$1 BILLION AWAITS PEOPLE WHO HAVEN’T FILED 2008 TAXES

Tax refunds amounting to over $1 billion are awaiting an estimated 1 million people who still have not filed a federal income tax return for 2008.

To collect, taxpayers and preparers must file a return with the Internal Revenue Service no later than Tuesday, April 17. The IRS estimated that half of the potential tax refunds are for more than $600.

In some cases, the IRS acknowledged, people may not have filed because they had too little income in 2008 to require filing a tax return, even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund.

HOW MANY DAYS DO WE WORK JUST TO PAY FEDERAL TAXES?

TAX FACTS

Here are some statistics to put the nation’s income tax system in perspective.

     ► 143 million tax returns were filed with the IRS in 2010, some of which represent households and married couples. 

     ► Only 85 million actually paid taxes out of the 143 million filers.  In other words, 58 million, or 41%, were non-payers.  96% of these non-payers made less than $50,000.

     ► The IRS paid out $105 billion in refundable credits to filers who paid no income tax.

     ► The effective tax rate for those making less than $50,000 was 3.5%, and their share of taxes paid was 6.7%.

     ► The effective tax rate for those making more than $50,000 was 14.1%, and their share of taxes paid was 93.3%.

     ► The effective tax rate for those making more than $250,000 was 23.4%, and their share of taxes paid was 45.7%.

     ► The IRS estimates that it takes more than 7 billion hours to comply with the tax code each year.

     ► The tax code is now 3.8 million words long.

DEATH AND TAXES

Death and taxes aren’t only certain; they also seem to share a same deadline in the U.S., according to a study that points to the role of stress in fatal accidents.

According to Bloomberg.com: Deaths from traffic accidents around April 15, traditionally the last day to file individual income taxes in the U.S., rose 6 percent on average on each of the last 30 years of tax filing days compared with a day during the week prior and a week later, according to research published in the Journal of the American Medical Association.

Even allowing Americans to file their taxes electronically hasn’t negated the crash trend, lead researcher Donald Redelmeier said. The findings suggest stress, lack of sleep, alcohol use and less tolerance to other drivers on tax deadline day may contribute to an increase in deaths on the road, Redelmeier said.

“An increase of risk in this magnitude is about the same as what we observe on Super Bowl Sunday, a time notorious in the U.S. for drinking and driving,” said Redelmeier, a professor of medicine at the University of Toronto in Canada, in an April 6 telephone interview.

The research showed that there were 226 fatal crashes for each of the 30 tax days and 213 fatal accidents for each of the 60 control days.

Stressful Deadlines

“Our research suggests that stressful deadlines can contribute to driver error that can contribute to fatal crashes,” Redelmeier said. “People have, for a long time, speculated that psychological stress may contribute to real world crashes, but this is the first study to pin that down.”

The study, which appears as a research letter in the medical journal, looked at tax deadline data from the Internal Revenue Service and fatal traffic accident data from the National Highway Traffic Safety Administration from 1980 to 2009. The researchers then used a database to identify crashes that led to deaths. For every tax day, they also identified a day one week before and one week after as a comparison.

Redelmeier said drivers who are stressed should remember to buckle their seat belts, obey the speed limit, avoid alcohol, minimize distractions and refrain from driving recklessly.

“Under normal circumstances, everyone nods their heads agreeable,” he said. “Under stressful circumstances, it’s when you tend to forget these pieces of advice.”

To read the article: CLICK HERE

WE MADE IT

We finally made it to the  end of the 2012 tax season and due to our office changing software, I must say it has been a little more difficult than normal and all of the returns took a little longer than usual, but our team did a great job and our clients, as usual, gave us some grace.

I just want to take this time to say thanks to all of our readers for their questions during the season and our readership continues to grow each month and I look forward to my 41st tax season next year.

I will be traveling New York City this weekend to speak at the IBS show at the Jacob Jarvis Center and then meet with some of our New York clients and some clients  that are in attendance.  My wife Maggie is going with me so there will be a little R&R between meetings. 

TAX FREEDOM DAY 2012

OBAMA'S REVENUE SOUP

Wall Street Journal editorial, Obama's Revenue Soup: A History Lesson on Capital Gains Taxes:

In "Annie Hall," Woody Allen tells the joke of two women complaining about a restaurant. The first says the food here is awful and the second replies, yes, and they serve such small portions. Sounds like President Obama's proposal to raise the capital-gains tax: It will hurt the economy and it won't raise much new revenue.

Mr. Obama's plan would raise the capital-gains rate on January 1 to 20% on those who earn more than $200,000 ($250,000 for couples), plus a 3.8% investment surtax to finance ObamaCare. That 23.8% rate amounts to a nearly 60% increase from the 15% rate in effect since 2003. And that's without his new "Buffett rule," which would take the rate to 30% for many taxpayers.

This and other rate hikes aimed at higher-income earners are supposed to raise about $700 billion in tax revenues over the next decade. Fat chance. Ever since the famous 1978 bipartisan capital-gains tax cut sponsored by the late William Steiger of Wisconsin, the same pattern has repeated itself: raising the capital-gains rate reduces revenues, and lowering it leads to revenue increases.

The nearby chart shows the 35-year trend in capital-gains revenue and tax rates—through 2008, the last year data are available.

