Tax Break

Essential reading: Amazon will collect Nevada sales tax, debating tax cuts, more

A rainbow appears over hotels on the Las Vegas Strip in Las Vegas, Nevada, REUTERS/Ethan Miller

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

* Amazon agrees to begin collecting sales taxes in Nevada.  The Wall Street Journal. Amazon.com Inc. has agreed to collect a sales tax on items sold in Nevada beginning in 2014, or earlier should proposed federal legislation mandate that online retailers collect sales taxes. The online retailing giant said it will collect taxes in the same manner as traditional brick-and-mortar retailers, an agreement that is expected to raise at least $16 million a year for the state, according to the Las Vegas Sun, which initially reported the news. Link

* German cabinet approves Swiss tax deal. Madeline Chambers – Reuters. German Chancellor Angela Merkel’s cabinet passed a revised deal to tax secret deposits in Swiss bank accounts on Wednesday, betting that the opposition Social Democrats (SPD) will drop their objections and back the accord in parliament. Switzerland and Germany hammered out the new deal earlier this month after a diplomatic spat that lasted years. Link

* OECD head urges Japan to fix finances, hike consumption tax. Kelly Olsen – The Wall Street Journal. The head of the Organization for Economic Cooperation and Development Angel Gurria said Wednesday that he supports Japan’s plan to raise the consumption tax. The Japanese government of Prime Minister Yoshihiko Noda submitted legislation to parliament in March that would raise the tax from the current 5 percent in two stages. But the plan has come under fierce criticism. Link

* Buffett gets a break on fee. Brody Mullins – The Wall Street Journal. NetJets Inc., the private-jet company owned by Warren Buffett’s Berkshire Hathaway Inc., spent more than $1 million over the past three years to lobby Congress to cut a user fee. The reduced fee, part of the recent Federal Aviation Administration bill that took effect earlier this month, will save customers of NetJets and similar companies roughly $83 million over about four years, according to congressional estimates. Link

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.

Your tax dollars at work

If you are writing a check to your state department of revenue or the IRS over the next few weeks, or are simply reminded by tax time just how much you send along to the government each year, you may well wonder where all that money is going.

The Center on Budget and Policy Priorities put together two graphics which capture the highlights.

First the states:

Like the states, the federal government spends big on healthcare.

Education drops off, however, replaced by spending on Social Security and national defense:

Tax clips from the Web: The tax code as literature, canceled debt and TV pitchmen

Then-U.S. Senator Sam Brownback (R-Kansas) gestures as he talks about the U.S. tax code in 2007 REUTERS/Frank Polich

How big is the tax code?

Wait…how many pages do they think War and Peace is? Kay Bell writes in her Don’t Mess With Taxes blog that the floor of Congress has logged several attempts to quantify the length of the U.S. tax code. “At 1.3 million pages it is twice the length of Leo Tolstoy’s War and Peace,” said one House Representative, speaking of the United States tax code. Another popular reference for the code’s impressive verbosity – The Bible.

The quotes in the linked blog have yet to be fact-checked, but one assured fact is that the tax code in its entirety is a long, murky mess. The impulse to reform is strong, but before that happens, Bell writes, “make Congress leave the tax code alone for a while.”

Small business taxes: the most overlooked deductions

New York City's main post office, tax day 2003. Today many small businesses file taxes electronically, and will be including a new form 1099-K. REUTERS/Chip East

Small business owners face a tax challenge this year. Form 1099-K is an attempt to help close the tax gap — the $385 billion difference between what the IRS thinks it should be collecting and what it actually collects — by making sales and other commercial transactions on the Internet harder to hide.

The forms are being sent to business owners by credit card companies and online payment processors including eBay, PayPal and Amazon. The 1099-Ks list all 2011 transactions processed for sellers with more than 200 transactions and $20,000 in annual gross receipts, according to this helpful Q&A on Bloomberg BusinessWeek’s small business site.

The five most common taxpayer questions answered

Filling out the 1040, New York City post office, April 15, 2010 REUTERS/Mike Segar

You’ve got a month left before the tax deadline — April 17 this year — and have you filed your taxes?

If typical patterns hold, more than one in four of us has yet to sign on the bottom line.  IRS numbers show more than 32 million individual income tax returns arrived after April 9 last year.

Tax clips from the Web: Kanye’s charity blunders, D.C. lobbyists and identity fraud

A Federal Trade Commission report listed identity theft as the top complaint from consumers in 2011 – for the 12th year in a row. Of those 280,000 complaints, about 24% were tax or wage-related. This is something of a stark wake-up call to the perils of our electronic lives, which can be hacked without our knowledge, right up until we hit the send buttons on our electronic tax returns, says Jonnelle Marte for Smart Money’s tax blog: “For some victims, the fraud isn’t discovered until they hit the send button on their electronic tax returns — and get a rejection note from the IRS. Other times it takes a little longer to know something is wrong, such as not receiving a refund check.”

