Jul 212017
 

Wash. D.C. msn.com

If you are looking forward to a retirement spent paying hefty tax bills, a trend called the Roth 401 K has developed to help buy your ticket to happiness.k Once you turn age 70 and a half, you are forced to start taking money out of your retirement plan, the terminology is “required minimum distributions” and every penny you take is taxable income.

Vanguard reports that nearly two thirds of 401 k plans it administers now have the option of saving in a Roth 401 k, rather than the standard traditional 401 k. With a Roth, contributions are made with after tax income. The payoff comes in retirement when you can either skip RMD’s completely or take distributions without owing a penny in tax.Yet less than 15 percent of retirement savers with the ability to save in a Roth 401 k are taking advantage of the Roth option. “I’m from the Midwest, so I use a farm analogy: Do you want to pay tax on the seed or on the harvest,” said David Hays, president of Comprehensive Financial Consultants in Bloomington, Indiana. “The only rational answer is that you pay it on the seed.” That is, take your tax hit early, by using a Roth 401 k is funded with after tax dollars, paying tax on the seed contribution–with the eventual payoff that you will not owe a penny of tax when it’s time to harvest your savings, in retirement.

While Roth 401 k plans are positioned as ideal for millennials who have yet to hit their peak earnings, 40 and 50 somethings who’ve been using a traditional 401 k for a few decades can add valuable tax diversification by switching over and doing some Roth saving. “Taxes are the most expensive thing in retirement,” said Hays. “Think about it, you pay 30 percent or so every time you want to access your money.” For the record, anyone can contribute to a Roth 401 k. There are no limits. Employer matching contributions will continue to be made into a traditonal 401 k account.

  •  07/21
Jun 282017
 

Wash. D.C. msn.com

The GOP is supposed to be really good at cutting taxes. President George W. Bush cut taxes. So did President Roanld Reagan, though he also raised them. So why are Republicans now struggling mightily to reach a consensus on how to overhaul the nation’ tax system ? And why is Presidnet Donald Trump, who has promised the largest tax cut ever, having so mcuh trouble accomplishing one of his main initiatives ? Here are some reasons why tax overhaul is hrd and why Republicans have been unable to reach a consensus. What’s the holdup ?

After weeks of private negotiations, the White House and congressional Republicans still don’t agree on exactly what they want to accomplish. House Republican leaders are firm that they want to completely overhaul the tax system for businesses and individuals. They want to make the tax law simpler and more efficient, and they want the changes to endure beyond the next decade. They want to cut tax rates, but they don’t wnat the changes to add to the federal government’s long term debt. That means Congress would have to eliminate a lot of exemptions, deductions and credits, and probably come up with a new source of revenue.

The White House is all about tax cuts. Administration officials have talked about simplifying the tax system and getting rid of deductions, but have offered few specifics. Republicans are working to pass a tax plan under a procedure that requires only a simple majority in the Senate, preventing Democrats from blocking it. But to use this procedure the package cannot add to the government’s long term debt. That means simple tax cuts would have to be temporary, like the ones passed under Bush. So cutting taxes is not as simple as it seems.

Why is Ryan pushing for a tax on imports ?  Ryan is pushing a plan that would increase taxes on imports and cut taxes on exports. It’s called a border adjustment tax. One reason he likes it is because it would raise enough revenue–aobut $1 trillion over the next decade–to lower the corporate tax rate from 35% to 20% without adding to the government’s debt. Cutting taxes can be quite complicated, but the border adjustment tax is a part of Ryan’s plan.

  •  06/28
Jun 262017
 

Vancouver, Wa. NSTP

In looking at tax reform, the White House has proposed radical changes to the tax code which include both individual and business tax reform. This proposal would eliminate the estate tax and the alternative minimum tax. COrporations would not have to pay taxes on their foreign profits and would be able to take advantage of a special, one time opportunity to bring back cash intothe U.S. that is currently retained overseas. While the next days and months will see significant discussion and changes to the initial proposal this is the first effort at tax reform put forward by the Administration.

The goals of tax reform include, to grow the economy and create millions of new jobs. Simplify our burdensome tax code and provide tax relief to American families, especially middle income families. Lower the business tax rate from one of the highest in the world to one of the lowest. The tax relief for American families includes reducing the 7 tax brackets to 3 tax brackets of 10%, 25%, and 35%. Doubling the standard deduction and providing tax relief for families with child and dependent care expenses.

