Tax Break

Essential reading: UK tax evaders face higher penalty, challenges of fixing U.S. taxes, more

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

* Tax evaders face higher penalty. Vanessa Houlder – The Financial Times. British tax evaders with secret accounts in Switzerland will pay more than originally planned to legitimize their holdings under a revised deal signed on Wednesday. Revenue & Customs demanded that Switzerland increase the maximum one-off penalty to cover former unpaid tax from 34 per cent to 41 per cent, after a similar revision to the Swiss-German tax deal earlier this month. The program is expected to bring in billions of pounds. Link

* US pressure over India tax law. James Politi and James Crabtree – The Financial Times. US business groups are putting pressure on Tim Geithner, the treasury secretary, to intervene to try to stop India from enacting a contentious retroactive taxation law that they argue would have “severe consequences” for American investors in the country. They have asked him to “raise concerns” about the tax bill in talks with Indian officials during the spring meetings of the World Bank and International Monetary Fund this week. Link

* What Hong Kong knows about China. Joseph Sternberg – The Wall Street Journal. In a bit of virtuous contagion, a coughing fit of accounting honesty concerning Chinese companies appears to be spreading from the U.S. to Hong Kong. The earnings season just concluded has seen a mini-spate of delayed accounts. Trading in 13 companies’ shares is currently suspended pending incomplete audits. Link

 * The tax code is a complicated, horrible mess because we like it that way. Derek Thompson – The Atlantic. Federal income taxes pay into a general fund that pays for everything from education to defense. We tinker with it all the time to award and punish behavior. Running social programs through tax breaks in the federal income tax code has complicated repercussions and we should stop, but taxpayers love the breaks. Link 

* Romney’s plan to close loopholes. David Leonhardt – The New York Times Economix Blog. Tax reform is hard. If Mr. Romney eliminated the deductions he mentioned to donors over the weekend – mortgage interest on vacation homes and the deduction for state and local taxes – he would need to come up with at least 10 times as much loophole-closing — and maybe 20 or 30 times as much — to keep his tax plan from adding to the deficit. Link

Essential reading: Cuts debated on tax breaks for retirement savings, Simpson-Bowles vote, more

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

* Lawmakers consider changing tax breaks on retirement savings. Lori Montgomery – The Washington Post. The painful trade-offs of tax reform came into sharper focus on Tuesday as lawmakers began considering reducing or otherwise changing specific tax breaks, starting with laws that allow millions of Americans to avoid taxes while saving for retirement through 401(k) plans, employer pensions, IRAs and other programs. Link

* White House says Obama would veto Republican tax cut. Alister Bull – Reuters. The White House said on Tuesday that President Barack Obama would veto a small business tax cut proposal by Republicans in the House of Representatives that his Democrats complain is biased toward helping the rich. Link

* Senate to take up Simpson-Bowles deficit plan. James Politi – The Financial Times. The centrist Democrat who chairs the Senate budget committee will present legislation on Wednesday to implement the recommendations of a 2010 bipartisan debt reduction panel, in a surprise move to force the upper chamber to consider the contentious plan. In a sign that the Simpson-Bowles plan is unlikely to garner much traction in the Senate, Republicans mocked the move. Link

Tax-free retirement accounts will be hard to touch in tax reform

House Ways and Means Committee Chair Dave Camp (R-MI), Washington February 15, 2012. REUTERS/ Gary Cameron

The latest in a series of congressional tax committee meetings ahead of the Next Great Tax Code Reform revealed one thing Tuesday: trying to squeeze revenue out of tax-free retirement accounts will be a tough sell.

“Tax Reform” as it is known, generally refers to a process that includes lowering tax rates for most everybody, but takes away special breaks to pay for that. The result, it is hoped, is efficiency and simplicity.

Essential reading: Americans overseas balk at taxes, trickle-down taxation, more

U.S. Park Police Officer Calvin Covington with his horse Harper mails his family's income tax returns at a mobile post office near the Internal Revenue Service building in downtown Washington. REUTERS/Jonathan

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

* Romney’s remarks on limiting tax deductions draw fire. By Sam Youngman and Donna Smith – Reuters. After Mitt Romney was overheard telling supporters at a private fundraiser in Florida over the weekend that he might seek to limit tax deductions for mortgages and eliminate the Department of Housing and Urban Development (HUD), aides said on Monday that Romney was simply throwing out ideas, not outlining policy to help offset his proposal to slash all U.S. tax rates by 20 percent. Link  

If you think 2011 taxes were bad, wait until this year’s tally

“This is going to be one of the craziest years I’ve seen,” said Mark Steber, chief tax officer for Jackson Hewitt Tax Services. “It’s kind of the perfect tax storm.”

