Website lets Taxpayers Redirect Breaks

GiveItBackForJobs.com is a new website that allowings high income taxpayers to donate the money from their extended tax breaks to charity. According to the site, they intend to both "make it easy for those with extra moolah to donate and to send a political message that they are doing so." I’m really curious to see who will donate, especially after all those millionaires’ “raise my taxes” media campaigns.

From CNN.com:

Three Ivy League professors, a law student and a designer created the site out of opposition to the extension of tax benefits for the wealthy, the founders write on the site.

"GiveItBackforJobs enables joint action, by all visitors to this site, to redirect our Bush tax cuts to the wise and just programs that our government would promote if it had not been hijacked," they write.

"As more and more Americans do so, GiveItBackforJobs will begin to replicate good government policy, outside the government and free from the grip of Senate Republicans."

Users simply select their filing status (single, married filing jointly, etc.) and enter their adjusted gross income. The site calculates the tax savings under the law. The resulting amount can then be donated on the same page to Habitat for Humanity, the Salvation Army, the Children's Aid Society, Nurse Family Partnership, or a charity of the user's choice.

Read more here

Tax Bill Heads to House for Hotly-Contested vote, President Obama Urges Passage with No Changes

The House of Representatives is expected to vote again today on the Obama-Republican tax compromise, which would extend tax cuts to all Americans for two years. The Senate has already approved the legislation, and the President has been pushing for Democrats in the House to get behind the compromise. Honestly, this entire process has become a nightmare. Here we are, 15 days from 2011, and we still don’t have the tax rates set in stone? Unbelievable.

From NYDailyNews.com:

"I know that not every member of Congress likes every piece of this bill, and it includes some provisions that I oppose," President Obama said on Wednesday. "As a whole, this package will grow our economy, create jobs, and help middle class families across the country."

The President wants the deal passed without any changes.

The bill is expected to cost $858 billion, reported The Associated Press.

The Senate backed the plan, passing it with an 81-19 vote on Wednesday.

The lame-duck House vote, however, is shaping up to be a battle as some Democrats believe the tax package gives too many breaks to the rich.

Before the plan goes to a vote, the House will first vote on whether to raise the estate tax, which, if passed, would force the bill to return to the Senate, a signal that the President is losing power over his own party.

Read more here

Trimming your Tax Liability Before the End of the Year

This year, end of the year tax planning has become even more confusing. Why? Because Congress continues to stall on taking any action on the Bush tax cuts; this inaction could result in significant tax increases on all Americans.

Obama's Compromise

President Obama put together a deal with Republican leaders last week to extend all of the Bush tax cuts for two more years. The compromise also included an extension of unemployment benefits and stopped the estate tax from increasing to 55% in 2011. However, the House of Representatives rejected the bill and have yet to pass any other tax legislation.

Why the Uncertainty is Problematic

Tax planning in prior years has always been pretty straightforward. Make donations to charities; make an extra mortgage payment, max out on your 401(k) contributions etc. However, with the possibility of a tax rate increase some experts are suggesting taxpayers wait until next year.

If your tax rate does increase next year, then it would be better to defer any deductions to 2011, when they will be more valuable. Deductions lower your taxable income, unlike credits, which are dollar for dollar benefits, so if tax rate goes up in 2011 then all of the standard end of the year deductions might be worth more if you wait until January.

What you CAN do

Although many tax laws are up in the air, there are some things you can do now that will help lower your tax liability without worry about next year’s tax rates. First of all, if you are a homeowner then you might want to consider making energy-saving improvements to your home such as adding dual pane windows or purchasing an Energy Star water heater or air conditioning system. The 30% (up to $1,500) tax credit is scheduled to expire at the end of the year. For more information on qualifying expenses, check out EnergyStar.gov.