Tax reform also includes simplification by eliminating targeted tax breaks that mainly benefit the wealthiest taxpayers. Protect the home ownership and charitable gift tax deductions. Repeal the Alternative Minimum Tax. Repeal the death tax.  repeal the 3.*% Obamacare tax that hits small businesses and investment income. It also includes business tax reform by lowering the business tax rate to 15%. It includes a territorial tax system to level the playing field for American companies, and has a one time tax on trillions of dollars held overseas. Eliminate the the tax breaks for special interests.

The Office of Management and Budget released President Trump’s proposed FY 2018 budget for the federal government on May 23rd. Included is a proposal to authorize the IRS to regulate all paid tax return preparers. This was done because a federal court in 2013 struck down an attempt by the IRS to regulate unenrolled tax return preparers.

 

  •  06/26
Jun 062017
 

New York. taxprotoday.com

Wealthy Americans are deferring taxes this year, causing such a pinch to government revenue that the U.S. could face a default on its debt months sooner than the White House expected. High income taxpayers may be anticipating a future tax cut from President Donald Trump, But they may also accelerate a political headache for him; persuading Congress to raise the government’s debt limit.

The wealthy deferring taxes by as much as 20 percent of their taxable income last year, according to independent estimates, a move that is legal and allows them to delay paying taxes on non-wage earnings including capital gains. Trump’s promise of tax cuts gives richer Americans “large incentives to shift non-wage taxable income from 2016 to 2017,” said Lucy Dadayan, a senior researcher at the Rockefeller Institute of Government. Treasury’s monthly budget statement for April showed weaker than expected income tax receipts. The drop in tax revenue is significant enough to alarm top officials, including Treasury Secretary Steven Mnuchin, who has urged Congress to pass “clean” legislation raising the debt ceiling without policy riders by August.

Debates over raising the debt ceiling became especially politicized under former President Barack Obama. Republicans used the specter of a default as leverage to demand spending cuts and other policy changes. Bills to raise the ceiling were commonly passed in the nick of time. Mnuchin began using special accounting measures in March to stay below the ceiling, and he has projected that the Treasury will run out of money in the second half of the year. By deferring taxes, wealthy american’s have raised the stakes. Global financial markets risk volatility if there is political uncertainty about the U.S. government’s ability to repay its debts. Failure to take action in time could result in the first ever U.S. default. Mnuchin has said he would prioritize debt payments over other government spending in the event the ceiling isn’t raised.

By deferring taxes, America’s wealthiest may be partly to blame if the deadline arrives sooner than anticipated. While most people pay their taxes through deductions from their paycheck richer taxpayers also earn income through the sale of stocks and other assets.

  •  06/06
May 112017
 

Wash. D.C. msn.com

President Trump plans to mark National Day of Prayer issuing an executive order that makes it easier for churches and other religious groups to actively participate in politics without risking their tax exempt status several administration officials said. Taking action as he hosts conservative religious leaders, Mr. Trump’s executive order would attempt to overcome a provision in the federal tax code that prohibits religious organizations like churches from directly opposing or supporting political candidates. The move is likely to be hailed by some faith leaders, who have long complained that the law stifles their freedom of expression. But the order falls short of a more sweeping effort to protect religious liberties that has been pushed by conservative religious leaders since Mr. Trump’s election.

Many clergy members say they do not want to endorse political candidates from the pulpit because it could split their congregations and distract from their religious messages. This appears to be the case even among evangelicals, although it is Mr. Trump’s conservative evangelical advisers who encouraged him to address the issue. A coalition of evangelicals, Roman Catholics, Mormons, and Orthodox Jews has been eagerly awaiting a so-called religious liberty order, which they also hope will exempt religious entities from providing their employees with coverage for contraception in their health care plans.

If is unclear how the executive order will get around the tax code provision for churches, since eliminating it would require legislation by Congress. But faith leaders who have had discussions with White House officials about the issue said Mr. Trump could direct the Internal Revenue Service not to actively investigate or pursue cases of political activism by members of the clergy in churches. Such a directive might be challenged in court. But in the meantime, pastors could feel freer to actively participate in coming elections without fear of being investigated and having their tax exempt status revoked by the federal government.

