The House of Representatives unanimously passed bill H.R. 6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008. The chief sponsor of the bill was Rep. Charles B. Rangel (D-NY).
The revised HEART Act (previous versions of the bill have already passed the House and Senate) would allow thousands of active duty military families to receive a stimulus check they were previously denied because a spouse did not have a valid Social Security number. Under the current economic stimulus plan, taxpayers cannot receive a rebate if one spouse does not have a valid Social Security number; an ITIN is not sufficient. The revised bill only applies to military families.
The bill accomplishes a number of other things for active and retired military, including:
- Making permanent the ability to include combat pay as earned income for purposes of the Earned Income Tax Credit (EITC);
- Making permanent the expiring Internal Revenue Code provision that permits active duty reservists to make penalty-free withdrawals from retirement plans;
- Permitting recipients of military death benefit gratuities to roll over the amounts received, tax-free, to a Roth IRA or an Education Savings Account;
- Providing a tax credit for small employers with respect to wages paid to employees who are on active military duty; and
- Permitting members of the reserves called to active duty to withdraw amounts held in a Flexible Spending Account (FSA) without penalty.
I’d love to hear your thoughts on this. Is it fair for active military to get special tax treatment – such as allowing them to receive a tax rebate when other taxpayers in a similar position may not?
And then take it a step further… What should the criteria for special tax treatment be? Should it extend to other folks who put their lives on the line – what about police officers and fire fighters? Who is a hero, really?
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economic stimulus, military, tax, rebate
It’s been suggested on this blog – and others – that the big “fix” to the economy would be to buy more American products.
I don’t know how much of an immediate impact it would have on the economy but doing it is actually harder than it sounds. So many products – even those that we think of as “American” – are manufactured somewhere else. We have outsourced nearly all of our manufacturing business.
So, today, on a rainy Friday here in Philadelphia (birthplace of America!), I’m conducting a social experiment. I’m going to post throughout the day what products I am using and/or consuming and try to figure out where those products are made or manufactured.
I’d love for you to play along. Throughout your day, if you see a “Made in…” label, please stop by and leave a note in the comments.
I am anxious to see how much of our purchases are American…
So this morning, I put on my glasses (made in Germany). I grabbed my cell phone (made in Korea). I put on my running shoes (made in China). None of my sweats were made in the USA – they were made in Haiti, Vietnam and Turkey.
After my run, I had coffee (Kenyan, fair trade) in a mug (made in China). I ate cereal (made in USA) in a bowl (made in China).
I am currently tapping away on an Apple computer – the tag says “Designed by Apple in California, Assembled in China.”
Not off to a terribly auspicious start.
What about you?
And just when we thought the IRS had a handle on things… After admitting that 350,000 taxpayers were underpaid on their tax rebates because of an omission of the child tax credit, the IRS has another mea culpa: they’ve been misdirecting tax rebates to the wrong accounts.
According to an article in Newsday, an IRS representative had indicated that as many as 15,000 rebate checks were misdirected as part of a “computer glitch.” An IRS spokesman would not confirm the number of misdirected checks – or the reason – but did admit that there had been “instances of problems.”
If you see a check in your bank account that doesn’t belong there, don’t spend it. The IRS warns taxpayers that misdirected IRS direct deposits should be reported to the bank and improper paper checks must be mailed back to the IRS.
What’s next, I wonder? And exactly how much is this (repeated) fiasco costing us?
I’ve received a number of emails from angry taxpayers who allege that third party preparers like H&R Block and tax software developers like Turbo Tax failed to properly advise that certain kinds of transactions (such as refund anticipation loans or paying filing fees from tax refunds) would result in a paper check versus direct deposit with respect to rebates. One taxpayer asked me if any recourse was available. Another asked, bluntly:
Do you think people understood that if they told their tax preparer “take your fee out of my refund” that they’d have to wait for their rebate check to arrive in the mail? Do you think TurboTax and H&R block communicated this?
Hmm.
Here’s my quick take on it and then here’s what I think will happen (get your rotten tomatoes ready)…
With respect to RALs and other loan transactions, I think that even if they were fully briefed on the consequences, a majority of taxpayers would not have acted differently. Refund anticipation loans are used for a number of reasons – but the reality is that most taxpayers if they opted not to have a RAL would have their refund checks direct deposited, on average, 11 days later. For whatever reason, taxpayers opt to get the money sooner rather than later. I personally don’t believe that taxpayers who pay interest to a third party in order to receive their refund a couple of weeks early would have opted to wait then rather than now – in other words, foregoing the RAL in order to get a rebate sooner. I don’t think – for that majority – that would happen.
My take on the software is not quite the same. I think most folks have those fees paid out of their refunds for the purposes of convenience only – and in that regard, some taxpayers might have acted differently. I say “some” and “might” because I still believe that the majority would have filed exactly the same way.
So what does any of that mean?
I think there will be lawsuits. I would not be surprised to hear that somewhere, already a class action plaintiff’s attorney is busily spurring his team into action to collect the names of potential litigants…
But the part that stumped me was “What are the damages?” Other than inconvenience, I can’t see where there are actual damages from a legal perspective – you know, that can be quantified. Taxpayers still received the same money, just a little later.
So, I asked an attorney familiar with class action suits what he thought. And his response was that he agreed that damages will be difficult to prove. He does not, however, believe that will prevent those lawsuits from being filed (hey, tax preparers and tax software manufacturers, get your legal teams ready!). And the result? His cynical take – which I will go on record as saying that I agree with – is that the only folks to benefit from this lawsuit will be the plaintiff attorneys who will, no doubt, walk away with millions. The matter will be settled with tax preparers and software companies agreeing to issue some kind of coupon off of next year’s purchases and services (the attorney that I spoke with ballparked the coupons at $5 off) in order to avoid a lengthy trial.
And there you have it.
Those are my thoughts on the whole liability issue – what are yours?