Other Uncertain Tax Benefits

The energy credit isn't the only tax incentive currently in limbo. The new health care legislation will ban using funds from flexible spending accounts to purchase over the counter medication and claim it as a deduction starting in 2011. If you qualify for the medical expense deduction then it might be a good idea to stock up on your over the counter meds while you can still deduct the expenses.

Another deduction that might expire at the end of the year is the $250 deduction for educators. If you are a teacher, or work in a classroom then be sure to take advantage of this classroom expense deduction while you can.

Tax-Cut Extension May Bolster Economy, Limit Need for Fed to Go Beyond QE2

From Bloomberg.com:

President Barack Obama’s agreement to prolong Bush-era income-tax cuts may reduce pressure on the Federal Reserve to extend its $600 billion bond-purchase program while spurring U.S. economic growth.

Obama’s deal with congressional Republicans may raise gross domestic product next year by as much as half a percentage point to about 3.1 percent, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Tom Porcelli, a senior economist at RBC Capital Markets Corp. in New York, is raising his growth forecast for 2011 by one point, also to 3.1 percent.

The agreement goes beyond what economists were expecting by including a 2 percent cut in payroll taxes, which fund Social Security and Medicare. The proposal also sets the estate tax at a top rate of 35 percent, extends aid for the long-term unemployed by 13 months and would allow companies next year to deduct the full cost of investments in equipment.

“I think it does reduce the odds that the Fed does more purchases,” Feroli said. “You’re going to have a pretty nice increase in disposable income and that should lift consumer spending.”

Stocks rallied after the agreement was announced, sending the Standard & Poor’s 500 Index to the highest level since the financial crisis in September 2008. Gains were erased in the final hour of trading after Obama said he’ll push to overhaul the tax code in two years. Treasuries fell and copper rose to a 31-month high.

Official White House Statement on Bush Tax Cuts

Well, at least we finally know what the result of all the political posturing is: the Bush tax cuts will be extended for all taxpayers, including the highest earning taxpayers. Yesterday the White House released their official statement regarding the deal on the Bush tax cuts. The President explained why he compromised:

We saw that in two different votes in the Senate that were taken this weekend. And without a willingness to give on both sides, there’s no reason to believe that this stalemate won't continue well into next year. This would be a chilling prospect for the American people whose taxes are currently scheduled to go up on January 1st because of arrangements that were made back in 2001 and 2003 under the Bush tax cuts.

I am not willing to let that happen. I know there’s some people in my own party and in the other party who would rather prolong this battle, even if we can't reach a compromise. But I'm not willing to let working families across this country become collateral damage for political warfare here in Washington. And I'm not willing to let our economy slip backwards just as we're pulling ourselves out of this devastating recession.

In addition to the official statement, the White House press secretary also released their "Fact Sheet on the Framework Agreement on Middle Class Tax Cuts and Unemployment Insurance." According to the document, the President’s plan will accomplish the following three things:

Working families will not lose their tax cuts.

A typical working family faced a tax increase of over $3,000 on January 1st. That’s avoided under this framework agreement, and working families won’t see their tax cuts go away next year.

Focused on high impact job creation measures.

The framework agreement includes some of the best measures for jumpstarting growth and job creation, including a full year of emergency unemployment insurance benefits, about $120 billion in payroll tax cuts for working families, and a continuation of tax credits for working families. This is on top of growth generated by extension of the middle-class income tax rates.

Does not worsen the medium- and long-term deficit.

These are responsible, temporary measures to support our economy that will not add costs by the middle of the decade. The President does not believe it is affordable to make the high-income tax cuts permanent and will continue to have that debate in the years ahead.

The Walking Death Tax

Although a deal may have been reached for the Bush tax cuts, and an unemployment benefit extension, Congress seems to have forgotten about the estate tax. In just 26 days, the estate tax is set to return at levels that will hit the middle class.

The Wall Street Journal reports:

Without action in the lame duck Congress, the estate tax will rise from the dead on January 1 with a vengeance, the rate climbing back to 55% from zero this year. The exemption amount will revert to a miserly $1 million, unindexed for inflation, so more middle class taxpayers will get hit year after year.

