirements. Individuals who received the Homebuyer Credit for a home purchased in 2008 are required to pay back the total amount received for the Homebuyer Credit over 15 years beginning in 2010. There are some exceptions. In addition, individuals who received the Homebuyer Credit in 2008, 2009 or 2010 generally must repay the entire amount they received, if, during the three-year period beginning on the purchase date and after the year for which the individual received the homebuyer credit, they dispose of the home or it ceases to be their principal residence. If the disposition is a sale, the repayment requirement is applicable to the extent there is a gain on the sale of the home.

“The scope of the FTHBC was unprecedented in that it required the development of a comprehensive and balanced strategy to administer the credit amid the many unique situations that could trigger the recapture provisions, and to provide information to affected taxpayers to assist them in complying with their tax reporting obligations,” wrote IRS Wage and Investment Division Commissioner Richard C. Byrd Jr. in response to the report.

TIGTA recommended that the IRS ensure that Homebuyer Credit repayment notices are accurately issued; correct erroneous purchase dates on tax accounts; and discontinue using third-party vendor data to identify individuals who may have disposed of their principal residents unless the reliability can be significantly improved.

The IRS agreed with two of TIGTA’s recommendations. For the remaining recommendation relating to accurately issuing notices, the IRS indicated it is replacing some of its notices with an online tool for taxpayers to obtain their Homebuyer Credit repayment status. It plans to make the Web-based tool available to taxpayers for the 2012 filing season. For details, visit IRS Wrongly Demanded Repayments of First-Time Homebuyer Tax Credit, on the Accounting Today website,www.accountingtoday.com.

Tags: , , , ,
Posted in Homebuyers, Taxes | No Comments »

Airlines Benefit More from Ticket Tax Holiday than Passengers

Monday, July 25th, 2011

Congress’s failure to reauthorize funding for the Federal Aviation Administration last Friday means that airlines can’t collect the federal excise tax on airline tickets, but most airlines quietly raised their fares so they could still pocket the extra money anyway.

There are a few exceptions for now, luckily. Alaska Airlines and Hawaiian Airlines currently aren’t collecting the tax or raising their prices, according to local Hawaiian station KITV.com. Spirit Airlines has also been passing along the extra savings to consumers, according to The Wall Street Journal. Virgin America also gave passengers a break over the weekend, but raised its price Monday morning.

The lack of reauthorization means the FAA had to furlough thousands of employees and close down many of its airport reconstruction projects. However, Congress’s failure to pass the FAA reauthorization also meant the FAA cannot collect its 7.5 percent federal excise tax for now, nor the flat fee of $3.70 per travel segment, and the international arrival and departure taxes of $16.30 per way.

Theoretically that should save airline customers a lot of money, except that most of the major airlines raised their prices over the weekend by 7.5 percent or more, including American Airlines, Delta, Frontier, JetBlue, Southwest and US Airways.

At least they’re making money. The U.S. Treasury will lose an estimated $200 million a week, according to the Transportation Department, at a time when the federal government is in danger of default if the debt limit isn’t raised by August 2.

The Internal Revenue Service is monitoring the situation, as Forbes.com blogger Kelly Phillips Erb noted. “The laws authorizing the airline ticket tax and other aviation-related taxes expired at midnight on Friday, July 22,” the IRS said on its Web site Saturday. “The IRS continues to monitor pending legislation related to this issue. The IRS will continue to work with the airline industry to address issues relating to the collection and payment of the taxes involved. Taxpayers do not need to take any action at this time. The IRS will provide further guidance on this issue in the near future.”

It would be a good idea if the airline companies had to repay all that extra money they charged on passengers’ tickets either to the Treasury or as a refund to passengers.

Tags: , , , ,
Posted in Uncategorized | No Comments »

« Older Entries