The IRS has a responsibility to pursue collection when taxpayers fail to meet their obligations. An overly rigid approach can produce hardship, however, without necessarily enhancing government revenue. Recognizing this reality, the IRS has announced what they call “a new effort to help struggling taxpayers get a fresh start.” They’ve increased the dollar threshold at which they’ll impose liens, made it easier to obtain lien withdrawals, and implemented other changes that should be helpful to many individuals and small businesses that are unable to pay their taxes. Click here for the IRS announcement.
Leading 529 Expert Back at the Helm
February 16, 2011by Kaye Thomas
If you’re looking for quality information on 529 college savings plans, you’ll be pleased to learn that Joe Hurley, the 529 “guru,” has repurchased Savingforcollege.com, three years after selling it to Bankrate Inc. Joe will be publishing a new edition of his terrific book “The Best Way to Save for College: A Complete Guide to 529 Plans” in April of this year and plans to get busy again with speaking and conferences. Savingforcollege.com recently released its 529 plan performance rankings for 2010 Q4, one of the more popular sections of the website.
Q&A on Domestic Partner Tax Filing
February 6, 2011by Kaye Thomas
This is the first tax season in which many gay and lesbian couples will file federal income tax returns reflecting community property rules. The change affects tax returns for 2010, and also provides an opportunity (but not an obligation) to amend prior year tax returns if the result is a refund. Here are some questions and answers regarding the new filing requirement. Read the rest of this entry »
Unpopular Paperwork Requirement Appears Doomed
February 4, 2011by Kaye Thomas
It turns out there’s one feature of the healthcare reform law just about everyone agrees on. A provision requiring increased reporting of payments by businesses using Form 1099 was designed to increase government revenues by some $44 billion without increasing taxes. Yet the paperwork burden brought complaints from all quarters, reaching such a level that President Obama mentioned the need to repeal this provision in his State of the Union address. Repeal had been stymied by disagreement over how to prevent a $44 billion increase in the projected budget deficit. The Senate has now voted overwhelmingly in favor of repeal with a provision that calls for unspecified cuts in spending.
Bug Affects Tax Filing for Some Age 64
January 31, 2011by Kaye Thomas
A software bug is preventing the IRS from accepting electronically filed returns if the taxpayer (or taxpayer’s spouse) is age 64 and the return claims the earned income credit. The IRS says the glitch will be corrected by 6:00 pm February 14.
Valentine from IRS: Season to Open for Itemizers
January 20, 2011by Kaye Thomas
The income tax filing season is open for most taxpayers, but delayed for some (including all who claim itemized deductions) because Congress changed the tax law so late in the year. The IRS has announced (PDF) that it will accept returns from taxpayers affected by the delay beginning February 14.
FICA Tax Prescribed for Medical Residents
January 12, 2011by Kaye Thomas
In a unanimous decision, the Supreme Court has upheld a Treasury regulation requiring medical residents to pay FICA tax. This tax, used to fund Social Security benefits, provides an exemption for amounts received by students for work that is incidental to their studies. The regulation says this exemption does not apply to the services of a full-time employee normally scheduled to work 40 hours or more per week. Medical residents typically spend more than 40 hours per week treating patients. A District Court ruling held the regulation invalid but was reversed on appeal, and the Supreme Court has put the issue to rest: full-time work does not qualify for the student exemption.
Fairmark Wrapup
January 10, 2011by Kaye Thomas
Here’s a summary of the top news, features and other items of interest relating to taxes and investing published recently at Fairmark.com.
The Fairmark Wrapup is also published as a free email newsletter. Click here to sign up.
Managing Income from a Roth Conversion
January 10, 2011by Kaye Thomas
People who did Roth conversions in 2010 now face the issue of how to manage the resulting income. With the Bush tax cuts having been extended through 2012, many will want to take advantage of a special rule, which applies only to 2010 conversions, allowing half the income to be taxed on their 2011 return and half on their 2012 return. This isn’t the optimal approach for all people, however. If you did a Roth conversion in 2010 and don’t want the income to be taxed in this manner, there are four ways to get a different result. Read the rest of this entry »
Life Insurance Loan Turns to Tax Debt
January 5, 2011by Kaye Thomas
If you own a permanent life insurance policy (“whole life”), you may be able to borrow against the cash value. These loans are secured by your ownership interest in the policy, so they may carry a relatively low rate of interest. What’s more, generally you aren’t required to repay these loans according to a fixed schedule. Interest that accrues without being paid is simply added to the amount of your loan balance. If you don’t pay attention, though, you can end up with an unexpected tax bill. Read the rest of this entry »