President Obama and Congressional Democrats don't think this is a high priority, but voters do. A November Gallup Poll found that Americans think that keeping the estate tax "from increasingly significantly" is "very important" by 56% to 17% "not too important." That's more than think it is a priority to extend current tax rates (50%), extend jobless benefits (48%), ratify the Start treaty (40%) or let openly gay men and women serve in the military (32%).

Liberals are content to let the rate revert to 55%, with some moderate Democrats arguing for a 45% rate. Republican Jon Kyl of Arizona and Democrat Blanche Lincoln of Arkansas are pushing a compromise that would lower the top rate to 35% with a $5 million deduction. That rate is still 35 percentage points too high for our liking, but we'll take it as an alternative to the greedy political confiscation of more than half of the wealth built by someone who has saved over a lifetime. An estate of $5 million isn't all that much for a successful and thrifty business person with some real estate to accumulate over 50 or 60 years.

Mr. Obama, who professes to care about small businesses and jobs, should pay attention to new estimates by the Joint Committee on Taxation. The committee finds that reverting to the 55% rate with a $1 million exemption will tax roughly 10 times more small businesses and farms than would Mr. Kyl's proposal. A recent study by Doug Holtz-Eakin, the former director of the Congressional Budget Office, finds that the estate tax reduces savings and capital formation and forces family businesses to liquidate at the time of an owner's death, which puts hundreds of thousands of jobs in peril.

Read more here

Obama Agrees to Two-Year Tax Cut Extension, Lower Payroll Taxes

After months of debating, the President has announced that he plans to break one of his largest campaign promises and extend all of the Bush tax cuts, even those to the wealthiest taxpayers. Obama has agreed to a deal with Republicans to allow for the two-year extension in exchange for an unemployment insurance extension and a reduction in the payroll tax. More spending and less revenue, how will this affect the deficit? Well, it can’t help.

From Business Week.com:

Obama said he would accept lower rates on high earners’ income, dividends, capital gains and multi million-dollar estates for the next two years to break a stalemate over extending the Bush administration’s tax cuts for middle-class taxpayers before Congress adjourns. The current tax rates, enacted in 2001 and 2003, are set to increase Dec. 31.

Without the compromise, middle-income families would become “collateral damage for political warfare here in Washington,” Obama said in televised remarks yesterday. He said he still believes that the nation can’t afford to permanently extend the reduced top tax rates.

“This compromise is an essential step on the road to recovery,” said Obama, who criticized Republicans for insisting on permanent tax cuts for the wealthiest Americans “regardless of the cost of impact on the deficit.”

Obama spoke in Washington after a White House meeting with Democratic congressional leaders. They and the Republican leadership still have to sell the plan to their caucuses. Obama called it a “framework” for a deal.

In addition to preserving the status quo on Bush policies, the proposal creates more than $300 billion in new tax cuts for wage-earners, wealthy families, and corporations.

President Obama Expresses Disappointment with Tax Vote

Over the weekend the Senate blocked legislation that would have extended the Bush tax cuts to middle income taxpayers. President Obama reportedly called the vote very disappointing.

"It makes no sense to hold tax cuts for the middle class hostage to permanent tax cuts for the wealthiest two percent of Americans," he added.

Check out this video from the Associated Press, or the article below explaining the Senate's decision.

In a rare weekend session that followed days of stormy debate, the 100-member Senate on Saturday fell short of the 60 votes necessary to approve the Democratic proposal of renewing low tax rates only for individuals earning up to 200,000 dollars and for families with 250,000 dollars or less of income.

The measure, backed by the White House, would have let rates on higher earners rise at the beginning of next year to where they were before cuts enacted by former president George W. Bush's administration in 2001 and 2003.

Republicans blocked the legislation on a procedural vote, complaining the measure failed to extend low tax rates for wealthier Americans. They want all of the tax cuts -- including those that directly benefit the top earners -- to be extended instead.

