OBAMA'S REVENUE SOUP

Wall Street Journal editorial, Obama's Revenue Soup: A History Lesson on Capital Gains Taxes:

In "Annie Hall," Woody Allen tells the joke of two women complaining about a restaurant. The first says the food here is awful and the second replies, yes, and they serve such small portions. Sounds like President Obama's proposal to raise the capital-gains tax: It will hurt the economy and it won't raise much new revenue.

Mr. Obama's plan would raise the capital-gains rate on January 1 to 20% on those who earn more than $200,000 ($250,000 for couples), plus a 3.8% investment surtax to finance ObamaCare. That 23.8% rate amounts to a nearly 60% increase from the 15% rate in effect since 2003. And that's without his new "Buffett rule," which would take the rate to 30% for many taxpayers.

This and other rate hikes aimed at higher-income earners are supposed to raise about $700 billion in tax revenues over the next decade. Fat chance. Ever since the famous 1978 bipartisan capital-gains tax cut sponsored by the late William Steiger of Wisconsin, the same pattern has repeated itself: raising the capital-gains rate reduces revenues, and lowering it leads to revenue increases.

The nearby chart shows the 35-year trend in capital-gains revenue and tax rates—through 2008, the last year data are available.

The data clearly show that the overall economy is the single biggest factor in capital-gains realizations and revenue. But the data also show that time and again revenue has multiplied despite a lower rate, and arguably because of it. ... Congress shouldn't be fooled by government forecasters who predict a revenue boom from a higher capital-gains rate. They have blown this call every time. ...

In our view the optimal capital-gains tax rate is one that leads to the most capital investment, jobs and wealth gains for American workers. That economically optimal rate is somewhere close to zero and would lead to more overall tax revenue as the economy grew faster. But if Congress wants a capital-gains tax, history suggests the revenue maximizing rate is closer to 15% than to 23.8%.

As John F. Kennedy put it in 1963 when he endorsed a cut in this tax: "The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital" as well as "the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy."

Today's Democrats in Washington are no Jack Kennedys. As President Obama told Charlie Gibson of ABC News in 2008, whether or not a higher capital-gains tax raises more revenue is irrelevant to him. He wants a higher rate as a matter of "fairness." The soup may be lousy but he wants more of it.

IRS GETS HALF A BILLION TO IMPLEMENT OBAMA HEALTH LAW

Did you ever wonder why the IRS is getting involved in our health care?  It has to do with them monitoring all the businesses to determine that they are providing the required coverage.  If you have ever tried to call the IRS you should be afraid.  It is not unusual to be on hold for 30 minutes.  I have even been on hold and then the music goes away and a busy signal comes over the phone.  I call back only to find that they are now closed for the day.

Even though the Supreme Court is looking at Obamacare they still are going forward funding the IRS.  See the article that was in Market Watch: CLICK HERE

2012 PRESIDENTIAL RACE

As you most likely know, on April 9, former Pennsylvania senator Rick Santorum suspended his campaign for the 2012 presidential race. This move effectively clears the way for former Massachusetts governor Mitt Romney to assume the Republican nomination.  This helps clear the way in determining your future tax situation Romney has made taxes a centerpiece of his campaign, and we expect to see even more attention focused on the issue as November draws near:

• Romney would make the Bush tax cuts permanent.
• He would cut top rates to 25% for both individuals and corporations.
• He would eliminate tax on interest, dividends, and capital gains for taxpayers making under $200,000.
• He would eliminate the estate tax entirely.
• He would eliminate the Alternative Minimum Tax (AMT) as well as new taxes imposed by the 2010 health care reform legislation.

We realize that this year's Presidential race will have a major effect on your taxes. So we're committed to tracking both candidates' tax proposals, letting you know how they affect your wallet, and offering proactive suggestions to plan for tax law changes. We're not here to take sides. We just want you to know we've got your back.

We'll be following the race carefully through November and beyond. So, if you have questions, don't hesitate to contact us.

BOOTH RENTER CAN'T PAY MY TAXES - WHAT DO I DO?

Q. I blew it. I started booth renting last year and I thought that my employer was withholding taxes. Now I find out I not only owe for 2011 but have to pay part of 2012. I thought that I had all this money to spend so purchased a cute little VW bug and went with some friends to Jamaica on vacation. I tried to sell the car but can’t even get what I owe. Don’t have the money. What do I do? Am I going to jail? Should I hide?

A. I would suggest selling your car and moving to Jamaica. Just kidding. By the way the person that you rent from is not your employer but actually a landlord. Many new booth renters do not save to pay their taxes. You are not alone.

 The worst thing you can do is ignore the problem. If you owe tax with your federal tax return, but can't afford to pay it all when you file, there are some things you can do to keep interest and penalties to a minimum.

· File your return on time and pay as much as you can with the return. By doing this it will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges

· Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code

· Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:

• Using the Online Payment Agreement application and

• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return

IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.

· Request an extension of time to pay. For tax year 2011, if you qualify you may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.

Good luck, and start saving for 2012. Estimated payments are due 4/15/12, 6/15/12, 9/15/12 and 1/15/13. I would work on the 2011 first.

BEWARE OF PHONEY TAX SCHEMES

Recently I was in Chicago speaking at an industry conference.  After my tax program a participant came up to me and said that he had been contacted by a group that promised him a refund due to a “loophole” in the tax law that would give him some type of education credit.  He was going to have to send them some money to have them get the credit for him.  My advise… run.

As a matter of fact the IRS recently issued a warning about the new scheme. Scammers have been targeting senior citizens, members of church groups, working families and other potential victims this tax season.  Just like the person that talked to me, the schemes promise large tax refunds to people who have little or no income and normally don’t have a tax filing requirement. Promoters claim they can obtain for their victims a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.

Con-artists falsely claim the tax refunds are available even if the victim went to school decades ago. A variation of the scheme also falsely claims the college credit is available to compensate people for paying taxes on their groceries. Huh?

The schemes can be extremely costly for the victims. Promoters may charge them exorbitant upfront fees to file the tax claims and are often gone before victims discover that they have been scammed.

There is a bigger problem in that regardless of who prepared their tax return, the taxpayer is legally responsible for the accuracy of your tax return and must repay any refunds received in error, plus any penalties and interest. You could even face criminal prosecution.

In recent weeks, the IRS said it has identified and stopped an upswing in these bogus tax refund claims coming in from across the country.

MORE TIME TO FILE FOR SOME

Most people must file their tax return on April 17th this year but some taxpayers get more time to file without having to ask for it.

These include:

• Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. Tax payments are still due April 17.

 • Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3 , Armed Forces Tax Guide.

 • People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Indiana, Kentucky, Tennessee and West Virginia are covered by federal disaster declarations, and affected individuals and businesses in these areas have until May 31 to file and pay.

STATE BEER

Did you ever wondered what the state excise tax rates on off-premise beer sales were? Well take a look at this....