Taxes

Why JPMorgan Will Always Be a Better Villain Than Apple

twocents@thestreet.com (Dan Freed) — Wed, 22 May 2013 15:00 GMT

NEW YORK (TheStreet) -- Apple CEO Tim Cook and JPMorgan Chase boss Jamie Dimon both successfully fought off challenges to their power Tuesday, but Cook's job will always be easier.

For evidence of the Apple advantage, one need look no further than Carl Levin (D.-Mich.), the perpetually dour Senate Investigations subcommittee chairman, who summoned Cook to Washington to call attention to Apple's tax avoidance schemes, was forced to admit "we love the iPhone and the iPad." His Republican counterpart, John McCain of Arizona, was similarly neutered.

As a result, Tuesday's Apple hearing wasn't about Apple. It was about changing the tax code to keep companies from stashing billions abroad in places like Ireland, even though everyone knows their profits really come from somewhere else -- California, in Apple's case. ...

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Apple Would Do Better Spending that Cash

twocents@thestreet.com (Antoine Gara) — Tue, 21 May 2013 17:53 GMT

NEW YORK (TheStreet) - Kudos to Apple for figuring how to legally shuffle $44 billion in profits to non-tax jurisdictions.

Unfortunately, while the iPhone designer may have broken new ground in tax avoidance -- according to a Senate Subcommittee on Investigations -- the company would be better off not holding the most swollen bank account among non-financial companies in the history of Corporate America.

Currently, Apple is sitting on about $137 billion in relatively interest free cash. The company even recently raised $17 billion in debt financing to boost its dividend and increase share buybacks, while leaving its cash untouched. ...

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Why the End of 'Craft' Beer Is Just a Tax Break Away

twocents@thestreet.com (Jason Notte) — Fri, 17 May 2013 12:30 GMT

Updated with clarification from the Beer Institute regarding its stance on the competing legislation and Deschutes Brewing and Matt Brewing's role in the process

PORTLAND, Ore. (TheStreet) -- Garret Oliver has been brewmaster at The Brooklyn Brewery since 1994. He was the brewmaster at Manhattan Brewing before that and has served as editor-in-chief of The Oxford Companion to Beer, written two other books on beer and continues to make a series of brews that gets all the beer geeks excited.

At some point this year, a person who claims to love beer is going to say that Oliver isn't a craft brewer because of a stance his company took on excise taxes. If that happens in your presence, pull the beer out of that person's hand and pour it over his or her swollen head. They don't deserve it. ...

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How to Invest Your IRA In Your Future Retirement Home

twocents@thestreet.com (Brian O'Connell) — Mon, 13 May 2013 15:00 GMT

NEW YORK (TheStreet) -- According to the Employment Benefit Research Institute, 49% of Americans are either "not too confident" or "not at all confident" about achieving a comfortable retirement. And it's true: A comfortable retirement can demand a lot of money many Americans don't have.

One novel way working Americans can close that retirement gap is to buy a home and rent it out to generate more retirement income, all using an Individual Retirement Account. Also see: 5 Things You Didn't Know About Taking a Vacation

That's what Lil Miller-Fox did, and she's more than lived to tell the tale. ...

IRS Knew Tea Party Was Targeted in 2011

twocents@thestreet.com (The Associated Press) — Sat, 11 May 2013 22:16 GMT

By Stephen Ohlemacher, Associated Press

WASHINGTON -- Senior Internal Revenue Service officials knew agents were targeting tea party groups as early as 2011, according to a draft of an inspector general's report obtained by The Associated Press that seemingly contradicts public statements by the IRS commissioner.

The IRS apologized Friday for what it acknowledged was "inappropriate" targeting of conservative political groups during the 2012 election to see if they were violating their tax-exempt status. The agency blamed low-level employees, saying no high-level officials were aware. ...

Morici: It's Time to Start Taxing Online Sales

twocents@thestreet.com (Peter Morici) — Tue, 07 May 2013 13:14 GMT

NEW YORK (TheStreet) -- The Senate recently passed a bill that would require internet retailers to collect sales taxes on behalf of local governments. This bill has flaws that could be fixed in the House, and should be passed.

I don't like the idea of the state and local governments collecting more taxes -- they know no limits to their capacity to tax and squander our hard earned dollars -- but the current situation is unfair and bad economic policy.