Churches and clergy are free to speak out on political and social issues–and many do–but the Johnson amendment served to inhibit them from endorsing or opposing political candidates.

  •  05/11
Apr 292017
 

Wash. D.C. msn.com

President Trump’s promise to enact a sweeping overhaul of the tax code is in serious jeopardy nearly 100 days into his tenure, as Trump’s taxes not being released is becoming a central hurdle to another faltering campaign promise. As procrastinators rushed to file their tax returns, the White House press secretary, Sean Spicer, emphasized that Mr. Trump  had no intention of making his public. Democrats have seized on that decision, uniting around a pledge not to cooperate on nay rewriting of the tax code unless they know specifically how that revision would benefit the billionaire president and his family. Trump’s taxes may end up preventing tax reform after all. And a growing number of Republican lawmakers now say Mr. Trump should release them.

“If he doesn’t release his returns, it is going to make it much more difficult to get tax reform done,” said Senator Chuck Schumer, the Democratic leader, pointing out that the president has significant conflicts of interest on issues such as taxation of the real estate industry and elimination of the estate tax, “Its in his own self interest.” With Republicans sharply divided on a path forward and the administration unable to come up with a plan of its own, the Democratic resistance is only the newest impediment.

As a candidate, Mr. Trump declared that he understood America’s complex tax laws “better than anyone who has ever run for President” and that he alone could fix them. But it is becoming increasingly unlikely that there will be a simpler system, or even lower taxes, this time next year. The Trump administration’s tax plan, promised in February, has yet to materialize: a House Republican plan has bogged down, taking as much fire from conservatives liberals, and Treasury Secretary     Mnuchin told the Financial Times that the administration’s goal of getting a tax plan signed by August was “not realistic at this point.”

The just released proposal by the  president contains nothing but bullet points, with very little specifics about how the proposals would be enacted.

  •  04/29
Apr 282017
 

Wash. D.C. msn.com

Trump’s tax plan, released wednesday, consists of a single page of bullet points. If this were a more rounded plan, we could wait for the tax wonks at various think tanks to run it through their models and tell with some precision how it would affect people at different income levels and who would benefit from different deductions. Lacking that level of detail, Trump’s tax plan only reveals in broad brush strokes which Americans would win and which would lose. In a homage to the Trump plan itself, here are those winners and losers in bulleted form.

Businesses with high tax rates. Trump’s tax plan would cut the 35 percent corporate income tax to 15 percent. While few businesses pay the full 35 percent rate, those that pay something close to it are in line for a huge tax cut. High income earners would get a reduced rate on individuals income tax, under Trump’s tax plan–now 39.6 percent for income over $470,000 for a married couple–to 35 percent. It would also eliminate the 3.8 percent tax, used to help fund Obamacare, that applies to investment income over $250,000 for a couple.

The 15 percent business tax rate could open a huge loophole for people to receive business income through a Limited Liability Company or other pass through entity. It would also eliminate the estate tax, which currently applies to individuals with estates of $5.5 million or couples with estates worth over $11 million. The Trump Administration did not embrace House Republicans strategy to pay for the tax cut, with the “border adjustment tax”, which was strongly opposed by the retail industry and other that thought they would be losers.

In Trump’s tax plan, it is striking how many of the categories listed above affect the president and his family. He is a high income earner, and the estate tax would apply to him, as would the pass through business provisions.

  •  04/28
Apr 032017
 

Wash. D.C. IR-2017-56

The Internal Revenue’s Service’s Low Income Tax Clinic office has issued its annual program report, which details how it has provided representation, education, and advocacy for taxpayers who are low income or speak English as a second language. During 2015, it represented 18,751 taxpayers in disputes with the IRS and provided consultation or advice to an additional 18,810 taxpayers. The tax clinic helped secure more than $4.3 million in tax refunds and eliminate more than $64 million in tax liabilities, penalties, and interest.

Through outreach and education activities, it also ensured individuals understood their rights as U.S. taxpayers. It conducted over 3,000 educational activities attended by over 78,000 persons. Overall, more than 1,800 volunteers contributed to the success of the tax clinic. The full report contains more details about the programs and stories about the services that it provides. It also describes more fully the results that the tax clinic achieves on behalf of their clients. Multiple stories of the help that these clinics offer are available as guidelines to other taxpayers who are considering applying for help themselves.

