Reply
Mon 9 Apr, 2012 10:15 am
What Do You Owe In Taxes? Depends Who's Counting
by Bill Chappell - NPR Morning Edition
April 9, 2012
In 2012, the federal tax return deadline is Tuesday, April 17 — so if you haven't already filed your income tax return, you have about one week left to shop around for different options to finish your taxes, or request an extension.
If you're wondering if you're better off filing your federal and state income tax returns through an online tax preparation service, a standard CPA (certified public accountant), or a more elaborate tax specialty firm, you may want to read an article over at Bloomberg Businessweek called "Joel Stein Has Four Accountants."
As he tells Morning Edition co-host Steve Inskeep, Stein plugged his financial results from 2011 into tax services that ranged from TaxSlayer.com to his father's Staten Island accountant.
One paragraph of Stein's article explains his motives:
"This year I really wanted to find out: What level accountant do I need? Can I do my returns myself using websites that promise to guide me through the process? Can H&R Block handle it? Is my current accountant great? Or would a high-end accountant know all the loopholes and get me so much money back that his fee would be worth it? Would any of them slip me the results of the Academy Awards?"
Stein's tax situation isn't as straightforward as some. The writer's income spiked to around $400,000 last year, he says, thanks to a book deal he signed. And because he often works from his house in Los Angeles, he also has the option of claiming a deduction for his home office — something he got conflicting advice about.
Here's the breakdown of services Stein tried out, and how much they cost:
TaxSlayer.com - $30
H&R Block - $400
Family Wealth Group at RBZ of Los Angeles - $1,200
Howie Halbreich of Staten Island - $400
Starting out at TaxSlayer — which, as a NASACAR sponsor, is "the preferred accounting method of Dale Earnhardt Jr.," Stein says — things went a little awry. Stein admits that he may have made some mistakes in entering his data.
And the results were shocking: The online service promised Stein a combined federal and state refund of $120,000, with about two-thirds of the money coming from the U.S. government.
Upon seeing those numbers, Stein tells Inskeep, his reaction was that "I have a Romney-like hedge fund that I apparently didn't know about."
So, he took the TaxSlayer documents along to his next stop: an H&R Block office in Los Angeles.
"When I showed the 80-page return to the H&R Block guy, he said that the IRS wouldn't bother calling me — they would just send a car straight to my house," Stein says.
After looking at his data, an H&R Block "tax associate" told Stein he needs to pay more than $2,000 — sending $1,227 to the IRS and another $1,160 to California's Franchise Tax Board.
That led Stein to return to TaxSlayer and correct his mistakes — the site eventually told him he would get nearly $17,000 from the federal government, but that he would owe California around $22,000.
Another accounting company he tried was RBZ, a venerable firm with plush offices overlooking Los Angeles.
"I kind of thought high-end accountants found all kinds of loopholes that only they knew about," Stein says. "That's not quite how it works."
Instead, the firm's adviser tried to help Stein position his finances so he could help his family, with plans for his son's education and possible care for his parents. The RBZ method would leave him with no refund, and owing around $4,544 for combined state and federal taxes.
Stein also gave his tax return info to an old family favorite, Howie Halbreich — a man he has never met but who has handled his taxes for more than 20 years, since Stein left college.
Halbreich, who also does Stein's father's taxes, already had all of his information on hand. He told Stein that he stood to receive a federal refund of $1,488 and owed California $1,019 — for a net gain of $469.
"That means I stick with Howie," Stein says.
Asked what it means for other taxpayers, he says, "They should go to Howie."
In his article, Stein wrote that Halbreich "makes the process painless, which — more than a fat return or even a long-term plan of how to beat the government — is what I'm really looking for."
In addition to the ones Stein tried out, other popular choices include TurboTax — which Treasury Secretary Timothy Geithner used when he neglected to report all of his income in his 2001 tax return.
And, if your income was under $57,000 in 2011, you can also use the IRS website to file your return free of charge. If you need help finding professional assistance, the IRS site also has a search tool.
@BumbleBeeBoogie,
$1 Trillion In Tax Loopholes
April 3, 2012
by Jacob Goldstein - NPR
Imagine a program where the government sent an annual check to homeowners with mortgages. The bigger the mortgage, the bigger the check. Checks for rich people would be bigger than checks for the middle class. Also: Checks for people with mortgages on vacation homes!
It's hard to imagine a program like that getting much support in Congress these days. But, through the mortgage-interest tax deduction, the government does something like this every year.
As we write in our New York Times Magazine column this week, it's easy to find ridiculous little loopholes in the tax code. Like, say, the fact that you can deduct some of the fees you have to pay to buy good tickets to many college football games.
But in a way, the most striking loopholes are the ones that are so big they don't even seem like loopholes. Like the tax breaks for putting money into a 401(k). Or the mortgage-interest tax deduction.
Wonks call these loopholes "tax expenditures," or "spending through the tax code." That's because they have the same effect on government revenues as a spending program of the equivalent size.
Tax expenditures will cost the government somewhere around $1 trillion this year. That's more than the government will spend on Medicare or defense. The graphic at the top of the post lists just a few tax expenditures; this report (PDF) from the Congressional Joint Committee on Taxation has a much longer list.
If economists ran the tax code, there would be far fewer of these loopholes. Taxes might be higher or lower than they are now. But either way, the tax code would be simpler.
The government could still choose to pay people for taking out mortgages or contributing to their retirement plans. But those payments would be direct payments, not spending through the tax code.
That way, people would spend less time trying to minimize their taxes by exploiting all the loopholes, and less money paying accountants and tax lawyers. And they'd spend more time producing useful goods and services, and more money buying stuff they want to buy.
PHOTO:
http://www.npr.org/blogs/money/2012/04/03/149849837/-1-trillion-in-tax-loopholes
@BumbleBeeBoogie,
Why Tax Day Falls On April 17 This Year
by Wendy Kaufman - NPR Morning Edition
April 13, 2012
Every year, millions of Americans scramble to file their income taxes before the filing deadline — ordinarily April 15.
But procrastinators get a reprieve this year: The 2012 deadline falls on Tuesday, April 17.
This year, April 15 falls on a Sunday. One might expect that would make Monday, April 16, the 2012 filing deadline.
But not so this year. Monday is the District of Columbia's Emancipation Day — a local holiday unfamiliar to most Americans.
Internal Revenue Service spokesman Eric Smith says, by law, District of Columbia holidays are treated like federal holidays when it comes to tax deadlines.
"It's just this quirky little thing in the law," Smith explains. "This is just for a very specific and limited purpose. For all other purposes, it's a regular business day," he says.
The later deadline gives 2012 yet another interesting twist. April 17 just happens to correspond to so-called "Tax Freedom Day" — the day Americans, according to the nonpartisan Tax Foundation, will have earned enough money to pay their entire tax bill for the year.
"Tax Freedom Day is a simple calendar-based measure of the cost of government," says Will McBride, an economist with the foundation, which makes the annual Tax Freedom Day calculation.
McBride calculates that Americans will pay 29.2 percent of their income to federal, state and local taxes this year. Do the math, and that means Americans must work 107 days to cover their 2012 tax burden — up until April 17.
For the record, almost 70 percent of American taxpayers — 98.9 million — have already filed their 2011 individual income tax returns. That means relatively few of us will be sharpening pencils, or navigating online tax forms, through the weekend.
Stumble It!
Tweet This
Bookmark on Delicious
Share on Facebook
Share on MySpace