In 1992, the Supreme Court held that states did not have the power to levy taxes on on-line sales, unless the retailer has a physical presence in their state. Large retailers, like L.L. Bean, routinely charge the appropriate state taxes where they have a store or warehouse but not on sales in states where they do not. ...

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Today's Economic Mystery

twocents@thestreet.com (Dana Blankenhorn) — Thu, 02 May 2013 10:00 GMT

NEW YORK (TheStreet) -- Today's economy is a mystery to investors.

We're told unemployment is almost 8% and that growth is anemic. It's so bad the Fed keeps interest rates at zero and monetary stimulus flooding in.

Yet despite the sequester taking billions out of the economy, and despite the payroll tax hike taking out billions more, the stock market keeps rising, as do home prices and consumer confidence. ...

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Morici: To Boost Growth, Everyone Should Pay Income Tax

twocents@thestreet.com (Peter Morici) — Mon, 22 Apr 2013 11:00 GMT

NEW YORK (TheStreet) -- The economy is not doing well. Unemployment is too high and big deficits threaten the credit worthiness of the federal government. Only genuine tax reform will make things right.

With 46% of Americans paying no income taxes and many more who pay very little, it is no wonder federal spending is at record levels. It's simply too easy to vote for politicians who promise free health-care services and other worthy benefits by raising taxes on someone else -- the wealthy.

Taxing the well off is not free. It slows growth, smothers jobs creation and pushes down wages for the middle class and working poor. ...

Like Clean Water? It May Cost More Under Obama's Budget Plan

twocents@thestreet.com (Tedra DeSue) — Mon, 22 Apr 2013 10:00 GMT

NEW YORK (TheStreet) -- As the federal government searches for ways to trim spending, President Obama has stressed some programs could face cuts and there would be cases where his proposals may be questioned.

As I've written, Obama's fiscal 2014 budget includes several proposals that are bound to directly impact the municipal bond market in a way never before seen. Further, the proposals could lead to higher taxes or costs for consumers as issuers of municipal bonds try to make up for any reductions caused by federal spending cuts.

The rating agencies are studying the proposals carefully. On Thursday, Moody's Investors Service pointed out another potential credit negative for municipal bonds. This one would affect funding that goes toward a revolving loan fund program state and local governments can use to finance, build and manage wastewater facilities. It was created in 1987 by the U.S. Environmental Protection Agency. ...

EBay Urges Users to Join Tax Fight

twocents@thestreet.com (TheStreet Staff) — Sun, 21 Apr 2013 22:46 GMT

SAN JOSE, Calif. (TheStreet) -- eBay is attempting to get its users to join a campaign to fight pending federal sales tax legislation.

The company's CEO, John Donahoe, began emailing users Sunday morning, telling them the Marketplace Fairness Act would burden small online merchants, Reuters reported.

On Twitter, eBay's government relations department was delivering a similar message, with one tweet saying: "Do you think #SmallBiz owners should be forced to act as tax collectors in all states? Neither do we." ...

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Morici: Anti-Growth Policies Slowing U.S. Economy Again

twocents@thestreet.com (Peter Morici) — Thu, 18 Apr 2013 14:18 GMT

NEW YORK (TheStreet) -- Anti-growth policies continue to frustrate the aspirations of working Americans. The economy is likely growing at less than 2% in the second quarter, making prospects for a better job market remote.

Higher payroll taxes and income taxes paid by the wealthy took away $165 billion in purchasing power. Consumers reacted but with a lag, because they need to keep driving to work and feeding their children -- now car dealers and shopping malls report slowing sales.

Overall, the fiscal drag of about $165 billion in higher taxes and another $44 billion in federal outlays mandated by sequestration are subtracting a tidy sum from aggregate demand, but the focus on short-term budget policies fails to reckon with a tougher issue. Before these, even with record government spending and rock bottom interest rates, the economy has averaged only 2.1% growth since mid 2009. By contrast, the Reagan recession was just as deep and wrenching as the Obama recession, but the Gipper accomplished 5.3% growth over the comparable period. ...

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Muni Bond Players Smoking Over Obama Plans to Hike Cigarette Taxes

twocents@thestreet.com (Tedra DeSue) — Wed, 17 Apr 2013 10:00 GMT

NEW YORK (TheStreet) -- It seems like President Obama can't catch a break with the municipal bond community these days. Or maybe the community can't catch a break with him.

