Average Tax Refund in 2010: $3,003

According to new figures, the average taxpayer received a refund of $3,000 last year, which is up 5% from the previous year. Overall the IRS gave out $328 billion in refunds. Remember, that is YOUR money! Adjust your withholdings and enjoy that money all year long.

CNN reports:

The jump was one of the biggest in years, thanks in part to several tax credits introduced as part of the American Recovery and Reinvestment Act.

The Homebuyer Tax Credit -- which gave buyers up to $8,000 for purchasing a home -- was expanded to include more taxpayers.

Meanwhile, the refundable American Opportunity Credit helped more students and parents pay for college tuition and course materials. It temporarily replaced the $700 non-refundable Hope Credit and gave students with income of $80,000 or less a credit of up to $2,500 a year.

(The Making Work Pay credit was part of the ARRA as well, but it didn't show up in refunds. Instead, it was distributed in paychecks.)

Refunds also likely received a boost from the sluggish unemployment picture, said Roberton Williams, a senior fellow at the Tax Policy Center.

Read more here

IRS Releases 2010 Taxpayer Attitude Survey

Yesterday the IRS Oversight Board released the results of its most recent Taxpayer Attitude Survey. There were 1,000 respondents, and here are some of the most interesting findings.

How much, if any, do you think is an acceptable amount to cheat on your income taxes?
A little here and there, 8% (down 1 percentage point from last year).

How important is it to you, as a taxpayer, that the IRS does each of the following to ensure that all taxpayers honestly pay what they owe:

Ensures high-income taxpayers are reporting and paying their taxes honestly? Very important, 78% (all-time low, down 5%)
Ensures small businesses are reporting and paying their taxes honestly? Very important, 73% (down 3%)

How much influence does each of the following factors have on whether you report and pay your taxes honestly –

Fear of an audit? Great deal of influence, 35% (down 4%)

Belief that your neighbors are reporting and paying honestly? Great deal of influence, 21% (up 4%)

Hat tip TaxProf Blog

Delinquent on Your Taxes? You Can Still Get a Federal Contract

From Washington Examiner.com

Federal contractors receive an estimated $377.5 billion in taxpayer funds, and now the IRS inspector general reports that the tax agency isn't bothering to complete tax checks and financial capability surveys before awarding contracts. According to a new report, the Treasury Inspector General for Tax Administration (TIGTA) reviewed 135 contractors with an award equal to at least $250,000. Fifteen percent (20) of those reviewed had delinquent tax liabilities totaling $5.2 million. And tax checks were not completed for seven of those 20 contractors.

In other words, 13 contractors still got awards despite being known to be delinquent.

From the report:

TIGTA believes IRS contractors should be held accountable to the same tax compliance requirements as IRS employees. If IRS employees fail to file accurate and timely income taxes, it can result in disciplinary action, and even loss of employment.

Guidelines do not require IRS employees to complete tax checks or financial capability surveys at the time a contract is up for renewal. Our analyses showed the IRS renewed the contracts for 17 contractors, of which six had delinquent tax liabilities that totaled over $943,000 at the time of the original award. As of March 2009, the delinquent tax liabilities increased by more than 500 percent to approximately $4.9 million.

Read more here

BP Oil Spill To Cost U.S. Taxpayer Almost $10 Billion

From Reuters.com:

Oil giant BP said it plans to offset the entire cost of its Gulf of Mexico oil spill against its tax bill, reducing future contributions to U.S. tax coffers by almost $10 billion.

BP took a pretax provision of $32.2 billion in its accounts for the period, for the cost of capping the well, cleaning up the spill, compensating victims and paying government fines.

However, the net impact on BP's bottom line will only be $22 billion, with the company recording a $10 billion tax credit, most of which will be borne by the U.S. taxpayer, a spokesman said.

BP's UK tax bill will also be reduced, BP added.

Analysts said BP could prompt more public and political anger in the United States by deducting all the costs, and especially the expected fines BP will face.

In 2006, Boeing Co decided to forego seeking a tax deduction for any of a $615 million settlement with the government in 2006 over ethics charges, under pressure from lawmakers.

AIG payback plan back to square one

AIG and Prudential were going to buy an Asian life insurance company, AIA, for an agreed upon $35.5 billion price tag that was projected to have accelerated AIG’s bailout repayment to the government. Instead, Prudential PLC, not to be confused with the American Insurer Prudential Financial Inc., has been trying to renegotiate the terms of the deal with AIG, offering $30.375 billion instead.

AIG has said that it considers the sale of AIA to be a crucial component of its effort to repay the more than $130 billion it has borrowed from U.S. taxpayers. AIA had planned on using the proceeds of the sale to pay down $25 billion of their own debt to the Federal Reserve.

Now that the deal has fallen through, AIG may consider an initial public offering for AIA.
According to a regulatory filing, AIG will receive a termination fee from Prudential worth $223.9 million on July 1.

Read the full article here.

Low Income Taxpayer Clinic Grant Recipients Announced

According to their newest press release, the IRS has awarded nearly $10 million in matching grants to Low Income Taxpayer Clinics (LITCs) for the 2010 grant cycle (Jan. 1 to Dec. 31, 2010).

LITCs are organizations that represent low-income taxpayers in federal tax controversies with the IRS for free or for a nominal charge, provide tax education and outreach for taxpayers who speak English as a second language, or both.

Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations. For the 2010 grant cycle, the IRS awarded LITC grants to 160 organizations. LITCs and their employees and volunteers operate independently of the federal government.

The LITC grant program is a federal program administered by the Taxpayer Advocate Service, led by National Taxpayer Advocate Nina E. Olson.

