Tax Law Blog | IRS Tax Attorneys

As we near the final days of 2008, what continues to weigh heavy on the minds of many people is the slowing U.S. economy — unemployment has reached the highest percentage in years at 6.7 percent*, layoffs and business closures continue and the housing market remains weak. This year, lawmakers have passed more than a hundred new tax law changes intended to help millions of individual taxpayers. Jackson Hewitt Tax Service(R) encourages taxpayers to find out how these new tax credits and deductions can help lower their individual tax liability and possibly put more money back in their pockets this tax season.

“With more than a hundred pro-taxpayer credits and deductions, many taxpayers will qualify for new benefits that may not have been available last year,” said Mark Steber, vice president of tax resources at Jackson Hewitt Tax Service. “Taxpayers affected by these changes could see significant savings, and with the current recession, it is even more important that taxpayers get all of the tax benefits they deserve.”

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(This letter was also sent to George W. Bush, Johnny Isakson, Saxby Chambliss and Paul Broun.)

I am writing to you as a constituent and a concerned citizen regarding the severe economic crisis that our nation is now enduring.

I’m sure that there are many very learned people working diligently to help resolve this situation and they are looking at it from every possible angle.

That said, here at Christmas time the American people need help more than ever. Our children and our families want desperately to help with this economic problem and also want equally desperately to provide a “Merry Christmas” for their families.

We all see, everyday, that the retail and consumer sector is expecting a particularly dismal Christmas shopping season this year, which will only exacerbate the financial crisis. Taking notice of all of the above, I would like to offer a suggestion.

While most stimulus plans would require a great deal of time, planning and bureaucracy to implement, the American working people have a pre-made mechanism upon which a stimulus could be accomplished with immediate results.

I would suggest that a moratorium, or immediate halt, be authorized in the collection of federal payroll withholding taxes from the weekly paychecks of working Americans for a period of time, the shortest of which would be until Jan. 1, 2009, and that such reduction in payroll taxes paid be reflected in IRS tax tables, etc. so that there would be no recapturing of those unpaid amounts at a later date.

The net result of this action by the federal government would be and immediate impact the financial situations of households all across America.

The funds would be given to those who are “producing” and keeping our economy strong and would hopefully be spent in the consumer retail environment right at this Christmas shopping season.

If the government can afford to consider the expenditure of billions of dollars to help large financial institutions and other concerns, it would only seem fair that some form of immediate relief be sent to those who will be carrying the load for all of us, the working people of America.

I hope that you will all work diligently together to get this measure passed in time for it to matter this year. I share your hopes and dreams for a prosperous America and offer this suggestion as one way of trying to make that a reality.

Dale P. Smith

Toccoa

Generation Skipping Transfer (GST) Tax is repealed as of the year 2010 but reapplies in its entirety as of 2011. Until 2010, the exemption amount will be the same as the estate tax exemption amount.

The Generation Skipping Transfer Tax is 45% in 2007 through 2009.

The basic Estate Tax is designed to tax assets when they are passed from one generation to another, such as a parent to a child. The generation-skipping tax (”GST” in estate-planning jargon) on the other hand, is designed to impose tax on those who the Government has figured are attempting to circumvent the Government’s expectation that it will collect more Estate Tax sooner rather than later, and by-pass the usual “leave it directly to your children”, and, instead, leave the inheritance to someone in the next generation – hence “the skip”. A simple example is that of a grandparent leaving money to a grandchild where the grandchild’s parent is still alive, leaving out the middle generation. But generation skipping tax can also apply in non-family situations — generation skipping tax may be due if a beneficiary of a gift or estate is 37.5 years younger than the donor or deceased.)

Individuals also have a life-time exemption of $2 million in 2006 ($4,000,000 for married couples). Beginning in 2009, the exemption amount will be $3,500,000 and unlimited in 2010.

Gifts given outright that qualify for the $12,000 in 2006. Gift Tax exclusion are shielded from the GST as are education and medical expenses.
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Make sure to get your maximum refund. Why should the IRS get to keep a penny of your money?

For 2007, you got to take off as much as $3,400 from your income for each qualified exemption you have, up from $3,300 in 2006. (The level rises to $3,500 in 2008.) Despite myths to the contrary, these include children who are full-time students under age 24, regardless of how much income they may have. As your income increases, your exemption deduction may decrease. For 2007, on a joint return, your exemption deduction were phased out between adjusted gross income of $234,600 and $357,100.

For singles, the numbers are between $156,400 and $278,900. With the exemption rising in 2008, the phaseouts increase as well.

