Saturday, January 12, 2008


Lots of buzz this week!
* TAX GIRL Kelly Phillips Erb reports that Money Management International thinks you can tell a lot about a taxpayer from their astrological sign in her post “What’s Your Tax Sign, Baby?”.
I am a Scorpio, and Kelly’s post tells us that “Scorpios are characterized as being passionate. Of those who plan to splurge with their tax refund, one out of four is a Scorpio”. What tax refund?
Kelly’s “Fix the Tax Code Friday” question was “Would you favor a tax ‘rebate’ or advanced credit for 2008?”. Check out my comment.
* Joe Kristan adds some additional things to look out for to the IRS “helpful hints when choosing a return preparer” in his post “Choosing A Reputable Preparer” over at the ROTH AND COMPANY TAX UPDATE BLOG.

I will be posting my annual “Don’t Assume” advice regarding choosing a tax preparer next week. One preparer you cannot choose is me – I am not looking for any new 1040 clients.

* If you want to know more about the “Fair Tax” proposal for a national sales tax currently being touted by Republican presidential candidate Mike Huckabee (it is not his idea – it has been around for quite a while now – he just hung his hat on it) the TAX FOUNDATION BLOG provides an extensive reading list in its post “Fair Tax Article Roundup”.

* MARKET WATCH reports that mutual funds issued record-breaking capital gain distributions this past December, which will mean increased capital gain taxes to be paid during the fast approaching tax season, in the article “How to Share Less With Uncle Sam”. While these distributions will be taxed at the lower capital gains rates they will be taxed just the same. And even though the distributions are taxed at lower rates, they increase AGI and therefore could end up costing much more than 5% or 15%.
* CCH reported that
“TIGTA Finds No Problems with IRS Fees Paid to Private Collection Agencies”. A recent audit of fees paid by the IRS to private collection agencies conducted by the Treasury Inspector General for Tax Administration apparently revealed no significant problems.
According to the article, “TIGTA also reported that its staff is performing an overall evaluation of the initiative to measure its performance and evaluate its effectiveness. The overall evaluation will also examine IRS oversight of the program, contractors' compliance with laws and procedures and taxpayers satisfaction with the program”.
I will be interested in the findings of the full overall evaluation. I hope it will address the issue that IRS employees can do the same work for a lot less cost. Besides, as I have said here over and over again, the only motivation of an outside collection agent is to collect money - the more he/she collects the more he/she will earn - whether or not the money is legitimately due. Private collectors have no concern about verifying that the outstanding debt is correct or about responsible tax administration.
* Kay Bell from DON’T MESS WITH TAXES reports that the word from the Government Accountability Office (GAO) is “Taxpayer Information Vulnerable to Tampering”!

According to Kay, “In a report released yesterday, GAO investigators found that IRS records, including taxpayer data, are vulnerable to tampering or disclosure because the agency has not yet corrected dozens of information security weaknesses.”

Oi vey! Or as Kay says, Yikes!
* Kathleen Webb provides “Four Nanny Tax Myths Debunked” in the Wednesday, January 9th posting at her NANNY TAX AND PAYROLL UPDATES blog.
* CCH reports that, as the tax filing season is about to start, so, too, are the email scams.
According to the article, “The latest version of the refund scam is similar to past scams. The email tells the recipient that he or she is eligible for an IRS refund. 'After the last calculations of your fiscal activity, we have determined that you are eligible to receive a tax refund of $129.53,' the email reads.
The email asks the recipient to link to an electronic refund request form so the IRS can process the refund. Scam artists then use the personal information on the form to steal the recipient's identity or for other criminal purposes. Some email scams contain harmful viruses or spyware that can infest the recipient's computer
Remember, as I have said here time and again, the IRS will never initiate contact with a taxpayer via email! If you receive such an email delete it immediately.


1 comment:

Anonymous said...