For those of us still smarting from the 2011 tax comeuppance, 2012 is nothing to look forward to.

A host of tax deductions are set to expire by Dec. 31. Together they add up to many billions of dollars in breaks for taxpayers.

Essential Reading: Deductions Romney would target, Buffett Rule politics, more

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

* Romney specifies deductions he would cut. Sara Murray – The Wall Street Journal. In order to offset the 20 percent income tax cut he has proposed for all taxpayers, Romney would eliminate or limit for high-earners the mortgage interest deduction for second homes, and likely would do the same for the state income tax deduction and state property tax deduction. He also said he would look to the Department of Education and the Department of Housing and Urban Development for budget cuts. Link

* Q+A: The ‘Buffett Rule,’ a minimum tax on the rich. Kim Dixon and Patrick Temple-West – Reuters. President Barack Obama and congressional Democrats are laying a political trap for Republicans to be sprung on Monday when the U. S. Senate is slated to vote on the proposed “Buffett Rule,” which would slap a minimum tax on the highest-income Americans. Link

* For Americans abroad, taxes just got more complicated. David Jolly – The New York Times. Americans overseas face a new form that will add to the hassle of tax time for many and, critics say, set up the unwary for penalties. The new requirement comes courtesy of the Foreign Account Tax Compliance Act, or FATCA, an effort to crack down on offshore tax evasion by U.S. citizens. Link

Sales tax rates stay high for many, revenue vital for cities, states

A shopper stands outside Saks’ famed flagship store in New York City where sales tax is 8.875 percent REUTERS/Mike Segar

When it comes to sales tax three things matter: location, location, location. 

Depending on where you live you may be paying 10 percent sales tax on your purchases, or zero. The tax could be marginal to your community’s fiscal health, or absolutely vital.

States rely on taxes rung up at the register for about one-third of their revenue on average, but as Cate Long pointed out in a recent MuniLand post, that rate varies widely depending on where you are.

State tax revenues up in 2011, but not booming

Tax collections rose in all 50 states last year, according to the U.S. Census bureau, as our colleague Lisa Lambert reported Thursday.

“The nationwide increases in state government tax revenue are an indication of the stabilization of revenues for state governments,” Lisa Blumerman, chief of the Governments Division at the Census, was quoted as saying.

Stable but not booming, according to a Rockefeller Institute analysis of that data, which finds overall tax revenue is still down significantly from pre-recession levels in 2008.
Source: Rockefeller Institute analysis of Census Bureau data.

Tax and accounting calendar

Some important upcoming events in the tax and accounting world:

Monday, April 16 - U.S. taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 after March 18, 2010 must report information about those accounts under FACTA using form 8938, or face stiff penalties.

Tuesday, April  17 -

    Tax day in the United States. Individual income tax returns and gift tax returns due. Tax-writing U.S. House of Representatives Committee on Ways and Means will hold a hearing on possible reforms to certain tax-favored retirement savings plans including employer-sponsored defined contribution plans and Individual Retirement Accounts (“IRAs”) that might be considered as part of comprehensive tax reform.  10 am, Room 1100 of the Longworth House Office Building.

Tuesday, April 17 – Friday, April 20 – International Accounting Standards Board meeting in London.

Tuesday, April 17 – Thursday, April 19 – The International Financial Reporting Standards (IFRS) Foundation, the World Bank and OHADA (The Organization for the Harmonization of Corporate Law in Africa) will run a workshop in the West African city of Douala, Cameroon, to support adoption of IFRS.

Essential reading: Obamas and Bidens release tax returns, challenge Romney, and more

U.S. President Barack Obama and Vice President Joe Biden in Washington February 21, 2012. REUTERS/Jason Reed

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

* Obamas and Bidens to release tax returns. Mark Landler and Jim Rutenberg – The New York Times. President Barack Obama and Vice President Joseph Biden plan to release their own income tax returns on Friday, along with a statement calling on Republican presidential contender Mitt Romney to do the same, according to an Obama campaign official. Link

* Swiss can’t offer more to Germany, US in tax row-fin min. Catherine Bosley – Reuters. Switzerland cannot make further concessions to Germany and the United States in a dispute over untaxed funds in secret bank accounts, Swiss Finance Minister Eveline Widmer-Schlumpf was quoted as saying in a newspaper interview on Friday. Widmer-Schlumpf also said France and Italy were likely to be watching these developments before themselves seeking agreements to claw back taxes. Link