Questions about the LITC Program can be addressed to the LITC Program Office at (202) 622-4711 (not a toll-free call) or by e-mail at LITCProgramOffice@irs.gov. IRS Publication 4134, Low Income Taxpayer Clinic List, provides information on LITCs in each geographic area and the languages each clinic serves in addition to English. It is available at www.irs.gov or at local IRS offices.

Three New Issues to be Addressed by IRS Industry Issue Resolution Program

In their newest press release, the Internal Revenue Service and Treasury Department announced that guidance will be developed and published under the IRS’s Industry Issue Resolution (IIR) program for several significant issues affecting the telecommunications and retail industries.

Telecommunication issues include the proper treatment of unit of property for network assets, and the appropriate asset class for wireless telecommunications assets. The retail industry issue selected will address vendor mark-down allowances under the retail inventory method. These issues affect nearly all taxpayers in the respective industries.

Since its inception in 2000, the IIR program has resulted in resolution of many different tax issues cumulatively affecting thousands of taxpayers in many different lines of business. For each issue selected, a multi-functional team gathers and analyzes the relevant facts and recommends guidance.

At any time, business associations and taxpayers may submit tax issues that they believe could be resolved through the IIR program. IIR project selection criteria and submission procedures are outlined in Revenue Procedure 2003-36, which is available on the IRS Web site at IRS.gov. While issues may be submitted for consideration for inclusion in the IIR program at anytime, submissions must be received by August 31st for the summer screening of submissions.

Fewer Taxpayers to Pay Off Debt with Refunds

Earlier this week the National Retail Federation (NRF) revealed that the number of Americans likely to pay off a debt with their tax refunds this year has gone down by about 4%. In 2009 it was estimated that 48% of Americans would use their tax refunds to pay off debts, but this year the number has dropped to only 44%. As this Biz Journal article explains, the main reason for the drop is that fewer US taxpayers are expecting to receive a refund this year.

According to those polled, fewer taxpayers are expecting a refund – 65.5 percent this year, compared to 68.4 percent last year.

“A little bit of ‘free money’ will go a long way for Americans this year,” said Tracy Mullin, president and CEO of the NRF. “Retailers planning special promotions over the next few months may find that shoppers are a bit more receptive to opening up their wallets than they have been for the past year.”

NRF said only 12.5 percent of those polled plan to treat themselves or their families with a major purchase with the refund, which is up from 11 percent last year. More than 40 percent plan to save it, nearly 29 percent will put it toward everyday expenses and 10 percent will use it for vacation.

Online filing is becoming more popular across the country, with more than 54 percent planning to file via Internet, compared to more than 50 in 2007.

Continue reading at Biz Journals.com…

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Two Out of Three Individuals Now Using IRS e-File

From the IRS Newsroom:

Individuals e-filed a record 95 million federal income tax returns during 2009, up almost 6 percent from last year’s total of nearly 90 million. About two out of three taxpayers e-filed this year; out of the 141 million returns filed so far this year, over 67 percent were e-filed, compared to 59 percent last year.

Each year, more taxpayers chose to e-file their tax returns. While the total number of tax returns has increased 10 percent during the past decade, the number filed electronically has increased by 168 percent. Taxpayers who e-file from a home computer continue to be an increasingly significant segment of those who e-file.

Home Computer e-Filers

This year, for the first time, more than a third of e-filers are those doing it themselves from a home computer More than 32 million returns were e-filed from home computers, up almost 20 percent from last year’s record of 27 million. People filing from their home computers account for about 34 percent of all e-filed returns from individuals.

Direct Deposit Refunds

Almost 73 million refunds were electronically deposited into taxpayer’s accounts, saving the government mailing costs and saving taxpayers a trip to the bank. More importantly, these taxpayers received their refunds a week sooner than those receiving a paper check.

These direct deposit refunds accounted for 66 percent of all refunds, up from 62 percent of refunds last year. Overall, the IRS issued 110 million refunds, averaging $2,753 per refund; direct deposit refunds averaged $2,997 per refund.

Free File

More than 3 million taxpayers filed their tax returns for free through the IRS free file program. This year for the first time, taxpayers could also file directly to the IRS by completing a Form 1040 on IRS.gov; 273,000 taxpayers used this new way to file.

World’s Dumbest Taxpayer

An Oregon man trying to pay his taxes in cash led to the state’s largest marijuana bust in over 10 years after a tax clerk smelt marijuana on the money.

According to the Associated Press, in Oregon, the Benton County sheriff's department arrested a man for trying to pay a tax clerk his tax liabilities with $600 in cash. Paying your taxes in cash is not usually considered illegal – however, the bills this gentlemen used apparently smelled like marijuana.

The concerned tax worker reported Eric Brian Michaelis to the Benton County sheriff’s department who then discovered over 230 marijuana plants inside Michaelis’ home. Deputies found plants in almost every room in his house, some reportedly over four feet tall. They also discovered a back-up generator that could be used to power "grow lamps" in the case of an electrical power outage.

"It's safe to say that it's at least the biggest indoor marijuana bust in the last 10 years," claimed the Chief Deputy District Attorney Chris Stringer.

Mr. Michaelis was arrested and forced to turn over $65,000 in cash that was seized in his house. He was also sentenced to 16 months in prison. However, there was no mention as to whether his original $600 payment was accepted or not.

As we get closer and closer to tax day stories that mention taxes are gaining popularity. Usually these articles talk about humorous tax deductions or advice on filing your taxes, but this article really stood out and made me laugh aloud. I guess the lesson learned is that federal taxes and illegal drugs do not mix.