Here's a round-up on what professional proponents deem salient about the FairTax, as advocated by Mr. Huckabee:

The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars – $358 billion more than the taxes it replaces. [BHKPT]

The FairTax has the broadest base and the lowest rate of any single-rate tax reform plan. [THBP]

Real wages are 10.3 percent, 9.5 percent, and 9.2 percent higher in years 1, 10, and 25, respectively than would otherwise be the case. [THBNP]

The economy as measured by GDP is 2.4 percent higher in the first year and 11.3 percent higher by the 10th year than it would otherwise be. [ALM]

Consumption benefits [ALM]:

• Disposable personal income is higher than if the current tax system remains in place: 1.7 percent in year 1, 8.7 percent in year 5, and 11.8 percent in year 10.

• Consumption increases by 2.4 percent more in the first year, which grows to 11.7 percent more by the tenth year than it would be if the current system were to remain in place.

• The increase in consumption is fueled by the 1.7 percent increase in disposable (after-tax) personal income that accompanies the rise in incomes from capital and labor once the FairTax is enacted.

• By the 10th year, consumption increases by 11.7 percent over what it would be if the current tax system remained in place, and disposable income is up by 11.8 percent.

Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system. [KR]

Implementing the FairTax at a 23 percent rate gives the poorest members of the generation born in 1990 a 13.5 percent improvement in economic well-being; their middle class and rich contemporaries experience a 5 percent and 2 percent improvement, respectively. [JK]

Based on standard measures of tax burden, the FairTax is more progressive than the individual income tax, payroll tax, and the corporate income tax. [THBPN]

Charitable giving increases by $2.1 billion (about 1 percent) in the first year over what it would be if the current system remained in place, by 2.4 percent in year 10, and by 5 percent in year 20. [THPDB]

On average, states could cut their sales tax rates by more than half, or 3.2 percentage points from 5.4 to 2.2 percent, if they conformed their state sales tax bases to the FairTax base. [TBJ]

The FairTax provides the equivalent of a supercharged mortgage interest deduction, reducing the true cost of buying a home by 19 percent. [WM]


[ALM] Arduin, Laffer & Moore Econometrics, “A Macroeconomic Analysis of the FairTax Proposal,” July 2006.

[BHKPT] Bachman, Paul, Jonathan Haughton, Laurence J. Kotlikoff, Alfonso Sanchez-Penalver, and David G. Tuerck, “Taxing Sales under the FairTax: What Rate Works?” published in Tax Notes, November 13, 2006.

[JK] Jokisch, Sabine and Laurence J. Kotlikoff, “Simulating the Dynamic Macroeconomic and Microeconomic Effects of the FairTax,” National Tax Journal, June 2007.

[KR] Kotlikoff, Laurence J. and David Rapson, “Comparing Average and Marginal Tax Rates under the FairTax and the Current System of Federal Taxation,” NBER Working Paper No. 12533, revised October 2006.

[THBNP] Tuerck, David G., Jonathan Haughton, Keshab Bhattarai, Phuong Viet Ngo, and Alfonso Sanchez-Penalver, “The Economic Effects of the FairTax: Results from the Beacon Hill Institute CGE Model,” The Beacon Hill Institute at Suffolk University, February 2007.

[THBP] Tuerck, David G., Jonathan Haughton, Paul Bachman, and Alfonso Sanchez-Penalver, “A Comparison of the FairTax Base and Rate with Other National Tax Reform Proposals,” The Beacon Hill Institute at Suffolk University, February 2007.

[THBPN] Tuerck, David G., Jonathan Haughton, Paul Bachman, Alfonso Sanchez-Penalver, and Phuong Viet Ngo, “A Distributional Analysis of Adopting the FairTax: A Comparison of the Current Tax System and the FairTax Plan,” The Beacon Hill Institute at Suffolk University, February 2007.

[THPDB] Tuerck, David G., Jonathan Haughton, Alfonso Sanchez-Penalver, Sara Dinwoodie, and Paul Bachman, “The FairTax and Charitable Giving,” The Beacon Hill Institute at Suffolk University, February 2007.

[TBJ] Tuerck, David G., Paul Bachman, and Sylvia Jacob, “Fiscal Federalism: The National FairTax and the States,” The Beacon Hill Institute at Suffolk University, June 2007.

[WM] Walby, Karen, and Dan Mastromarco, “Promoting home ownership: How the FairTax’s benefits for homeowners exceed the mortgage interest deduction,” Americans For Fair Taxation White Paper, August 2006.