They also rejected another Democratic proposal to extend the tax cuts for annual incomes of up to one million dollars. A handful of Democrats voted against the two measures.

"With so much at stake, today's votes cannot be the end of the discussion," Obama said in a statement.

Read more here

Stephen Colbert's Year-End Estate Planning Tips

Well, if Congress is going to torture us all with their inability to make decisions, at least we get some good comedy out of the mix. Best line: “all those poor innocent people who are willing to kill Nana for the extra cash.” Thank you, Mr. Colbert!

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Return of the Estate Tax
www.colbertnation.com
Colbert Report Full Episodes 2010 Election March to Keep Fear Alive

Hat tip: Tax Prof Blog

House Passes Legislation to Extend Only Some Tax Cuts

On Thursday the House of Representatives passed legislation to extend some of the expiring Bush-era tax cuts. 234 members voted for the bill, while 188 voted against it. The legislation now heads to the Senate, where it is expected to struggle. When are we going to see a final decision?!

The Hill.com reports:

Twenty Democrats broke with their party and voted against the bill after 33 had defected in a previous test vote. Most of those who voted with Republicans on the first ballot were members of the centrist Blue Dog Coalition, and many lost their bids to be reelected last month.

Speaker Pelosi gaveled the vote to a close herself, receiving a smattering of applause from Democratic members. The bill extends only the cuts for the middle-class, letting tax breaks end for families earning more than $250,000 per year and individuals making more than $200,000. Congress originally authorized the cuts in 2001 and 2003.

Three Republicans, Walter Jones (N.C.), Ron Paul (Texas) and John Duncan (Tenn.), voted with Democrats to renew only the middle-class cuts.

Read more here

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Permanent = no, temporary = yes

Return of Estate Tax Looms as Final Impediment to Extending Bush Tax Cuts

Experts predict that a compromise on the Bush-era tax cuts may involve a return of the estate tax. Without any action at all, the estate tax will go from the 2010 zero percent, to a 2011 top rate of 55% on estates over $1 million.

Bloomberg.com reports:

A new tax on multimillion-dollar estates may emerge as the final hurdle to a deal that preserves most or all of former President George W. Bush’s tax cuts, analysts said. Congress has unsuccessfully sought at least a half-dozen times to resolve the issue since 2000, including an abandoned effort last December to prevent the estate tax’s expiration.

“The history on the estate tax is every time there’s almost an agreement someone leaves the table in the belief they’ll get a better deal next time,” said Clinton Stretch, a managing principal at the Washington consulting firm Deloitte Tax LLP.

With Obama planning to meet with bipartisan congressional leaders at the White House tomorrow, three main factions have formed in the Senate, none of which has the 60 votes needed to advance an estate-tax proposal. One includes Republicans such as South Carolina’s Jim DeMint who favor permanent repeal. Another is led by Democrats including Majority Leader Harry Reid who support a top rate of 45 percent that would apply after a $3.5 million tax-free allowance.

Read more here

Top 5 Falsehoods About the Bush Tax Cuts

PolitiFact.com put together an informative list of largest misconceptions of the Bush tax cuts, which are due to expire in just over a month. I have included a section of their article below, but you can find the full list of falsehoods here. There’s so many misstated facts and overblown declarations about the cuts, it’s amazing all of Washington isn’t walking around with their pants on fire.

"Should Democrats get their way, every income tax bracket will increase on Jan. 1, 2011. Every single one."

We've noticed that those who favor extending all the tax cuts will sometimes say that their opponents want to see all the tax cuts expire. But this is not the case. It's not President Barack Obama's position, nor of the Democratic leadership in Congress. And some Democrats think it might be a good idea to extend the Bush tax cuts for everyone, at least until the economy has recovered. Rep. Mike Pence, R-Ind., said this one, and we rated his statement False.

"Ninety-four percent of small businesses will face higher taxes under the Democrats' plan."

