Posts Tagged ‘Alex Durante’

Tax Roundup, 2/12/16: I want my K-1. I want it now, Daddy!

Friday, February 12th, 2016 by Joe Kristan

Accounting Today visitors, click here for the post on password hygiene.

20160212-1No, your K-1 isn’t late. As even late 1099s are arriving, more and more taxpayers are ready to file their 2015 1040s. So why is that stupid partnership or S corporation taking so long to get me that 1099? Isn’t there a penalty for not getting that to me by the end of January?

No, there isn’t. First, it’s not a 1099, it’s a K-1. The earliest any K-1s are due is March 15, and that’s only for “electing large partnerships”  — typically publicly-traded ones (and if you own a bunch of these, expect a dirty look from your tax preparer, as they are time-consuming and therefore bill-increasing).

K-1s for S corporations are due March 15 for calendar-year corporations. Unlike with 1099s, though, the S corporation can get an automatic extension of the filing deadline until September 15. This is often needed because preparing a business return is a more complicated project than computing someone’s wages or interest income. It can be more complex still if the S corporation itself has to wait on…

Partnership K-1s. For 2015, these have an April 15 deadline that can be extended to September 15 (except for the publicly-traded partnerships due March 15). Preparing partnership returns can be devilishly complex, especially when partners come and go. The deadline becomes March 15 next tax season, but that just means more extensions will be filed.

Trust K-1s are also due April 15. Most bank trust departments can get their trust returns and K-1s filed in January and February, as they have all of the information at hand. If the trust has business or rental property, or is waiting on K-1s of its own, though, expect delays.

Remember, almost all pass-throughs are calendar year taxpayers. That means everybody is trying to get their returns done at once. We preparers do our best, but the pipe is only so wide.

Tax is hard. If you think preparing your 1040 is painful, it’s minor compared to doing a return for an operating business.  Look at the IRS publications for partnerships or S corporations if you don’t believe me. If you have to wait on your K-1, it’s not because the partnership, S corporation or tax preparer is indolent or incompetent. It just takes time to get it right — and when you have a bunch of 1040s that will be thrown off if you goof, you really want to get it right.

This is another in our irregular series of 2016 filing season tips

 

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Taxable Talk, Phishers Target Tax Professionals:

Tax professionals, be wary. There are phishing emails supposedly from the IRS targeting tax professionals. Now, we have supposed new clients emailing tax professionals. My mantra, if it sounds too good to be true it probably is, holds for tax professionals, too. Do not click on links that you do not know for certain are valid.

Read the whole thing for more good advice on protecting yourself.

 

William Perez, 3 States are Delaying Tax Refunds

Kay Bell, Full, permanent Internet access tax ban approved

Stuart BassinDistrict Court Certifies Class Action in Tea Party Challenge to IRS (Procedurally Taxing).

Robert Wood, IRS And Justice Department Push Tax Prosecutions

TaxGrrrl, Ask The Taxgirl: Solar Panels & Tax Credits

Kristine Tidgren, Iowa Court Denies Private Condemnation of Right of Way (AgDocket). “Iowa Code § 6A.4(2) confers the right to take private property for public use ‘upon the owner or lessee of lands, which have no public or private way to the lands, for the purpose of providing a public way which will connect with an existing public road.'”

 

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Howard Gleckman, Rubio’s Ambitious Consumption Tax Would Reduce Revenue by $6.8 Trillion, Give Most Benefits to the Highest-Income Households (TaxVox):

Senator Marco Rubio would convert the income tax into a progressive consumption tax, an ambitious idea that would eliminate the income tax’s penalty on saving. However, a new Tax Policy Center analysis finds that Rubio’s version would slash federal tax revenues by $6.8 trillion over the next decade with most of the benefits going to high-income households.

The “mostly benefits high-income households” is the most tiresome and useless cliché in tax policy. Considering that the high earners pay almost all the income taxes, any improvement to the (awful) system will inevitably benefit them disproportionately. But the possible revenue loss is a serious issue, if Rubio remains a serious candidate.

Alan Cole, The Most Important Chart from Tax Policy Center’s Analysis of the Rubio Plan (Tax Policy Blog). “Our latest estimates, calibrated for Washington’s traditional ten-year budget window, showed the plan reducing overall tax revenues by $6.1 trillion on a static basis, while TPC shows a reduction in revenue of $6.8 trillion.”

