Understanding the Taxpayer First Act

If you’ve been paying attention to recent changes in tax law, you may have taken notice of the Taxpayer First Act, which was enacted in July of 2019. The goal of this act is to make the IRS seem and actually be more “friendly” towards taxpayers.    

Basic Changes 

Under the act, the Department of the Treasury has been tasked with developing a customer service plan for the IRS to follow. The agency is also required to provide more information about identity theft and other potential threats to taxpayers, particularly over its phone lines. Plus, taxpayers are now able to make direct payments to the IRS, instead of having to use a third party agency.  Other changes have been enacted as well, but these are some of the simplest and most inherently noticeable for the average taxpayer.   

Direct Deposit Protection  

One major benefit of this act, but also one that you hopefully won’t have to experience firsthand, is increased protection for those who request but do not receive direct deposits of tax refunds. Under the Taxpayer First Act, your funds can be recovered if they were sent to the wrong person or if some other error or issue occurs that keeps you from getting your money.  

Protection for Low Income Taxpayers  

If you’re a low-income taxpayer or someone who gets their income via disability insurance, you’ll also enjoy greater protections when it comes to debt collection. Under the act, you no longer have to worry about private debt collection agencies trying to collect money from you for federal amounts owed.

As you can see, in most ways, this act should benefit the vast majority of taxpayers in one or more ways. If you’re unsure about how this act affects you, or if you have questions or concerns, remember, however, that your true “friend” and the best resource you have is always a qualified tax professional who is 100% on your side. After all, the IRS is still an entity with focus on getting what it’s owed, no matter how much nicer this new act may make it appear.

How Do the Super Rich dodge Taxes

Some people in the world are very rich, so rich that they’re often called or referred to as the “super-rich.” And, while you might think that these individuals pay a ton in taxes, that’s not always true.

Many of these super-rich people know how to use the tax law and its loopholes to their advantage. Thus, they sometimes end up paying nothing or close to nothing in taxes. Believe it or not, there are more ways to achieve this goal than you might think.   

Trust Freezing

Sometimes, the super-rich will engage in trust freezing, which is transferring their assets to an heir while avoiding taxation in the process.

They often accomplish this by trading common stock for preferred stock and then living off the dividends.

Overseas Accounts

It’s also very common for rich individuals to have bank accounts in other countries. Conveniently, these will often be countries with very low taxation rates, which means their money ends up being taxed less, and they end up keeping more of their cash.

Shell Companies

Some people even create “shell companies,” which are companies that aren’t real, except for on paper. They use these ‘companies” to funnel money and dodge taxes. And, since the company legally exists, they often don’t end up getting into trouble for this loophole.

Whether or not you agree with these methods so common among the rich, there is one takeaway: you can use the tax law to your advantage if you know what you’re doing. And, best of all, you don’t have to be super rich to do this. You simply need the help of someone who knows the tax laws inside and out and who can help you navigate the complicated tax laws to your advantage.

Taxes so Crazy You Won't Believe They Exist

No one likes paying taxes or following tax laws. However, if all you’re having to follow are basic tax laws, count yourself lucky. You could be following one of the craziest tax laws to ever exist. And, trust us, there are some really bizarre ones!  

The Jock Tax

Did you know that many states have what is referred to as a “jock tax?” That’ s just a nickname, but this tax goes against athletes, performers, and entertainers.  And, while those who have to pay it may hate it, the money earned brings in a lot of money to the states that enforce it.

California was the very first to impose this tax in 1991. Michael Jordan was famously subjected to this tax, which is still in existence in many states today.

The Cow Gas Tax

If you live in Ireland or Denmark, you’ll have to pay a tax for your cow’s gas. The reasoning behind this tax is that cow flatulence can lead to global warming, and the countries seem to think it’s the cow owners’ responsibility to make up for it.

The Blueberry Tax

Do you like blueberries? You might not if you live in Maine and have to pay a blueberry tax!

The production of wild blueberries comes with a tax, keeping them from being overharvested. While paying the tax might not be fun, it’s actually a smart move on the state’s part since it helps protect its lucrative blueberry industry.

The Online Ad Tax

In France, some online ads get taxed, which can earn huge sums for the country. Right now, ads that appear on Google, Digg, Facebook, Microsoft, Yahoo!, and AOL, among others, are all taxed.  

What’s more is that there’s a lot of speculation that these taxes could one day exist worldwide.

Looking at these crazy taxes, those average everyday taxes you have to pay don’ t seem so bad now, do they?

Claiming the Same Dependent

If you and another person are both responsible for the same dependent, you may have wondered whether or not both of you are eligible to claim the person as a dependent. Unfortunately, tax law is written in such a way that only one person can claim a dependent on his or her tax return. However, in some cases, both parents can claim a dependent and receive certain associated tax breaks as long as the custodial parent agrees.    