Since the president released his fiscal 2014 budget proposal last week, it has been under fire from municipal bond players who charge his measures will make munis less attractive as investments. The domino effects of some of the measures becoming law are extensive, and like most fiscal measures being bandied about they could lead to higher costs and taxes for those outside the muni bond arena.

The latest fallout from Obama's budget proposal deals with raising the excise tax on cigarette sales. The problem is it could negatively impact upon the revenue of tobacco companies, which would be particularly troublesome to the shareholders of the publicly traded companies. Among those affected are Altria, Reynolds American, Lorillard Tobacco and Vector Group. ...

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Tax Tip: Don't Be Late

twocents@thestreet.com (MainStreet) — Mon, 15 Apr 2013 14:14 GMT

Editor's Note: This article is part of our 2013 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) --Happy Tax Day!

Today is the deadline for filing your 2012 federal and state income tax returns. The envelopes must be postmarked by midnight tonight! ...

Obama's Take on Taxes: Right Intentions, Not Perfect

twocents@thestreet.com (Joe Deaux) — Thu, 11 Apr 2013 09:00 GMT

The president proposes his 2014 budget but it's similar to his previous proposals, former House tax counsel Marc Gerson tells Joe Deaux.

April Brings a Bit More Anxiety Than Usual to Taxpayers

twocents@thestreet.com (Brian O'Connell) — Wed, 10 Apr 2013 15:00 GMT

NEW YORK (TheStreet) -- Call it the best of times and the worst of times.

"It" is tax season, racing to a close as April 15 draws a bead on the millions of taxpayers who haven't filed their paperwork with Uncle Sam.

According to an April 1 study by Rasmussen Reports, only 61% of taxpayers had filed two weeks before the deadline. Another 25% said they would file by April 15, and another 7% planned to ask for an extension. Also see: Last-Minute Tax Tips For 2013 ...

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Are You the Partner With 'Material Participation'?

twocents@thestreet.com (IRS.com) — Wed, 10 Apr 2013 11:00 GMT

By Elizabeth Rosen NEW YORK (IRS.com) -- When it comes to your income taxes, U.S. tax law makes a distinction between different types of income -- including income from passive investments and active businesses in which the taxpayer "materially participates." The issue of material participation can be extremely important for you as a business owner or investor. Whether you qualify as a material participant determines the extent to which you are allowed to deduct losses on your tax return.

For example, let's say you are completing Schedule C of Form 1040 (the U.S. Individual Income Tax Return) to report your business' profits and losses. You will have to check a box indicating whether you materially participated in the business during the tax year. Generally, you are eligible to claim material participation if you participated in a business on a "regular, continuous and substantial basis." To claim material participation, check "yes" on your tax form.

Most sole proprietors are qualified to claim material participation because they typically spend substantial amounts of time running their business. Merely having a financial interest in a business (even if it is significant), though, is not enough to meet the material participation criteria -- unless you also handle the day-to-day management of the business. This means your managerial tasks do not qualify you for material participation if you are simply reviewing financial statements, monitoring operations or providing business advice. ...

With Payroll Tax Back, Consumers Look to Refunds for Basic Needs

twocents@thestreet.com (Brian O'Connell) — Fri, 05 Apr 2013 15:00 GMT

NEW YORK (TheStreet) -- Maybe you've heard the term "the law of unintended consequences?"

It's what happens unexpectedly after plans and processes are into place -- and it's usually not good news.

Take the 2% payroll tax cut enacted by Congress in 2011 and 2012 to spur consumer spending and kick-start a slumbering U.S. economy. Also see: How to Get the Most Out of Your Tax Refund ...

The Most Important Tax Documents You Might Be Missing

twocents@thestreet.com (Kathryn Tuggle) — Thu, 04 Apr 2013 17:19 GMT

NEW YORK (MainStreet) -- Even though most Americans filed their taxes weeks ago and have by now kicked back to wait on their refund check, many will spend the next week scrambling to gather the documents they need before that all-important April 15 deadline.

Thankfully, most businesses and investment firms are diligent when it comes to sending out the appropriate W-2 and 1099 forms, but other essential documents may need to be requested, such as those reflecting mortgage and tuition payments. Also see: How To Consolidate Your 401(k)s

We checked in with the experts to find the most important tax documents you'll need to find now, and what to do when you -- or a former employer -- can't find them in time. ...

