Patti's Blog - Advocate for Elders, People with Disabilities and Their Families

Mulligan: The EITC Discourages Work for Most Taxpayers

Excerpt from TaxProf Blog: (click for entire article)

New York Times:  Do Tax Credits Encourage Work?, by Casey B. Mulligan (University of Chicago, Department of Economics):

    The earned-income tax credit is often said to encourage work, but it may do just the opposite. ... The chart below shows the credit’s schedules for the 2011 tax year as a function of annual earned income for a given family situation (other family situations have the same basic shape). The schedule shown illustrates the mountain-plateau pattern described above: an increasing portion for the lowest incomes, a flat portion, a decreasing portion and then finally a flat portion of zero.

WSJ: New Ex-Patriot Tax on Facebook Co-Founder 'Isn't Worthy of America'

Excerpt from TaxProf Blog: (click for entire article)

Wall Street Journal editoiral:  The Saverin Lesson : A Punitive Exit Tax on the Facebook Expat Isn't Worthy of America:

    Facebook on Thursday priced the IPO it expects to launch Friday at $38 a share, valuing the social media company at $104 billion. But so much for that welcome sign of confidence in American entrepreneurship and capital markets. This being the age of envy, the bigger story in some circles seems to be the decision by Facebook co-founder Eduardo Saverin to renounce his U.S. citizenship in favor of Singapore.

    Democratic Senators Chuck Schumer and Bob Casey, a pair of envy specialists, pounced on the news by announcing Thursday that they will introduce a plan to tax capital gains at 30% for any wealthy Americans who try to escape from U.S. shores. No doubt they hope to score political points by punishing the fleeing rich who will strike most Americans as unpatriotic, but the Senators are doing far more harm than Mr. Saverin is to the U.S. and its global reputation.

GAO: Health Law's Tax Credit For Small Businesses Underperforms

Excerpt from Kaiser Health News: (click for entire article)

A Government Accountability Office report found that only about 17 percent of the businesses that would otherwise be eligible for the maximum tax credit offered health insurance to employees.

The Hill: GAO: Tax Credit In Health Care Law Underperforms
Only about 17 percent of the businesses that would otherwise be eligible for the maximum tax credit offered health insurance, according to government data cited in the GAO report. The tax credits are administered on a sliding scale, covering up to 35 percent of a company's healthcare costs. "While some small employers could be eligible for the credit if they began to offer health insurance, small business group representatives and discussion group participants told us that the credit may not offset costs enough to justify a new outlay for health insurance premiums," GAO said (Baker, 5/21).

For Small Business Week, IRS Spotlights Expanded Tax Credit for Hiring Veterans, Credit for Providing Health Care Coverage to Employees and Tax Relief

Excerpt from IRS.gov: (click for entire article)

The Internal Revenue Service is marking Small Business Week, May 20 to 26, by encouraging small business owners to check out two key tax credits and a special relief program that could provide significant tax benefits during 2012.

Both the expanded credit for hiring veterans and the credit for employer-provided health care coverage can provide tax savings to eligible small businesses when they file their 2012 federal income tax returns. In addition, substantial relief from past payroll tax obligations is available to eligible employers who agree to reclassify their workers as employees in the future. Here are details on each of these benefits.

Expanded Tax Credit for Hiring Veterans

A law change enacted late last year now provides an expanded Work Opportunity Tax Credit (WOTC) to employers that hire eligible unemployed veterans. The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations. The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hire, hours a veteran works and the amount of first-year wages paid. Employers who hire veterans with service-related disabilities may be eligible for the maximum credit.

IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start

Excerpt from IRS.gov: (click for entire article)

The Internal Revenue Service today announced another expansion of its "Fresh Start" initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.

"This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years," said IRS Commissioner Doug Shulman. "It is part of our multiyear effort to help taxpayers who are struggling to make ends meet."

Today’s announcement focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.

