Despite lots of hearings, reports, proposals and discussion on tax reform, the last major reform to our federal tax system was signed into law as the Tax Reform Act of 1986 on October 22, 1986. Thus, its 30th anniversary is October 22, 2016!
Archive for Annette Nellen
Continuing with a recent theme in this blog – here is an update on federal legislation to not tax winnings of Olympic athletes. That is, the value of the medal and the cash from the U.S. Olympic Committee will be tax free. H.R. 5946 has now passed in the House and Senate, so will soon be off to the White House.
The Blockchain which is best known for the “guts” of how bitcoin transactions are verified, recorded and transacted, has uses beyond bitcoin. This decentralized system can be used to verify and process many types of transactions where two or more parties want verification of authenticity and to get information or transfer information or value. IBM and others have been exploring this. The Federal Reserve and others held a conference on the topic in June.
New Security Step – IR-2016-124 (9/22/16) – The IRS alerted people filing an extended return electronically for 2015 (due 10/17/16), that they likely would be asked to enter their AGI (Adjusted Gross Income) for 2014. The purpose is to help properly identify the taxpayer. The information release reminds people how to order a tax transcript from the IRS should they not have it.
More on legislative efforts to give a tax break to winning Olympians(!) …
California always has budget problems. In 2012, temporary tax increases were voted in to raise both the state sales tax rate and the top personal income tax rate. These put California at the top among state for high tax rates. These provisions expire soon, but budget problems remain. So, Prop 55 on the November 2016 ballot calls for extending the income tax rate increase.
Technology has made tax compliance a lot simpler and more efficient. I believe at some point, tax compliance and payment will be a just-in-time activity we can easily do from our smart phone or watch.
But, computer systems and networks need to be extremely secure due to the highly sensitive data and the thieves who work 24/7 to get the data. Just this week, the IRS alerted tax professionals of thieves and scammers trying to get control of practitioner computers to avail themselves of client tax data.
A recent post (8/26/16) on the Tax Justice website was titled – Why We Must Close The Pass-Through Loophole? That caught my attention as I was trying to think what the “loophole” might be? A loophole is a provision that can be used beyond its intended purpose because the rule is not written specifically enough. When a rule is being used as intended, it is not a loophole. For example, sometimes the mortgage interest deduction is called a loophole, but it is not. People deducting interest on the mortgages on their primary and vacation homes is using the rule as intended.
A PTIN is a Preparer Tax Identification Number. Paid preparers of most federal returns must have one and include it on the return along with their signature in order to avoid penalties. The IRS can use the PTIN to track returns prepared by particular individuals (years ago they had to use the preparer’s SSN). PTINs are part of a system rolled out in 2010 where the IRS planned to regulate all preparers of individual returns and a few others. The system was found contrary to Section 330 of Title 31.
For the past few years, tax reform discussions have focused on broadening the base and lowering the rate. We are now hearing a bit more about consumption taxes including in the form of a credit invoice VAT like most of the world uses (in addition to their income taxes).