Tax Break

Essential reading: Jumping off the fiscal cliff, and more

July 2, 2012

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Analysis: Jumping off the fiscal cliff. Kim Dixon and Richard Cowan – Reuters. Members of Congress from both parties are increasingly mulling the unthinkable: going home in December without acting to avoid the $4 trillion in tax hikes and deep spending cuts known as the fiscal cliff. Neither Democrats nor Republicans claim this is their preferred option, as it could rattle global financial markets badly and anger their constituents. But as they circle each other in an ever-more partisan atmosphere they see little prospect for a settlement acceptable to both parties in the lame duck session of Congress after the Nov. 6 election. Link

* Get ready for the new investment tax. Laura Saunders – The Wall Street Journal. When the court affirmed the law on Thursday, investors — and tax advisers — started scrambling. The new tax, which Congress passed in 2010, affects the net investment income of most joint filers with adjusted gross income of more than $250,000 ($200,000 for single filers). Starting on Jan. 1, 2013, the tax rates on long-term capital gains and dividends for these earners will jump from their current historic low of 15 percent to 18.8 percent, assuming Congress extends the current law. Link

* GOP’s new health-law front. Louise Randofsky – The Wall Street Journal. Republicans are planning to use the main component of the Supreme Court decision upholding President Barack Obama’s healthcare law as a weapon to try to repeal it. Republicans are preparing a fresh assault on the law, including a move by the Republican-controlled House to vote to repeal the entire overhaul July 11. Link

* Japan’s leader is set back as party faction quits. Martin Fackler – The New York Times. The unpopular government of Prime Minister Yoshihiko Noda suffered another setback on Monday when the largest faction of his governing Democratic Party quit in protest over a proposed tax increase, leaving the party barely in control of Parliament’s lower house. While the prime minister said the increase was needed to defray the costs of Japan’s rapidly aging population, opponents called it a betrayal of the party’s campaign pledge not to raise taxes made when it swept to power in a historic election three years ago. Link

* Australian PM campaigns to sell unpopular carbon tax. James Grubel – Reuters. Australian Prime Minister Julia Gillard began an election-style campaign on Monday to promote a tax on carbon emissions, with her political survival hanging on a program highly unpopular with both industry and voters. Gillard’s poll rating remains near record lows and some 2,000 protesters denounced the tax when they marched through Sydney on Sunday, the day the tax came into force. Link

* New IRS rules for disclosure of foreign assets. Amy Feldman – Reuters. If you have foreign assets – whether or not you live abroad – the deadline to file with the Internal Revenue Service is June 30. But for those who have not filed the forms previously and are trying to come back into the system, some new rules from the IRS are going to help distinguish between true tax cheats and American citizens abroad who feared the massive penalties required by voluntary disclosure amid the recent IRS crackdown. The IRS announced that it would help U.S. citizens overseas who are considered low compliance risks – including dual citizens (many Canadians), and those with foreign retirement plans – square their tax obligations through the voluntary disclosure program without facing penalties or additional enforcement actions, starting September 1. Link

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