General Business, Tax Planning
The Internal Revenue Service has just released its first ever smart phone app – IRS2Go.
You can use the new app to check the status of tax refunds and obtain tax tips and other information.
The Tax Tips are pretty basic, but they do provide some useful information on a variety of topics, including tax credits, ways to obtain IRS forms, and how to file electronically, to name a few.
They even have Top Ten Lists, but no Letterman, and no punch lines.
If you really like the IRS, you can even sign up to follow an IRS Twitter news feed.
You can find out more at http://www.irs.gov/newsroom/article/0,,id=234882,00.html?portlet=7
General Business
Last fall President Obama signed into law the Plain Writing Act of 2010 (H.R. 946).
The law is intended to “improve the effectiveness and accountability of Federal agencies to the public by promoting clear Government communication that the public can understand and use”.
I like the idea and hope it takes off.
But what happens if federal agencies, like the IRS, don’t follow the new law?
Do they get fined? Arrested? Is there a trial or other judicial hearing?
And what are the legal remedies for those of us affected by IRS non compliance with the new law?
Turns out nothing happens according to Section 6 of the Act:
SEC. 6. JUDICIAL REVIEW AND ENFORCEABILITY.
(a) JUDICIAL REVIEW.—There shall be no judicial review of
compliance or noncompliance with any provision of this Act.
(b) ENFORCEABILITY.—No provision of this Act shall be construed
to create any right or benefit, substantive or procedural,
enforceable by any administrative or judicial action.
We’ll be watching to see if the IRS sticks with TaxSpeak or whether they start to write in Plain English.
General Business, Tax Planning
The State of Illinois now has the 3rd highest corporate tax rate in the country. Make money and you pay tax at a 9.5% rate.
What happens if you lose money this year?
Before last week, you could use that loss to offset next years profits.
But under the tax bill passed last week, that loss is “suspended” for the next 3 years for a regular “C” corporation.
Let’s say a company has a $100,000 loss this year and a $100,000 profit next year. So over the next 2 years, the company breaks even – no net profit.
Under the old law, the company could use the 2011 loss to offset the 2012 profit, and not pay any Illinois tax. And that’s the way it should be. No net profit. No tax due.
But under the new law, the company can’t use the 2011 loss to offset the 2012 profit. And that means the company has a $9,500 tax liability, even though the company didn’t make any money over that time period.
What happens to that 2011 loss? It’s suspended “in air” – the company won’t be able to use that loss until 2014.
Governor Pat Quinn and Illinois lawmakers say they’re “closing tax loopholes”.
That’s just semantics antics.
Using a loss to offset the tax on future profits isn’t a tax loophole. It’s simple economics and a matter of tax fairness.
General Business, Tax Planning
The massive tax hike passed by Illinois legislators gives the state the dubious distinction of now having the third highest corporate tax rate in the country.
The total corporate tax is now 9.5%, which includes the 7% corporate income tax and the 2.5% Illinois “replacement tax”.
Add that to the 35% federal rate and Illinois now has the third highest corporate income tax rate in the industrialized world, according to a new report from the Washington D.C-based Tax Foundation.
Most small and mid sized companies don’t pay Illinois corporate tax.
That’s because these companies are generally organized as proprietorships, partnerships, LLCs or “S Corporations”. And that means the business income is taxed on the owners’ personal returns at the individual tax rate.
The Illinois individual rate went up from 3% to 5%. But partnerships, LLCs and S Corporations are also subject to a 1.5% Illinois replacement tax.
So that means most small and mid sized companies will now pay a 6.5% Illinois tax on their business income.
Do the math, and a profitable Illinois small business could be paying up to 41.5% in combined federal and state taxes. The self employed, including LLCs that are subject to self employment tax, could see a total tax cost that exceeds 50%.
You can find the full Tax Foundation report at http://www.taxfoundation.org/publications/show/26965.html
General Business, Tax Planning
While most of us were asleep, Illinois lawmakers passed the largest tax increase in Illinois history early this morning.
The tax rate is increased from 3% to 5% on the individual side, a 66% increase. And the corporate tax rate is increased from 4.8% to 7% on the corporate side, a 46% increase.
The increases are retroactive to January 1, 2011.
Governor Quinn, Senate President John Cullerton and House Speaker Mike Madigan tell us the massive tax hike is just “temporary”.
See the rates are supposed to drop back down after 4 years.
Back in 1989, Illinois lawmakers raised the individual rate from 2.5% to 3%. That was supposed to be a “temporary’ hike as well, since the rate was scheduled to drop back to 2.5%.
Of course that never happened, and the 3% rate was made permanent in 1993.