The tax breaks that are generally associated only with the custodial parent include:

·         The dependent’s personal exemption

·         The child and dependent care tax credit

·         Head of household status where eligible

·         Exclusion for dependent care benefits

·         Child tax credit

·         Earned income tax credit

When the custodial parent waives the right to claim a dependent and passes that right down to the non-custodial parent, however, that parent can receive the following benefits:

·         The dependent’s personal exemption

·         Tuition and fees deduction/ Education tax credit

·         Child tax credit

Waiving these exemptions can be very helpful, financially speaking, for the non-custodial parent. And, furthermore, doing so doesn’t leave the custodial parent “out in the cold” when it comes to tax benefits. This parent can still receive:

·         Head of household filing status when applicable

·         Exclusion for dependent care benefits

·         Child and dependent care tax credit

·         Earned income credit

If you are considering allowing someone else to have some of your benefits and claim a child as a dependent or if you’re on the other end and are hoping to get some of these benefits for yourself as the non-custodial parent, you and the other parent are encouraged to speak with a financial adviser about how to make the change. It’s usually a fairly simple and quick process, but these professionals can handle all your forms and paperwork carefully and answer any questions or concerns that you may have to ensure that everything goes as smoothly as possible.

Tax Changes You Should Know About

Tax laws are known for changing quite frequently. In fact, there are changes almost every tax year, and 2016 is definitely no different. While there were many changes this year, some are definitely bigger and more likely to affect average people than others. Here, we’ve outlined some of the more major changes that you should be aware of.  

  

A Permanent Business Break: Section 179

As of 2016, under section 179, businesses can get a break on up to $500,000 worth of equipment that they’ve purchased for their businesses- pretty impressive, right?

Up until now, Congress has had to approve this break and its limit, but, as of this year, it’s permanent, so if you own a business, you can bet on this break for good!

                                     

Big Penalties for Not Offering Affordable Health Insurance

While, as of this year, businesses can benefit under Section 179, they may also end up suffering some serious consequences if they don’t offer affordable health insurance to their employees. Health insurance is now a required offering from businesses with fifty or more full-time employees.

Businesses that don’t obey the law could end up paying tens of thousands of dollars in fines! Penalties can be assessed when one of your employees get a tax credit for health insurance marketplace coverage or ends up spending a large chunk of his household income on health insurance because your business doesn’t offer it.

Don’t take these kinds of chances. Brush up on the new laws taking effect this year and then make sure you’re abiding by them fully.

Business Mileage Rates Plummet

If you drive a vehicle for work, then you probably already know that you can deduct mileage costs using the standard mileage rate set in place by the IRS. This is a great way to end up saving a surprising amount of money over time.

This year, however, business drivers and travelers won’t save quite as much. Unfortunately, the new tax laws have reduced the standard business mileage rate to fifty-four cents per mile, instead of last year’s 57.5 cents per mile.

The R&D Tax Credit: Now Permanent

The IRS-offered tax credit for research and development isn’t temporary anymore! It’s now a permanent offering, and it’s available to more businesses as well. From this year forward, companies that have been in business for fewer than five years and that bring in less than $5 million in revenue can use up to $250,000 worth of the credit. That’s good news for a great many businesses that have taken advantage of the credit in the past and for new ones that are just getting started and could use an extra boost of help!

Tax laws will probably never stay 100% the same from one year to the next, but as long as you stay on top of the changes, like these presented here, you should always come out on top!

The Potential Impact of Maryland v. Wayne

The Supreme Court is gearing up to hear arguments in the much talked about Maryland v. Wayne case. The case all has to do with Maryland’s tax laws, which allow residents to deduct income taxes they’ve paid in other states on their income tax forms. However, the deduction cannot be applied to income tax collected by various counties and municipalities in the state.  

The Maryland Court of Appeals found it unconstitutional for the state to provide credit for state income tax but not for county income tax. Now, it’s up to the Supreme Court as to whether or not it wishes to uphold that ruling.

Experts are speculating that, if the ruling is upheld, tax laws around the country could change, with more states being forced to follow in Maryland’s forced footsteps.

Cases like this one just go to show that tax laws are always changing. You can be prepared for whatever changes are thrown your way by having an in-the-know tax advisor to count on. You can find a trustworthy Naperville tax advisor through Susan S. Lewis, Ltd.

Related articles

• Court To Hear Dispute Over State Tax Collection (baltimore.cbslocal.com)

Same Sex Couples and Taxation

Recent changes in tax law are affecting all kinds of people from all walks of life. Surprisingly, one group of people that they are affecting is same-sex couples. While same-sex couples may not be able to get married in every state in the United States just yet, married same-sex couples are now allowed to file their income taxes jointly or as “married filing separately,” even if they live somewhere where the marriage is not recognized by the state. 

While many people regard this recent change as a step in the right direction for homosexual couples, the new law could potentially result in increased taxes for same-sex couples. Couples who will likely face the highest increase in taxes are couples in which both spouses are employed.

Whether you are affected by this new tax law or any other, you should know that there is available tax help in Naperville. You can get the tax help you need, regardless of your situation, by contacting Susan S. Lewis, Ltd. of Naperville.

Related articles

• IRS Announcement: Same-Sex Couples Recognized as Married for Federal Tax Purposes (turbotax.intuit.com)