In certain circumstances, the changes announced today include:

    Revising the calculation for the taxpayer’s future income.
    Allowing taxpayers to repay their student loans.
    Allowing taxpayers to pay state and local delinquent taxes.
    Expanding the Allowable Living Expense allowance category and amount.

The Tax Consequences of Mark Zuckerberg's Marriage

Excerpt from TaxProf Blog: (click for entire article)

    Forbes:  How Mark Zuckerberg's Taxes Change Now That He's Married, by Robert W. Wood (Wood LLP, San Francisco):

    What a week! First an unprecedented IPO, then marriage. Yes, Facebook’s Zuckerberg Marries His Longtime Girlfriend Priscilla Chan. ... [W]hat does this latest one-two development mean for the Zuckerberg family tax return?

        Joint v. Separate?
        Separate v. Community?
        Business and Investment Management?
        Gifts During Marriage?
        Divorce Rules

Facebook Billionaires Used GRATs to Save $200 Million in Gift Taxes

Excerpt from TaxProf Blog: (click for entire article)

Following up on my prior posts:

    Facebook Billionaires Used GRATs to Transfer More Than $200 Million Free of Gift Tax (Mar. 8, 2012)
    More on the Facebook Billionaires GRAT Tax Strategy (Mar. 21, 2012)

Wall Street Journal Tax Report, How Facebook's Elite Skirt Estate Tax, by Laura Saunders:

    Investors are focusing on Facebook's offering price as the company prepares to go public as soon as next week. Tax specialists are paying attention to something else: how half a dozen of the firm's luminaries, including founder Mark Zuckerberg, appear to be using a perfectly legal maneuver called a grantor-retained annuity trust, or GRAT, to avoid at least $200 million of estate and gift taxes on their own Facebook shares.

Notice Concerning Public Act 115 of 2012

Excerpt from the attached Notice:

On May 1, 2012, Governor Snyder signed Public Act 115 of 2012 (2011 Senate Bill 349), which amended Section 211.7cc of Public Act 206 of 1893, the General Property Tax Act.  The Act makes two significant changes:

• It establishes two deadlines by which a Principal Residence Exemption may be filed.
• It creates a new conditional rescission for "foreclosure entities."

Download Notice Concerning Public Act 115 of 2012

How to Pay No Taxes: 10 Strategies Used by the Rich

Excerpt from TaxProf Blog: (click for entire article)

Bloomberg: How to Pay No Taxes: 10 Strategies Used by the Rich, by Jesse Drucker:

    For those who can afford a shrewd accountant or attorney, our era is rife with opportunities to avoid—or at least defer—tax bills, according to tax specialists and public records. It’s limited only by the boundaries of taste, creativity, and the ability to understand some very complex shelters. Here’s a look at some of them:

1.     The ‘No Sale’ Sale:  Cashing in on stocks without triggering capital-gains taxes
2.     The Skyscraper Shuffle:  Partnerships that let property owners liquidate without liability
3.     The Estate Tax Eliminator:  How to leave future stock earnings to the kids and escape the estate tax
4.     The Trust Freeze:  “Freezing” the value of an estate, so taxes don’t eat up its future appreciation

Americans Pay More in Taxes than for Food, Clothing, and Shelter Combined

Excerpt from TaxProf Blog: (click for entire article)

Tax Foundation, Americans Paying More in Taxes than for Food, Clothing, and Shelter:

    In 2012, Americans will pay approximately $4.041 trillion in taxes, which is $152 billion, or 3.9%, more than they will spend on housing, food, and clothing. ... Between 1929 and the early 1980s, aggregate tax collections were less than total expenditures on housing, food, and clothing. From 1929 to 1980, tax liabilities grew from $10 billion to $751 billion, while expenditures on housing, food, and clothing grew from $41.6 billion to $775.7 billion. In 1982, total tax collections exceeded expenditures on those items. The gap between tax collections and expenditures on essential goods reached a maximum in 2000, when Americans gave 19% more to the government than they spent on these items. The growth in tax collections has halted due to economic contractions, such as the collapse of the "dot-com bubble" in 2001 and the 2007-2009 financial crisis.