Republicans often say they're opposed to the tax increases because they will hit small businesses, but the numbers don't really support that. Under the Democratic plan, a small business owner would have to report profits of more than $250,000 before the tax increases kicked in. (Rates would rise for the top two brackets, from 33 percent to 36 percent and from 35 percent to 39.6 percent.) But most small businesses aren't nearly that profitable. In fact, Internal Revenue Service data shows that of all taxpayers who declare business income, only 2 to 3 percent declare that much. We rated this Pants on Fire when Rep. Randy Neugebauer, R-Texas, said this back in August.

Small businesses that have "$250,000 in gross sales for the business ... They're the ones that are looking at massive tax increases."

This is another variation on the claim that tax increases will hit small business. This statement is wrong because gross sales are all the money a business takes in. Under longstanding IRS rules, businesses get to deduct most expenses before reporting their final taxable income. That includes things like employees' pay, supplies, a car or truck, fuel costs, advertising, and more. Rep. Michele Bachmann said this on Nov. 16, and we rated it Pants on Fire.

Continue reading at PolitiFact.com...

Warren Buffett: Read My Lips, Raise My Taxes

Yesterday famed billionaire Warren Buffet spoke with ABC News' Christiane Amanpou and said that he supports letting the Bush tax cuts expire for wealthy taxpayers.

"If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further," Buffett said. "But I think that people at the high end -- people like myself -- should be paying a lot more in taxes. We have it better than we've ever had it." While about 40 other super-rich taxpayers have jumped on this “tax me, please!” bandwagon, I’m sure there are dozens more rich folk who would just as soon pay less in taxes.

Check out a video of Buffet's interview below, or click here for the full article on ABC News.com.

Questions for the Tax Lady: November 23rd, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, can I deduct all of my gambling losses on my tax return?

Answer: Unfortunately, the answer is no. You are allowed to deduct gambling losses on your tax return, but only to offset the amount of gambling winnings you report.

For example, if you report $2,000 in gambling winnings (as miscellaneous income on your tax return), you could only deduct up to $2,000 in gambling losses.

Question: I keep hearing about the expiring Bush tax cuts in the news, and how Congress still hasn't voted on them. How late into the year will we have to wait before we find out if the tax rates are going to change next year or not?

Answer: Get ready to wait some more! Congress has now said they will not vote until “after Thanksgiving.” How long after that, no one is sure. It could be their first order of business, or their last before the Winter break. I do think that no matter when they start discussing, they’re going to be arguing for quite a while.

The worst part is that no matter what is decided, you will likely see more taxes being withheld from your paychecks for the first part of 2011. The reason is the IRS has to print and distribute the tax charts to employers. Printing and distributing take time. So, the tax withholding charts had to be made as the laws are written right now: all cuts expire. Oh, you’ll get the money back, but in the meantime it will be confusing quagmire.

Millionaires to Obama: Tax us

For months we have seen anti-tax activists who are calling on legislators to extend all of the Bush tax cuts. However, a group of wealthy taxpayers have emerged that are actually asking to be taxed. More than 40 of the wealthiest people in the U.S. are asking the government to raise their taxes; saying they have more than they can ever need, so why not spread it around?

Yahoo News reports

More than 40 of the nation's millionaires have joined Patriotic Millionaires for Fiscal Strength to ask President Obama to discontinue the tax breaks established for them during the Bush administration, as Salon reports.

"For the fiscal health of our nation and the well-being of our fellow citizens, we ask that you allow tax cuts on incomes over $1,000,000 to expire at the end of this year as scheduled," their website states. "We make this request as loyal citizens who now or in the past earned an income of $1,000,000 per year or more."

The group includes many big-time Democratic donors such as Gail Furman, trial lawyer Guy Saperstein and Ben Cohen of Ben & Jerry's ice cream (pictured). The list remains open to millionaires who want to sign on.

