States consider raising beer taxes to help balance the budget
Equal opportunity. It’s not just smokers who will be forced to pay more taxes.
Posted by taxguru on April 5, 2003
Tax Returns Are For Self Defense
One of the biggest mistakes many people make is assuming that because a sale of assets didn’t result in any taxable gain, that they don’t have to report it on their tax returns, or even file a tax return at all if they didn’t have much other income. That is a very incorrect and dangerous assumption.
I have seen cases where people have had huge stock market losses and assumed they didn’t need to report the sales on their tax returns. I have seen cases where people qualified for the tax free residence sales or Section 1031 tax deferred exchanges and assumed they didn’t need to show them on their 1040s. I have also seen cases where recently inherited property was sold and the heirs didn’t report the sales on their 1040s because they knew that the stepped up cost basis of the property resulted in no net gain.
In almost all of these cases, the individuals came in for a rude awakening when they received bills for taxes, interest and penalties on those sales from the IRS and/or State tax agencies. This is because the 1099 information that is provided to the tax agencies only provides half of the equation, the gross sales price. IRS and the States have very efficient document matching programs that compare the gross income items reported on tax returns with the 1099s that have been received. When items have been left off (or no tax return even filed), they assume that it was unreported income and that the sales price represented 100% profit, and assess taxes accordingly. They have no information on the cost basis of the assets sold. If you want them to know that you had a net loss, or qualified for the primary residence exclusion, you must report the sale on Schedule D with your tax return and include that additional information.
KMK
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Posted by taxguru on April 5, 2003
This could really apply to every level of government, especially our rulers in DC.
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Posted by taxguru on April 4, 2003
D-I-Y Tax Prep Software
Again, I am not endorsing the concept of anyone preparing their own tax returns. However, if you are set on doing this, you really should use a computer program. There are far too many things that can be left out or screwed up when doing returns by hand to justify scrimping on the cost of a copy of one of the consumer programs. I would never even consider doing a tax return by hand because of all of the interrelated forms and schedules that make it too easy to leave something crucial out. Here is an updated review of some of the most popular consumer level programs.
One tip for those who do use one of these programs. Make sure you have it print (or hand-write it yourself) “Self Prepared” in the paid preparer’s section. I handled an IRS audit a few years ago for a couple where the wife had used TurboTax to prepare their 1040; but had left the paid preparer section blank. IRS suspected it had been prepared by one of the underground preparers that they have been trying to catch. The audit opened a can of worms that took me several months to straighten out with the Auditor and Appeals Officer, costing thousands for my fees.
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Posted by taxguru on April 3, 2003
A first crack at dynamic scoring
Foes of dynamic scoring are at it again
Thick haze of economic misunderstanding
Bush Will Fight for Smaller Tax Cut
Bush aide sees ‘give-and-take’ shaping tax cuts
President Seeks To Revive Plan For Tax Cuts
Signs Suggest Bush, Hill GOP May Accept Smaller Proposal
The status of the tax cut plans, as well as how they are measured, are both still important issues. As I have to constantly remind everyone, the numbers that are used to describe the “cost” of tax cuts are completely bogus on several levels. Most important is their use of static analysis or scoring methods, which do not allow any consideration of changes in behavior due to changes in tax rates and rules. Second is the fact that nobody has an accurate crystal ball that can predict the future. Even changing from static to dynamic scoring moves the figures from being mere WAGs (wild ass guesses) to SWAGs (scientific wild ass guesses). It always fries me to hear anyone discuss tax legislation figures as if they were gospel, when they are anything but.
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