The data clearly show that the overall economy is the single biggest factor in capital-gains realizations and revenue. But the data also show that time and again revenue has multiplied despite a lower rate, and arguably because of it. ... Congress shouldn't be fooled by government forecasters who predict a revenue boom from a higher capital-gains rate. They have blown this call every time. ...

In our view the optimal capital-gains tax rate is one that leads to the most capital investment, jobs and wealth gains for American workers. That economically optimal rate is somewhere close to zero and would lead to more overall tax revenue as the economy grew faster. But if Congress wants a capital-gains tax, history suggests the revenue maximizing rate is closer to 15% than to 23.8%.

As John F. Kennedy put it in 1963 when he endorsed a cut in this tax: "The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital" as well as "the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy."

Today's Democrats in Washington are no Jack Kennedys. As President Obama told Charlie Gibson of ABC News in 2008, whether or not a higher capital-gains tax raises more revenue is irrelevant to him. He wants a higher rate as a matter of "fairness." The soup may be lousy but he wants more of it.

IRS GETS HALF A BILLION TO IMPLEMENT OBAMA HEALTH LAW

Did you ever wonder why the IRS is getting involved in our health care?  It has to do with them monitoring all the businesses to determine that they are providing the required coverage.  If you have ever tried to call the IRS you should be afraid.  It is not unusual to be on hold for 30 minutes.  I have even been on hold and then the music goes away and a busy signal comes over the phone.  I call back only to find that they are now closed for the day.

Even though the Supreme Court is looking at Obamacare they still are going forward funding the IRS.  See the article that was in Market Watch: CLICK HERE

2012 PRESIDENTIAL RACE

As you most likely know, on April 9, former Pennsylvania senator Rick Santorum suspended his campaign for the 2012 presidential race. This move effectively clears the way for former Massachusetts governor Mitt Romney to assume the Republican nomination.  This helps clear the way in determining your future tax situation.

Romney has made taxes a centerpiece of his campaign, and we expect to see even more attention focused on the issue as November draws near:

• Romney would make the Bush tax cuts permanent.
• He would cut top rates to 25% for both individuals and corporations.
• He would eliminate tax on interest, dividends, and capital gains for taxpayers making under $200,000.
• He would eliminate the estate tax entirely.
• He would eliminate the Alternative Minimum Tax (AMT) as well as new taxes imposed by the 2010 healthcare reform legislation.

We realize that this year's Presidential race will have a major effect on your taxes. So we're committed to tracking both candidates' tax proposals, letting you know how they affect your wallet, and offering proactive suggestions to plan for tax law changes. We're not here to take sides. We just want you to know we've got your back.

We'll be following the race carefully through November and beyond. So, if you have questions, don't hesitate to contact us.

TEN TIPS ON A TAX CREDIT FOR CHILD AND DEPENDENT CARE EXPENSES

If you paid someone to care for your child, spouse, or dependent last year, you may qualify to claim the Child and Dependent Care Credit when you file your federal income tax return. Below are 10 things the IRS wants you to know about claiming the credit for child and dependent care expenses.

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.

2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

3. You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, and other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.

4. The payments for care cannot be paid to your spouse, to the parent of your qualifying person; to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.

5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.

6. The qualifying person must have lived with you for more than half of 2011. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.

7. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.

8. For 2011, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income, such as a flexible spending account for daycare expenses.

10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer's Tax Guide.

If you need any more information let us know.

THANKS FOLLOW UP

Last week I posted a piece on Thanking clients.  If you missed it, check it out.

After I posted it I thought "maybe I should include thanking your staff."  When is the last time you thanked them for all that they do?

I CAN'T PAY MY TAXES- WHAT DO I DO?

Q. I blew it. I owe tax and don’t have any money. "What do I do?" "Am I going to jail?" "Should I hide?"

A. The worst thing you can do is ignore the problem. If you owe tax with your federal tax return, but can't afford to pay it all when you file, there are some things you can do to keep interest and penalties to a minimum.

 · File your return on time and pay as much as you can with the return. By doing this it will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges

· Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code · Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:

• Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return

 IRS charges a user fee to set up your payment agreement. See http://www.irs.gov/
 or the installment agreement request form for fee amounts.

· Request an extension of time to pay. For tax year 2011, if you qualify you may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment.

But hurry, your application must be filed by April 17, 2012.

Good luck, and start saving for 2012. Estimated payments are due 4/15/12, 6/15/12, 9/15/12 and 1/15/13. I would work on the 2011 first.

MORE TIME TO FILE FOR SOME

Most people must file their tax return on April 17th this year but some taxpayers get more time to file without having to ask for it.

These include:

• Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. Tax payments are still due April 17.

 • Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3 , Armed Forces Tax Guide.

• People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Indiana, Kentucky, Tennessee and West Virginia are covered by federal disaster declarations, and affected individuals and businesses in these areas have until May 31 to file and pay.

A REMINDER: FEDERAL TAX FILING DEADLINE IS APRIL 17 THIS YEAR

The good old IRS sent us a reminder, they sent out a video this week reminding everyone that this year's tax filing deadline is Tuesday, April 17, 2012. This is because the traditional April 15 deadline is a Sunday, and April 16 is a holiday in the District of Columbia.

This give us two extra days to get your taxes in!