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Tax Breaks Enrich Companies, Burden Communities

twocents@thestreet.com (Guest Contributor) — Wed, 03 Apr 2013 19:50 GMT

By John Solari

RENO, Nev. (J. A. Solari and Partners) -- The headline was an economic coup. A massive Apple data center and $1 billion of investment from one of the world's most successful companies was coming to Reno. The city, a Northern Nevada community at the base of the Sierra Nevada mountains and minutes from Lake Tahoe, was working to reinvent itself in the face of a deep recession, a decline in gambling and large state budget deficits.

The deal, inked last summer, was generally heralded as an infusion of new economic lifeblood into the Reno community, and a move that would put the growing Reno technology sector into hyperdrive. It promised jobs, construction activity, and an economic ripple effect that would benefit businesses throughout the community. Also see: Tax Breaks for the Average American >> ...

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Politics, Not Math, Drive Fannie Mae Earnings

twocents@thestreet.com (Dan Freed) — Tue, 02 Apr 2013 20:46 GMT

NEW YORK (TheStreet) -- Fannie Mae reported a record $7.6 billion profit for the fourth quarter, but the government-owned mortgage guarantor could easily have announced a figure of $66.5 billion.

The $58.9 billion difference consists of a something known to tax geeks as a valuation allowance on deferred tax assets. Essentially these are tax credits Fannie accumulated during several years of multibillion dollar losses while it bore the brunt of the subprime housing crisis.

Accounting rules provide some flexibility regarding when these credits can be counted as income. Much depends upon management estimates of future profits, and we all know those estimates often tend toward the optimistic. Citigroup, for example, took a fair amount of heat from Mike Mayo in 2009, when the well-known analyst argued the bank was too aggressive in its assessment of when it would be able to make use of its tax credits. ...

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Fannie Reports Record Earnings; Plays It Safe On Taxes (Update 1)

twocents@thestreet.com (Dan Freed) — Tue, 02 Apr 2013 14:12 GMT

Fannie Mae earnings story updated with changes throughout.

NEW YORK (TheStreet) -- Fannie Mae reported record earnings Tuesday, even as it chose not to recognize any of its $58.9 billion deferred tax asset (DTA) as net income.

Fannie Mae earned $17.2 billion for 2012 and $7.6 billion for the fourth quarter of 2012, the largest quarterly and annual profits in the company's history. Strong earnings had already been widely expected, since Fannie announced last month it had delayed its earnings release in order to evaluate whether to release any of its DTA. ...

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What Are Your Biggest Tax Worries?

twocents@thestreet.com (Ross Kenneth Urken) — Mon, 01 Apr 2013 17:56 GMT

NEW YORK (TheStreet)--How the mind worries at tax time with mounting pressure as deadlines wind down and paperwork piles up. But this year with the arcane sequestration, people are moving beyond their traditional phobias.

According to a GfK survey conducted on behalf of MainStreet, 3 in 10 Americans (31%) fear there will be a tax refund delay because of the sequestration, while another 1 in 5 (20%) expressed concerned there might be a problem in obtaining tax forms because of the sequestration. About 1 in 5 (18%) also say they have the perennial fears of an IRS audit, and more than one-third (36%) of respondents say they are concerned about the possibility of owing more taxes this year than they had thought. Also see: Cramer Greets the 21st Century: Lango

Some surmise that a feeling of ignorance about the sequestration and beyond may be exacerbating people's on-edge feeling. ...

Can ETFs Help Reduce Taxes?

twocents@thestreet.com (Stan Luxenberg) — Mon, 01 Apr 2013 14:25 GMT

NEW YORK ( TheStreet -- With April 15 approaching, plenty of investors are faced with painful bills. The healthy markets of the past year produced ample taxable capital gains.

To limit the damage, many financial advisers recommend exchange-traded funds because of their tax efficiency. The praise may be warranted for big equity funds, which can help to control taxes over the long term. But in recent years, many ETFs have not been as tax efficient as comparable mutual funds.

Morningstar analyst Michael Rawson cautions tax-conscious investors to be particularly wary about bond ETFs. "In theory, bond ETFs should have a tax edge, but in practice we have not seen evidence of that," he says. Also see: How to Get the Most Out of Your Tax Refund ...