If only there was a candidate with a plan that would improve the tax system and not increase the deficit

 

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Megan McArdle, Obama’s Oil Tax Is Running on Empty. “The administration has made some gestures toward mitigating this opposition, notably by claiming that the tax will be paid by oil companies. But this is obvious nonsense.”

Carl Davis, More Details Emerge on President’s Proposed Oil Tax (Tax Justice Blog)

TaxProf, The IRS Scandal, Day 1009

Alex Durante, High Corporate Taxes May Increase Debt, Study Finds (Tax Policy Blog). “A new paper published in the Journal of Financial Economics finds that countries with high tax rates on corporate income also have higher corporate leverage ratios. This paper improves upon the methodologies of prior research that had struggled to confirm a link between tax rates and corporate structure.”

 

News from the… Profession? Area Police Department Offers Help to Drug Dealers Struggling With Tax Season Preparations (Caleb Newquist, Going Concern)

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Tax Roundup, 1/8/16: A look at Iowans and their federal income taxes.

Friday, January 8th, 2016 by Joe Kristan

20160108-1aSoak the rich? Iowa’s soaking in it! The Iowa Legislative Service Bureau this week published a report on the federal taxes paid by Iowans in 2013. It’s a useful reminder that the politicians running around Iowa talking about how “the rich” pay no taxes are talking nonsense.

This table covers a lot of ground:

 

 

 

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Source: Iowa Legislative Service bureau. Click to enlarge.

Note that for the >$1 million filers, the biggest category is “other income.” Given that they also pay the highest effective rates, it’s clear that this isn’t tax-preferred capital gains or dividends. It’s K-1 income from partnerships and S corporations, or business income from farms or schedule C businesses. In other words, its taxes paid by employers. When you soak the rich, you are soaking employers.

It’s also clear that “the rich” in Iowa are paying a bigger share of their earnings than everyone else. If we count “the rich” as taxpayers with gross income over $200,000, their average federal tax rate as a percentage of gross income — before any deductions — is 22.4%, compared to 7.3% for all other taxpayers.

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Tax Update Chart using Iowa Legislative Service Bureau data. Dollars in millions.

The taxes paid at the top end are a much larger share of the tax paid than of their share of the income: they have 20.8% of the gross income, but pay 44.7% of the taxes. While some politicians may say that’s not enough, remember that much of that is income earned by employers from their businesses. If they have to pay more to the IRS, that’s money they don’t have to hire people, give raises, or grow their business.

Another lesson is that even with the disparity towards the high end, 59.2% of the taxes paid are paid by those in the $25,000-$200,000 gross income range. When the politicians promise to give you stuff paid for by someone else, they lie. They intend to take your money, give you some back, and expect you to thank them.

 

Last night I gave a presentation to IMA chapters across the state over the Iowa Cable Network, mostly on the newly passed extenders bill. You can download the Powerpoint slides I used here.

 

It’s Friday! It’s Buzz Day! At Robert D. Flach’s place. Links all around, including commentary on Turbo Tax ads.

Russ Fox, Substance Over Form. “So today’s petitioner, who represented himself in Tax Court, won that he was an independent contractor, not an employee”

TaxGrrrl, When It Comes To Taxes, Where Not To Win Powerball.

Robert Wood, To IRS, ‘Willful’ Means Penalties Or Jail

Jason Dinesen, How Often Should a Budget Be Updated?

Kay BellRecently issued tax identity theft PINs are valid for 2015 filings despite wrong date in IRS letters to taxpayers

 

 

Alex Durante, New NBER Paper Underscores Need for Corporate Integration (Tax Policy Blog). By “corporate integration, they mean “stop taxing corporation income twice.”

For the convenience of the politicians all concerned how corporate taxes have declined as a share of all federal taxes, they illustrate the obvious:

c corp share of entities

The high C corporation rate and the second tax imposed when corporate earnings are withdrawn as dividends or cashed out on a share sale explain why people set up their businesses in other ways.

 

Howard Gleckman, If Banning Negligent Low-Income Households From Taking Tax Credits Is Such a Great Idea, Why Stop With Them? (TaxVox). Good point.

TaxProf, The IRS Scandal, Day 974. Today’s link discusses the proposal abandoned by the IRS yesterday to make charities collect social security numbers of their donors.

 

If you are a regular reader, you know better than to click on the link if you get an email like this:

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Be careful out there, people, and be smart.

And have a great weekend.

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