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IRS Claims 2 Out of 3 Taxpayers Now E-File

Kelly — Mon, 02 Nov 2009 21:51:27 +0000

And here’s their evidence:

Of course more folks are e-filing. It’s fast, it’s easy. And with more folks than ever with internet and computer access, it’s to be expected.

But.

And you knew there would be a but.

Here’s my cynical take… You’ll note fewer taxpayers filing generally, down a whopping 12 million this year. There’s a bump in 2008 – certainly attributable to the stimulus. Might it be the case – and I’m just saying – that folks have been encouraged to filing electronically in order to get money back a little quicker.

I’d love to see the data for 2009 returns filed in 2010. I’m betting if you back out the homebuyer’s, that percentage will drop a little. And I’m not a betting girl normally. But I have a hunch on this one.Similar Posts:

Tax or No Tax?

Kelly — Wed, 30 Sep 2009 20:42:30 +0000

The good news: nearly 50% of American households (47%, to be precise) won’t pay any federal income tax in 2009.

The bad news: the remaining 50% (or so) will have to foot the bill for everyone.

You can thank (or blame) the new economic recovery package for bumping the percentage of taxpayers who won’t be paying a wee bit higher (about 10%).

But don’t just start pointing fingers at the working poor. While it’s true that the majority of those who are paying no federal income tax this year make below $30,000 annually, up to 10% of households making between $75,000 and $100,000 also qualify. New tax breaks, refundable credits, exclusion of a portion of unemployment benefits and state and local sales tax deductions account for much of the zero income tax for 2009.

It’s important to note that these figures don’t include payroll taxes (Social Security and Medicare). On average in 2009, taxpayers will pay an average of 8.4% of their income in payroll taxes. If you take those taxes into account, only 24% of households will pay no tax.

Payroll taxes often get left out of the “who pays tax?” equation. While it’s true that the top percentage of wage earners pay most of the federal income taxes as a percentage of income, they are also among the lowest in terms of payroll taxes. The top 1% of income earners report 16% of total income but pay less than 4% of payroll taxes. That’s because contributions for Social Security are capped at $106,800. If you make more than that, the overage is not subject to Social Security; this is referred to as a regressive tax (our “regular” income tax system is said to be progressive). Additionally, much of the unearned income in the country (dividends, etc.) is attributable to the very wealthy; unearned income is not subject to payroll taxes.

The lower 60% of income earners report 25% of income but pay about 33% of payroll taxes. Those somewhere in the middle pay the rest (of course).

How does this play out in terms of averages? In 2009, the average federal tax rate paid as a percentage of income in the US is 18.2%. The top 0.1% wealthiest taxpayers will pay an average of 27.9% (not as high as I would have guessed) while the very poorest taxpayers actually “pay” a negative tax (this is due to refundable credits like the EITC and the Making Work Pay credit).

In terms of all federal taxes, and not just income tax, the top 20% of income earners will report more than half of total cash income but will pay a whopping 2/3 of all federal taxes (including income, estate, etc.).

Of course, this data can be manipulated a million different ways (look, I already started!) and you can bet it will continue to be throughout the next election. For now, it’s just something to munch on. You can read the entire Tax Policy Center report here (downloadable as a pdf).Similar Posts:

Tax Trivia: Millionaires and Taxes

Kelly — Mon, 09 Mar 2009 18:30:44 +0000

We have a winner! See comments!

Our next tax trivia question is:

For the 2006 tax year, which state’s population filed the fewest number of individual tax returns reporting adjusted gross income of more than $1 million?

Don’t forget: the first correct answer wins free CCH tax prep software.

What’s your guess?Similar Posts:

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More Than Half of US Companies Pay No Income Tax

Kelly — Wed, 13 Aug 2008 01:25:01 +0000

According to the Government Accountability Office, in any given year, at least 60% of US corporations surveyed paid no federal income tax liability for 1998 to 2005 (the years studied). That statistic includes corporations of varied sizes.

If the trends in the survey are accurate, nearly one quarter of large US corporations don’t pay any federal income tax at least half of the time. Large U.S. corporations are those with at least $250 million in assets or gross annual receipts of at least $50 million.

Even more interesting? Nearly three-quarters of large foreign-owned corporations operating in the US reported no tax liability for at least one of the seven years in the study. Foreign-owned corporations are required to file and pay federal income taxes if they are doing business in the US.

