Talking Shop Blog

Tax refunds will be delayed next year for many early filers.

The IRS has just announced that some key tax forms won’t be available until mid-to late February.

Those include Schedule A for itemized deductions and Form 8917 for the Higher Education Tuition and Fees Deduction.

Taxpayers claiming the “above-the-line” Educator Expense Deduction will have to wait too. That’s the $250 deduction for teachers and educators with out of pocket classroom expenses.

But late filers will have extra time to get their tax returns in next year.

Friday April 15, 2011 is Emancipation Day in Washington D.C. That means Tax Day is moved to Monday, April 18.

So if you expect to owe, you’ll have 3 more days to get that check in the mail.

The findings of the President’s bipartisan Debt Commission have been widely publicized.  

Their recommendations include an overhaul of the tax code that would lower rates, broaden the base, and “cut spending in the tax code”.

Yesterday the Joint Committee on Taxation (JCT) issued a report on “Estimates of Federal Tax Expenditures for Fiscal Years 2010-2014”.

Congress defines “tax expenditures” as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income”.

Put another way, Congress views any potential tax on ”income” that they don’t currently tax as an “expenditure”.

And that “income” includes things like employer provided health insurance and employer contributions to retirement plans, such as 401(k) profit sharing plans.

Webster defines “expenditures” this way:

“Something expended: Disbursement, Expense”.

Synonyms include “Expense, Outlay, Cost, Disbursement”, you get the idea.

I have lots of “expense” items set up in Quicken, like groceries, clothing, utilities and taxes, to name a few.

I don’t have “new tax on “income” that Congress currently doesn’t tax” set up as an expense.

But maybe I should.

We’ll see what the next Congress does with some of those Debt Commission recommendations.

You can find the full Commission report in PDF format at http://www.fiscalcommission.gov/news/ . Just click on the link to “The Moment of Truth Report” .

The JCT report is also available in PDF format at http://www.jct.gov/ . Just click on the link to Publication JCS-3-10.

The House passed the tax compromise bill yesterday, and President Obama is expected to sign the legislation later today.

The two-year extension of the Bush-era tax rates has been widely reported in the media.

Here are some other highlights of the bill:

The first-year bonus depreciation provision is increased from 50% to 100% for new property acquired after September 8, 2010 and before January 1, 2012 and placed in service before January 1, 2012.

The 15% tax rate for long term capital gains and qualified dividends is extended for two years through December, 31, 2012.

The research tax credit is extended for two years through December 31, 2011.

The employee share of Social Security taxes is reduced from 6.2% to 4.2% for wages earned in 2011, up to the taxable wage base of $106,800.

The AMT “patch” is extended for two years through 2011.

The top estate tax rate is decreased from 55% to 35% for 2011 and 2012.

The estate tax exemption is increased from $1 million to $5 million for 2011 and 2012.

We’ll have more on Monday.

Rahm Emanuel testified today at a Chicago Board of Election Commissioners hearing on the residency challenge to his mayoral run.

Back in October we wrote about the potential residency challenge, and how his Illinois income tax return might come into play:

“If he filed a 2009 “full year resident” Illinois return maybe he intended to retain his Illinois and Chicago residency. But if he filed a “part year return” or “non-resident” return, that suggests he changed his residency.”

( http://blogs.duganlopatka.com/general/2010/10/05/rahm-emanuel-and-state-income-taxes/ ).

Today we find out that Emanuel filed an amended 2009 Illinois return on November 24, changing his status from part year resident to full year resident.

In filing the amended return, Emanuel notes that “the original return’s statements regarding part-year residency were not accurate. The amended returns make clear that we were full-year residents of Illinois in 2009. … We are also full-year residents of Illinois in 2010.”

Hmmmm.

Some parts of the Infernal Revenue Code seem indecipherable.

Like this one:

“For purposes of paragraph (3), an organization described in paragraph (2) shall be deemed to include an organization described in section 501(c)(4), (5), 0r (6) which would be described in paragraph (2) if it were an organization described in section 501(c)(3).”

- IRC Section 509(a) (the flush language following Sec. 509(a)(4)).

This one’s not too bad:

“For purposes of this chapter, the term “non-skip person” means any person who is not a skip person.”

- IRC Section 2613(b)

Of course, it makes you wonder who is a “skip person”?

If you have questions about the tax law, or maybe just understanding the IRS instructions to a tax form, try our new D & L Tax Decoder Service.

Just e-mail your question to info@duganlopatka.com

The Congressional Research Service (CRS) is the public policy research arm of Congress.

Last week CRS issued a new report titled “Federal Individual Income Tax Terms: An Explanation, December 2, 2010”. 

The report offers explanations of some pretty basic terms, like “tax liability”, “tax refund” and “amount owed”, to name a few.

Does the term “amount owed” really need an explanation?

CRS reports are generally not made public, but rather are used by members of Congress in public policy debates, like whether or not to extend the Bush-era tax rates.

We’re not sure why Congress asked CRS to issue this specific report.

But the report does note that many taxpayers “determine their tax liability with the use of tax preparation software (e.g., TurboTax®), which eliminates the need to be familiar with Form 1040. Therefore, taxpayers who rely on tax preparation software may not be familiar with some of the concepts presented in this report.”

Maybe some members of Congress just needed a refresher course after their lengthy Christmas recess: “Taxes 101”.

We’re here to help too. Tomorrow we roll out our D & L Tax Decoder.

The President continues to lobby Democrats in the House and Senate to sign on to the compromise tax bill.

There’s nothing in bill form yet, but the White House has released a “Fact Sheet on the Framework Agreement”.

Among the highlights:

• Two year extension of the Bush-era tax rates.
• 100% expensing for bonus depreciation for business assets acquired and placed in service through 2011.
• Two year extension of the R & D tax credit.
• 35% estate tax rate and a $5 million exemption for two years.
• Reduction in the employee share of Social Security taxes from 6.2% to 4.2% for 2011.
• Two year extension of the AMT “patch”.

There’s no firm deal yet, so stay tuned.

“It’s a compromise that won’t make anyone happy, except the taxpayers.”

-ABC White House Reporter Ann Compton

Come again?

We heard the reports this morning. The White House and Congress are close to a compromise that will extend all of the current Bush-era tax rates, probably for at least 2 years.

As part of the deal, some or all of the expiring tax breaks will be extended, including the AMT patch and the R & D tax credit.

Stay tuned.