The IRS program has also posted on the IRS.gov update of information about this program. The information contains the names and contact information for the 2017 Low Income Tax Clinic grant recipients that can provide representation and education to low income taxpayers and taxpayers who speak English as a second language. The IRS awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand, or maintain a Low Income Clinic. They are usually operated by accredited law, business, or accounting schools. Legal aid or legal services organizations. Other tax exempt organizations that assist low income individuals and families.

If you earn too much, but need helping filing your tax returns, call us at 1-888-689-7861 for a free Tax Resolution Services consultation today.

  •  04/03
Mar 072017
 

Wash. D.C. thehill.com

A House Democratic lawmaker has forced the House to vote on a resolution to request President Trump’s tax returns, but the effort failed on a party line vote-229-185-with two Republicans voting “present”. The move was the latest in a series of Democratic efforts to push Congress to request Trump’s tax returns, and Democrats demanded a roll call vote to force Republicans to go on the record. The two Republicans who voted present were Reps. Walter Jones (N.C.) and Mark Sanford (S.C.). Sanford is one of the Republican lawmakers who has in the past called for Trump to release his returns.  The tax resolution of Trump’s tax situation could be resolved by all parties if the information was released.

After the vote, House Minority Leader Nancy Pelosi fired at the GOP. “Tonight, House Republicans made themselves accomplices to hiding President’s Trump’s tax returns from the American people,” she said. “Our security and our democracy have been endangered by Russia’s clear influence on the Trump Administration. The american people deserve the truth about Russia’s personal political and financial grip on President Trump. If there’s nothing there, then what are Republican’s afraid of ?

Rep. Bill Pascrell (D. N.J.) offered a resolution that would have directed the House to request 10 years of Trump’s tax returns, have the House Ways and Means Committee review then in a closed session and ten vote to send the information in the returns to the full house. Under federal tax law, the chairman of the House Ways and Means and Senate Finance Committees and Joint Committee of Taxation can request ta returns from treasury to be considered in a closed meeting. The resolution would also direct the House to “support transparency in government and the longstanding tradition of Presidents and Presidential candidates disclosing their tax returns”.

Trump was the first major party presidential nominee in decades to refuse to release his tax returns. He frequently said that he wouldn’t make his returns public until the IRS finished auditing him. However, the IRS has said that an audit doesn’t prevent people from releasing their own tax information.

If you face an IRS audit and tax bill, call us for your Tax Resolution. 26 years of Nationwide Tax Resolution Services.

 

  •  03/07
Mar 032017
 

Wash. D.C. msn.com

The child tax credit is for taxpayers with qualifying children–and they can claim this super tax credit on top of the earned income tax credit and credit for child and dependent care expenses. The child tax credit could be worth up to $1000 per child living in your household.

To qualify, you must claim the child as a dependent on your taxes,and the child must be a U.S. citizen and have lived with you for at least half of the year. Additionally, the child must not provide more than half of his own support. You might qualify for this super tax credit if your MAGI is less than the following amounts:  $75,000 for single filing status,  $55,000 for married filing separately, head of house hold or widower,  $110,000 for married filing jointly.

The Lifetime Learning Credit is an educational super tax credit that’s similar to the American opportunity credit. However, if you claim one of these two credits, you cannot claim the other. Unlike the refundable American opportunity credit, the Lifetime Learning Credit is nonrefundable. You can claim the LLC for an unlimited number of tax years but the AOC has a four year maximum.

The Lifetime Learning Credit lets you claim up to $2,000 to help off set the educational costs of a qualifying student. The credit comes with relatively high modified adjusted gross income caps: $130,000 if you’re married and filing jointly and $65,000 if you’re filing as single, head of household or qualifying widower. However, you can’t claim the credit if you’re married and filing separately. The tax credit is available regardless of your age as long as it goes toward a qualified educational expense. Acceptable expenses include tuition, student activity fees and course related books, supplies and equipment.

These and other super tax credits are available in the Internal Revenue Code, but you must have the knowledge that they exist, and when you may use them. Having a good tax professional determine that can save you thousands

National Society of Tax Professionals

of dollars when you file your taxes.

  •  03/03