So how do so many corporation escape taxation? Deductions and credits. Corporations wipe out their tax liability by using tax credits or net operating losses (NOLs) from excess deductions. NOLs allow a company to deduct losses generated in previous years in a current year. In contrast, individuals, unless reporting business losses on their personal returns, are not allowed to carry forward federal income tax losses. In other words, if a company has a good year, it can offset taxable income from losses it faced in a bad year. If an individual has a bad year, the loss is wiped clean.

The GAO also noted in its report that taxable income in many corporations differed from profits reported to shareholders. Companies that are reporting no taxable income are still reporting profits to shareholders. This is an exercise in accounting, to be sure, but proof to some that the corporate tax structure needs to be fixed – and soon.

Corporate tax issues have been on the political agenda even before the report was released. Amid rising profits for companies and rising costs to taxpayers, both presidential candidates, Senators McCain and Obama, have vowed to close corporate tax loopholes. My bet is that no matter who becomes president, it won’t happen. And I’m not even cynical – just realistic (did you see those numbers?).

Technorati Tags:
Barack Obama, John McCain, corporate tax, tax, Government Accounting Office

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No Surprise Here: IRS Data Says More Taxpayers Filed in 2008

Kelly — Thu, 15 May 2008 21:29:17 +0000

The IRS has reported that as of May 3, 2008, more tax returns had been processed than at the same time last year. How many more? About 15 million more to nearly 142 million, an increase of about 11%.

And despite what those hold times felt like, the number of phone calls answered by IRS representatives totaled 18.4 million calls, up from 16.2 million calls, an increase of 13.1%. More significantly, the IRS completed 22.2 million automated calls (a la “Where is my refund?”), an increase of 19.2% from last year.

More taxpayers filing returns. That wasn’t unexpected, was it?

Hmm… Conspiracy theories, anyone?Similar Posts:

Are Sales Tax Rates Going Up As the Economy Goes Down?

Kelly — Mon, 05 May 2008 20:14:55 +0000

The semester before I left for law school, my best friend, Bren, and I packed our stuff into my old Buick Regal (the former family car), affectionately named “Bessie” because she looked like a cow. We were on a mission to examine East Coast law schools that were still on my short list. It was easy enough to noodle up I-95 from Raleigh, NC, with stops in, among other places, Washington, DC (to visit Georgetown) and Philadelphia, PA (to visit Temple). We also had a trip to Atlantic City planned but that’s another post altogether…

The second that we stepped out of the car in Philly, I knew that it would be home. There was so much about the city that I adored – the buildings, the history, the people. I even handed my keys over to an attendant without even noting whether he was really a valet (we didn’t exactly have valet parking in Hampstead, NC).

Bren and I decided to pop into a few stores and “urban up” a little since I had arrived in – not kidding – short denim overalls and Birkenstocks. With my hair in braids and Brooks and Dunn on the radio, I didn’t exactly fit in.

I found a few things that I liked and hustled them over to the counter. When the cashier rang up my order, I was perplexed. It was a few dollars cheaper than I had imagined (and being a math minor, I was usually pretty spot on). The difference? Sales tax.

You see, I hail from the “tax everything” state of North Carolina. In NC, there is sales tax imposed on practically everything, including necessities like food and clothes. In PA, however, there is no sales tax imposed on certain necessities – and clothing fit the bill. For Bren and I, it was the equivalent of an extra discount.

In our case, it was a happy surprise. But many cities and states have used sales tax rates and exemptions as a calculated method of luring shoppers to spend money at their stores rather than somewhere else. In my neighboring state of Delaware, for example, they regularly tout that they are the “home of sales tax free shopping.” Does it work? You bet. Shoppers flock to places like Christiana Mall – particularly in the fall for back to school – looking for sales tax free bargains.

Is that about to change?

Vertex, Inc., recently reported that in the last year, 485 U.S. cities increased their sales tax rate. That included 178 newly imposed city tax rates and 307 straight increases in existing city tax rates. Of course, the news that taxes are going up wouldn’t phase Chicagoans – they are facing the highest sales tax rate in the country.

Of state tax rates, only South Carolina raised its state-wide sales tax rate, from 5.0 percent to 6.0 percent.