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How to Get the Most Out of Your Tax Refund

twocents@thestreet.com (Bill Hardekopf) — Mon, 01 Apr 2013 13:30 GMT

NEW YORK (LowCards.com) -- Millions of American households will soon get tax refunds. According to the IRS, the average tax refund last year was nearly $2,800.

It will be tempting to use the refund to buy some big-ticket items on your wish list or go on a much-needed vacation, but you may want to resist the urge to splurge and use that refund to pay down high-interest debt or to get ahead in savings. ...

Morici: A Time for Optimism and Some Yankee Pragmatism

twocents@thestreet.com (Peter Morici) — Wed, 27 Mar 2013 15:41 GMT

NEW YORK (TheStreet) -- Easter is a celebration of springtime rebirth, a good time to enumerate reasons for optimism and the tasks necessary to accomplish America's potential.

The U.S. economy is in renaissance. The wrenching recession and halting recovery have masked a major restructuring ignited by technology and good-old- fashioned market forces.

Typewriters and toys have become a powerful competitive advantage. ...

Puerto Rico's Tax Pitch

twocents@thestreet.com (Fisher Investments) — Mon, 25 Mar 2013 15:48 GMT

NEW YORK (TheStreet) -- There've been so many recent examples of nations making fiscal choices at odds with long-term economic aims, it's easy to miss choices aimed at wooing corporations and job creators to their shores.

To name just a few: Ireland's vigorously defended its eurozone-low 12.5% corporate tax rate; Sweden and Denmark recently rolled out the red carpet with tax incentives; and Belgians, Londoners and even the Russians have welcomed French businesses and high-earners put off by French President Francois Hollande's 75% tax proposal on incomes over one million euros. Now Puerto Rico's getting in the game, seeking more attention from business leaders and entrepreneurs through a 2012 tax law change.

The law capitalizes on Puerto Rico's unique tax system. Most U.S. territories are required by the U.S. Internal Revenue Code (IRC) to "mirror" U.S. taxes near verbatim. For example, the territory cannot compete on corporate tax rates to try to win business because these are legally required to be harmonized (in euro-speak) with the mainland's prevailing rates. ...

Mail Is a Slow, Distant Second to e-Filing Your Taxes

twocents@thestreet.com (Mia Taylor) — Sat, 23 Mar 2013 12:01 GMT

SAN DIEGO (MainStreet) -- When sending personal information to the Internal Revenue Service, which method feels safer to you: traditional snail mail or electronic submission?

If you answered electronic submission -- such as e-filing -- you're among a growing number of people in the United States becoming more comfortable with filing taxes and sending personal information via computer and online.

A few years ago, the IRS actually established a mandate to have 80% of consumers e-filing. ...

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Stay Calm and Survive Your Own Audit Horror Story

twocents@thestreet.com (Brian O'Connell) — Fri, 22 Mar 2013 16:00 GMT

NEW YORK (TheStreet) -- For Shauna Wekherlien, the owner of Tax Goddess Business Services PC in Scottsdale, Ariz., the scariest tax audit she saw was a corker, including threats from the Internal Revenue Service and a dash of ignorance and hostility.

"This client was in manufacturing," she says. "They sent out a young auditor, who CPAs refer to as 'iPod auditors' because during the whole audit all they do is listen to their iPods. This auditor came in and asked for bank statements -- a very normal thing for an auditor to do. However, in this instance, the auditor kept telling the client that he was missing the November bank statement. Of course, the auditor had the November bank statement, but didn't understand the bank statements didn't close exactly on the first of each month and end on the 31st of each month."

That led to further problems, Wekherlien says. ...

Do You Qualify as a Daytrader?

twocents@thestreet.com (Jill Malandrino and Jane Bryant Quinn) — Thu, 21 Mar 2013 20:32 GMT

Personal finance expert Jane Bryant Quinn tells Jill Malandrino how the IRS distinguishes between daytraders and investors.

Second Tax Extensions Don't Go to Just Anyone

twocents@thestreet.com (IRS.com) — Wed, 20 Mar 2013 14:00 GMT

By Elizabeth Rosen NEW YORK (IRS.com) -- Up until tax year 2005, a taxpayer could file IRS Tax Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) and get a four-month automatic tax extension. An additional two-month tax extension could be obtained by completing Tax Form 2688.

Then the Internal Revenue Service (modified Tax Form 4868) to allow for an automatic six-month extension of the original April 15 filing deadline.

READ: 4 great tax tips for this year's return ...