If you have been unlucky enough to be hacked, correcting the error could take the IRS from 6-12 months, according to Marte.

Home on the range

Here is a quote from the author of the Tax Foundation’s annual rating of the states with the best tax climates -“The lesson is simple,” wrote study author Mark Robyn, “A state that raises sufficient revenue without one of the major taxes, all things being equal, has an advantage over those states that levy every tax in the state tax collector’s arsenal.”

IRS budget: IT a priority, enforcement funding down

Commissioner of Internal Revenue Doug Shulman REUTERS/Hyungwon Kang

Remember the budget? Not the one President Barack Obama introduced last month. But the budget for fiscal 2012 – the year we’re in right now?

Don’t feel bad if you forgot. Obama signed the bill two days before Christmas, the same day that he signed the highly-politicized, media-frenzied payroll tax cut extension.

On March 6, the Congressional Research Service published a nice coda report detailing where the money will be spent through Sept. 30 2012.

Essential tax and accounting reading: Swiss eager for U.S. deal, E&Y auditor/advocate, slow refunds, and more

Internal Revenue Service office near Times Square in New York.

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

* Swiss president wants tax accord with U.S. David Jolly – The New York Times. In the view of Switzerland’s president, her country would sign a deal on banking secrecy with the United States “tomorrow” if not for an impasse created by Washington. “We are ready,” President Eveline Widmer-Schlumpf, who is also finance minister, said on Wednesday. “We’ve made a lot of constructive proposals. We could sign it tomorrow if the United States wants to do it.” She said the countries had made “considerable progress” toward a global deal in the last few months. An agreement will include deferred prosecution deals against Swiss banks accused of helping American tax evaders, fines and a “substantial” transfer of client data to the Internal Revenue Service, she said. Widmer-Schlumpf said that Switzerland, which accounts for more than one-quarter of the world’s offshore wealth, was not prepared to abandon banking secrecy altogether and that the data transfer “has to take place within the existing legal procedures in both countries.” Link

* Ernst & Young tightropes between audit, advocacy. David Ingram, Dean Aubin and Sarah Lynch. Corporate audit giant Ernst & Young operates a lobbying firm in Washington, D.C., that has been hired in recent years by several corporations that were at the same time E&Y audit clients, prompting two senior lawmakers to demand closer regulatory scrutiny. Amgen Inc, CVS Caremark Corp and Verizon Communications Inc have ongoing lobbying contracts with Washington Council Ernst & Young, an E&Y unit, while also using the audit firm to review the corporations’ books, according to documents reviewed by Reuters. U.S. rules on “auditor independence” include one that bars auditors from serving in an “advocacy role” for audit clients. The rule is focused on legal advocacy, such as providing expert witness testimony, but several accountants said the general prohibition on advocacy may cover lobbying, as well. Link

* Tax break goes far beyond factory floor. Kim Dixon – Reuters. A Reuters analysis of company filings and government data shows how broadly the Section 199 manufacturing deduction is now used, suggesting it may be nearly impossible to keep it focused on manufacturing. From Starbucks Corp to Time Warner Cable Inc, businesses far beyond traditional manufacturers use the benefit. President Barack Obama wants to cut the top corporate tax rate from 35 percent to 28 percent, with a special 25 percent rate for manufacturing. Critics say the manufacturing focus is in large part politics as Obama faces a potentially tough re-election fight in battleground states such as Ohio and Pennsylvania, where manufacturing is important. Link

Romney’s 2010 IRS return flags complex tax strategies

U.S. Republican presidential candidate Mitt Romney. REUTERS/Laura Segall

Republican presidential candidate Mitt Romney’s release of his 2010 tax return offers a rare glimpse at two sophisticated tax transactions which the U.S. Internal Revenue Service requires that taxpayers disclose for investments driven by tax considerations.

Like thousands of other Americans’ returns, Romney’s included special attachments flagging “reportable transactions” to the IRS. Known as Form 8886s, the attachments showed that these foreign currency and contingent swap transactions were undertaken by one Bain Capital fund and three Goldman Sachs funds in which blind trusts for the assets of Romney and his wife Ann have invested several million dollars.

Under disclosure rules strengthened in 2002 to grapple with rising tax evasion by Americans, the IRS requires taxpayers to disclose transactions that it has banned or warned it may challenge as improper.