What does all of this mean? Sadly, it’s likely part of a trend. As the economy turns sour, cities and states scramble to find revenue. The federal government is in no position to help. This is particularly devastating for metropolitan areas where the federal government has imposed regulations requiring action on the part of municipalities that might not have the funds to comply. Examples include No Child Left Behind legislation and Homeland Security programs – both are federally mandated but largely funded on the state level.

What about where you live? Are you seeing any difference in sales tax rates?Similar Posts:

Call for Tax Papers

Kelly — Wed, 19 Dec 2007 13:36:25 +0000

The IRS Statistics of Income Division has issued a request for paper for its 2008 conference to be held in Washington, DC.

According to the IRS, general topics of interest include tax compliance, taxpayer burden, tax administration, and the nature and behavior of the taxpayer population. For example, we welcome proposed papers about closing the tax gap, identifying compliance problems, promoting voluntary compliance, reducing taxpayer burden, improving taxpayer service, improving the efficiency of tax administration, allocating enforcement and other resources, the effects of the globalization on taxation, the tax-exempt sector, and research methodologies.

The deadline for submissions is soon – click here for more details.

Technorati Tags:
IRS, tax, tax policy, scholarship

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Fix The Tax Code Friday: Flat Tax

Kelly — Fri, 11 May 2007 10:01:22 +0000

A number of the presidential candidates have suggested replacing the current tax system with a more simple program. It feels like it shouldn’t be hard to do since Title 26, the Tax Code, is the largest section of the U.S. Code. To put the laws and related documents on paper now takes more than 55,000 pages. If you’re having difficulty imagining just how long that is, maybe this will help you. It’s the equivalent of:

– 43 editions of the Bible
– 37 editions of War and Peace
– 286 editions of Gone With the Wind
– 237 editions of Harry Potter and the Philosopher’s Stone (but only 72 editions of Harry Potter and the Order of the Phoenix)

See where I’m going here?

With all of this seeming verbosity, politicians and the general public alike have been grasping at a solution. The notion of a flat tax has been bandied about quite a bit. So, I’m wondering, what do you – the taxpayer – think? Does a flat tax make sense? Or is it simply an excuse to start all over – building the same kind of complex document that we’ve built over the last 94 years?

I want to hear your thoughts! Today’s Fix the Tax Code Friday question is:

Should we throw out the current Tax Code and replace it with a flat tax?

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Death and Taxes… Actually Certain?

Kelly — Tue, 16 Jan 2007 03:05:38 +0000

As Congress continues to ponder whether the federal estate tax makes any sense, the Citizens for Tax Justice weighs in with some IRS statistics.

Consider this: In 2004, there were 2,429,024 Americans who died. Only 18,431 of those Americans were required to pay federal estate tax in 2005. If you’re keeping score, that’s .8% – yep, less than 1%. That represents a dip of more than 30% over the prior year, not surprising since the federal estate tax exemption continues to rise.

A little more surprising is the number of taxable estates over $20 million – almost 500 – which comprised more than 1/3 of all federal estate taxes paid (the average net estate in that category was more than $65 million). And while the top rates for federal estate taxes (a progressive tax, not a flat tax) can reach almost 50%, the average federal estate tax rate for those who actually paid tax was just over 12%.

What does this all mean? Well, practitioners like to think it means that there is some stellar estate planning going on (ahem). It’s more likely that the federal estate tax just doesn’t affect Americans in huge numbers.

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Data, data everywhere… and only a few dollars a pop!

Kelly — Mon, 18 Dec 2006 17:25:43 +0000

That’s right. The IRS has announced that Zip Code Area tables for Tax Years 2002 and 2004 are available for purchase. That’s right, purchase. If you’re racking your brain to remember, yes, this information used to be available for free (you can see the 2001 data here). The cost is now $25 per state or the bargain bundle price of $500 for the entire United
States.

The IRS has graciously posted a sample of the data on its website. You can take a peek at the data for… North Dakota. Yep, North Dakota. No offense to the folks who live in North Dakota, but I’m guessing the Service chose ND for its relatively small amount of data and let’s face it, lack of demand for such statistics. At any rate, the sample gives you an idea of what you can find out from the reports. If you’re interested in purchasing the data, contact the IRS Statistics of Income Statistical Information Services Office (say that really fast three times in a row) by phone at (202) 874-0410 or by email at sis@irs.gov.

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