You can find out how House and Senate legislators voted on the tax hike at:
http://ilga.gov/legislation/votehistory/96/house/09600SB2505_01112011_011000T.pdf
http://ilga.gov/legislation/votehistory/96/senate/09600SB2505_01112011_008001C.pdf
And you can contact your representatives in Springfield at
http://www.ilga.gov/house/
http://www.ilga.gov/senate/
More tomorrow.
General Business
ADP released its December National Employment Report on Wednesday.
ADP reports that private sector jobs increased by 297,000 from November to December on a seasonally adjusted basis.
Service sector jobs increased by 270, 000, and jobs in the goods-producing sector increased 27,000, including a 23,000 increase in manufacturing jobs.
ADP also reports that small and mid size business employment increased by 261,000 jobs in December.
You can find the full ADP National Employment Report at http://www.adpemploymentreport.com/
The Small Business Report can be found in PDF format at http://www.adpemploymentreport.com/pdf/FINAL_Release_December_10.pdf
Today the Labor Department released its December jobs report.
Nonfarm jobs increased by 103,000 with most of the increase coming from service sector jobs. Manufacturing jobs increased by 10,000.
Why the difference in reported jobs?
For the most part, it’s caused by differences in the methodologies used. ADP also bases its report on representative companies that ADP tracks.
You can read the full Labor Department report at http://www.bls.gov/news.release/empsit.nr0.htm
General Business, Tax Planning
Last March Illinois Governor Quinn proposed “a 1 percent tax surcharge for education”. That would increase the tax rate from 3% to 4% on the individual side, a 33% increase.
The Illinois Senate has already approved a tax hike that would increase the individual tax rate to 5%, a 66% increase.
Mark Mahoney, the Clerk of the Illinois House, publishes a daily calendar. The House officially starts business today at 11:30 A.M. There’s nothing on today’s calendar about proposed tax legislation.
But according to various media reports, Quinn, Senate President John Cullerton and House Speaker Mike Madigan are working behind the scenes on a tax hike compromise.
The Illinois legislature started its lame duck session yesterday and the new general assembly starts business next Wednesday, January 12.
So legislators have a week to work out a deal in the lame duck session – which is likely to include a tax hike of some sort.
In related news, yesterday the Illinois Department of Revenue issued Information Bulletin 2011-7, “What’s New for Illinois Income Tax.”
The bulletin summarizes the various 2010 Illinois income tax changes and changes to 2011 withholding income tax forms and schedules.
Of course, the bulletin would need to be revised for 2011 forms, schedules and tax tables – if Springfield passes a tax hike before the new legislature convenes next week.
It’s noteworthy that the bulletin was available on the Department’s website early this morning – but has since been taken down.
Hmmm.
Better stay tuned.
General Business
A disaster of biblical proportions!
Dogs and cats living together! Mass hysteria!
-Dr. Peter Venkman (Bill Murray from Ghostbusters)
White House Economic Advisor Austan Goolsbee says it would be “catastrophic” if the new Congress fails to increase the National Debt Ceiling.
We’re not sure he’s thinking the same thing as Dr. Venkman, but some bloggers are talking about a “cataclysmic” economic collapse if the debt ceiling isn’t raised.
The National Debt Ceiling stands at $14.294 trillion.
And as of Friday, the actual national debt stood at $14,025,215,218,708.52 according to the Treasury Department. That’s cutting it close.
So I suppose Congress will need to increase the debt ceiling and soon.
But we’ll all be watching to see what Congress does on the spending side when the new Congress starts work tomorrow.
You can find the Treasury Department’s Debt to the Penny at http://www.treasurydirect.gov/NP/BPDLogin?application=np
And there’s also my favorite, the U S Debt Clock which you can find at http://www.usdebtclock.org/
Pretty scary stuff, Dr. Venkman.
General Business
Internet sales were up over 15% this holiday season according to various reports.
That means the “Tax Gap” on uncollected state sales and use tax continues to grow too.
The Illinois use tax is a tax accessed on the “privilege” of using tangible personal property in Illinois. The tax is most often due on internet or mail order purchases, where the seller does not collect Illinois sales tax.
The State of Illinois has started a Use Tax Amnesty program. The program runs from January 1, 2011 through October 15, 2011.
The tax can be paid on Form Il-1040 as long as its $600 or less annually. Form ST-44 is used if the tax exceeds $600 annually, in which case the form is due on the last day of the month following the month in which the purchase was made.
There are a number of exemptions that apply to business taxpayers, such as the “resellers” exemption and the exemption for the purchase of assets used in a manufacturing process.
You can find out more about the amnesty program at http://tax.illinois.gov/Individuals/IllinoisUseTax.htm
