Tax Break

What Mitt missed on his tax forms, and why?

Romney tax return 

Mitt Romney’s presidential campaign acknowledged to Reuters and others that his campaign is revising his federal ethics forms. They will now report more than a half-dozen offshore holdings, including income from a multimillion-dollar Swiss bank account, that was not disclosed last year.

The Romney campaign has described the issue as a minor discrepancy, and noted that all taxes owed on the overseas accounts were paid. But given the political football that overseas assets and tax disclosure have become –with the Internal Revenue Service cracking down on those who have assets abroad — that acknowledgment raises important questions.

First, why did the Romneys choose to hold assets overseas, particularly in places that have been targeted in the IRS’s ongoing crackdown? In addition to Switzerland, the Romneys held assets in the Cayman Islands, the Bermudas and Ireland, all countries that have lower tax rates than the U.S. Things can be perfectly legal, yet look terrible for someone with political ambitions, especially a presidential candidate.

An official representative for the Romneys has said that he opened the Swiss bank accounts, whose holdings are valued between $1 million and $5 million, in 2003, on behalf of the Ann Romney Blind Trust to provide international currency diversification for the trust’s holdings, and that he shut it in early 2010. There are, however, other ways to get currency diversification in a portfolio than going to Switzerland.

Second, why would Romney fail to disclose everything in his filings with the ethics office that was in the tax returns? The Los Angeles Times/Tribune Washington Bureau found that at least 23 funds and partnerships listed in the Romneys’ 2010 tax returns did not show up or were not listed in the same way on the financial disclosure, including 11 offshore accounts. 

Mitt Romney’s tax returns explained: David Cay Johnston on CNN

 

Reuters Tax Columnist David Cay Johnston appeared on CNN earlier this week to discuss some of the interesting details in Mitt Romney’s tax returns.

For a direct link, click here.

Tax clips from the Web: Mitt’s millions, cost basis and more

Mitt Romney taxesTax season looms! Indeed, for many, it already has begun. Here are some of the best stories on taxes that you might have missed elsewhere on the Web.

Mitt’s millions raise a fundamental tax question

Call it the dawn of the debate over carried interest and why it may be taxed differently in the future. The primary question that has emerged from the ruckus over Mitt Romney’s finances, which Kay Bell asks in her tax blog don’tmesswithtaxes, is whether capital gains should be taxed at a lower rate than normal income. There are arguments on either side. One is that  investments help build the U.S. economy, so tax breaks may be justified. On the other side is an argument that Warren Buffett was famous for making in the Op/Ed pages of the New York Times last August in which he asked why capital gains tax breaks should result in a billionaire paying an effectively lower tax rate than his middle-income staff.

Cost basis exploration

Forbes’ blogger Kelly Philips Erb weighs in with “Got Stock? Cost Basis Rules May Impact Taxes,” a good read if you have income from investing in stocks. This year investors need to know about changes to “cost basis” rules from the IRS. The department made changes partly to ensure that investors pay enough tax on gains from their stocks last year. Now stock brokers are required for the first time to provide the cost basis amounts to their clients in time for filing, and send a new form to the IRS. Investors still have responsibility for reporting all transactions that resulted in stock gains, of course, so whether the process will become more complicated remains to be seen.