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Have you been following all the changes the U.S. tax code has seen this decade? How about the tax bill passed late last year that expanded breaks for families facing the alternative minimum tax? Got a kid in college? Have you used the “Tuition and Fees” deduction that lets you deduct as much as $4,000 in tuition and fees off your 2007 taxes? And did you know that you may not able to use the deduction on your 2008 return? (The provision expired at the end of 2007, and Congress hasn’t renewed it yet.)

If not, get educated! If you’re “tax simple,” the IRS can actually do the return for you, or you can have your return done online — sometimes even for free. Alternatively, if you’re tax-savvy, do your own return after learning all the new rules here at the Tax Law Blog.

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Unfortunately for some, any joy about a new tax break is tempered by the fact that it was created because they were having trouble paying their mortgages.

On a more positive note, another new law now allows some homeowners to deduct a common insurance cost.

A similar good news/bad news theme runs through other 2007 tax legislation.

A last-minute compromise on Capitol Hill granted millions of taxpayers a reprieve from the costly alternative minimum tax. But at the same time, the law means millions might have to wait to submit their returns and get any refunds.

And while one law made it easier for some to give to their favorite charities, another will have some philanthropic filers scrambling to find receipts.
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(1) IRS assessments can be fixed by filing a tax return. Sometimes the IRS will take an educated guess about what your tax liability might be. The IRS will then send you a notice of proposed assessment, or even file a return on your behalf. You can reduce or eliminate the IRS proposed assessments by filing your back tax returns.

(2) There are strict time limits for getting a refund, for collecting on tax debts, and for auditing your tax returns. You need to know these IRS Statute of Limitations, because they have a direct impact on your tax filing strategy.

(3) The IRS has the authority to impose penalties and interest on tax liabilities not paid in full by the deadline for the tax return. You need to know how IRS penalties and interest are calculated, and what you can do to minimize them.

(4) Your tax information is absolutely, totally, and completely confidential. A tax professional is ethically and legally obligated not to share your tax information with anyone – not even with the IRS – unless he or she has your explicit authorization.
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For help fighting the IRS call 1-877-505-9455

Every year, the Internal Revenue Service adjusts the standard mileage rate for automobile use for business purposes or charitable activities, or for moving or medical expenses.

For 2007, the standard mileage rates are:

• 48.5 cents a mile for business use.
• 20 cents a mile for medical or moving expenses
• 14 cents a mile for driving in charitable activities.

For 2008, the standard mileage rates will be:

• 50.5 cents a mile for business use.
• 19 cents a mile for medical or moving expenses.
• 14 cents a mile for driving in charitable activities.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The standard rate for medical and moving purposes is based on the variable costs as determined by the same study.

Runzheimer International, one of the nation’s largest travel-management consulting firms, conducted the study for the IRS.
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Do you need help preparing your tax return, or should you try to do it yourself? The following quiz can help give you an idea of how well you understand tax concepts and current tax laws. There are 25 questions, and each question is worth four points.

When you finish, you’ll see your score and the correct answers to any questions you missed.

Click Next to begin.

If you need the Assistance of a National Tax Attorney be sure to call 1 (877) 505-9455 to scheduel your free consultation.

The primary purpose of the tax system is to raise revenue for the U.S. Government. According to the U.S. Budget, tax receipts represent 58.8% of federal revenue; the federal deficit is projected to be $364 billion and $521 billion for the years 2005 and 2004, respectively. Therefore, the $345 billion tax gap has a considerable effect on the federal budget (see “Analytical Perspectives: Budget of the United States Government, Fiscal Year 2005,” from www.whitehouse.gov).

While measuring the magnitude of the tax gap is important, from an economic standpoint identifying the source of the tax gap is a necessary precursor to developing a structured plan to reduce the gap. To guide enforcement efforts, policymakers must identify who is cheating as well as how they are cheating. Identification of tax-gap sources also matters from a psychological standpoint, because tax evasion has been linked to the perceived fairness of taxpayer burden. That is, taxpayers are more likely to cheat if they perceive others in similar situations (occupation, education, income) are cheating:

The United States has long been proud of the “taxpayer morale” of its citizens—the willingness to pay voluntarily the income taxes necessary to finance government activities. Taxpayer morale ultimately depends, however, on the belief that taxes are fair. If the basis for this belief comes under suspicion, voluntary compliance with the tax laws is jeopardized. … Taxpayers resent paying substantially more than their neighbors who have equal or higher incomes. (“Tax Reform for Fairness, Simplicity, and Economic Growth,” U.S. Department of the Treasury, 1984; www.treas.gov/offices/tax-policy/library/tax-reform).
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