Read more here

Middle Class Tax Cuts: Democrats To Hold Votes On Letting Bush Tax Cuts Expire For Wealthy

Just what we were all hoping for, more deadlock from our leaders in Washington. Now Democrats have stated they are still pushing to extend only the Bush tax cuts that affect middle-income taxpayers, while letting cuts for the wealthy expire. Of course, the Republicans will try to block the moves and we will continue in this fashion on into eternity. At least, that’s how it seems right now.

From Huffington Post.com:

After meeting with President Barack Obama Thursday, Democratic leaders in Congress said they plan to hold a series of politically charged votes to extend middle-class tax cuts while letting tax cuts for the wealthy expire.

Republicans are expected to block the plan, leaving both sides back at square one as they try to negotiate a deal to spare families at every income level from a big tax increase in January.

Democratic officials said Obama did not embrace a particular approach to the tax cuts in his Oval Office meeting with Democratic leaders. He indicated he wanted to wait for a meeting with Democratic and Republican leaders on Nov. 30 before staking out a position.

"I think there's a reality here which is that while it might be best to continue the middle-class tax cuts and raise taxes on higher income people, the votes are not there to do that," said Sen. Joseph Lieberman, a Connecticut independent who caucuses with the Democrats. "I think everybody's got to deal with a stark reality which is, are we going to leave here knowing that we haven't come to an agreement and that everybody's taxes are going to go up Jan. 1?"

Senate Majority Leader Harry Reid, D-Nev., said he would like to schedule competing votes on the Senate floor. One would be on Senate Republican Leader Mitch McConnell's bill to make all the tax cuts permanent; the other would be on a Democratic plan to extend only the middle class tax cuts. Neither is expected to pass.

White House Denies Folding on Bush Tax Cuts, but Still ‘Open to Compromise’

From WashingtonIndependent.com:

A lot of hubbub this morning surrounding a Huffington Post article that suggested the White House was willing to cave on its position of permanently extending tax cuts for most Americans while only temporarily extending those for the upper two percent and instead accept the idea of a temporary extension of all the tax cuts. Following the story’s publication, White House Communications Director Dan Pfeiffer emailed Greg Sargent to set the record straight:

The story is overwritten. Nothing has changed from what the President said last week. We believe we need to extend the middle class tax cuts, we cannot afford to borrow 700 billion to pay for extending the tax cuts for the wealthiest Americans, and we are open to compromise and are looking forward to talking to the Congressional leadership next week to discuss how to move forward. Full Stop, period, end of sentence.

That still leaves unclear, however, whether the White House will keep demanding that the majority of the tax cuts be permanent while the ones for individuals making more than $200,000 be temporary. Republicans are pretty much categorically opposed to “decoupling” the time frames of tax cuts for these two groups, because then they’d be forced to advocate for an extension of tax cuts just for the rich at some point down the line.

Survey: Americans Mixed on GOP, Health Plans

According to a new Associated Press-Gfk poll, a slight majority of taxpayers (53%) support the campaign promise of many newly elected Republican leaders: to extend all of Bush tax cuts. However, they do not support a repeal of Obama's health care legislation.

CBN.com reports

Forty-four percent feel that only taxpayers making less than $250,000 a year should receive the cuts.

As for Obamacare, only 39 percent want to see the Republicans fulfill their pledge to kill the new health care law. Instead, 58 percent want it left alone or extended even further.

"I think everybody wants change," said Steven Lamb, 60, a Tenn. state government worker in Nashville who voted Republican last week despite opposing the party's stance on tax cuts and health care.

"I'm tired of what's going on, and the only way to do it is to make a change," he added.

Read more here

Stephen Colbert and the Bush Tax Cuts

Monday night, Stephen Colbert discusses the Bush tax cuts and class warfare on his television show. If you missed it check out the embedded video below, courtesy of ColbertNation.com.

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
The Word - Nothingness
www.colbertnation.com
Colbert Report Full Episodes 2010 Election March to Keep Fear Alive