Jumat, 08 Januari 2010

The Case for an Energy Tax

by Charles Wheelan, Ph.D.

Posted on Monday, December 14, 2009, 12:00AM
I do a fair amount of public radio. It's usually a staid, polite conversation among the guests, even when there are sharp disagreements.But a few weeks ago, I nearly leaped across the table and went after one of my fellow guests.

Fortunately I resisted the urge (barely) and the segment ended without a brawl. (The brawl would have been awkward since there are no commercial breaks, and it's not obvious what the host would have done.)Why did I contemplate this escalation? The program host was discussing the cap and trade legislation currently being considered by Congress, and my fellow panelist asserted emphatically that Congress should not do anything that would raise the cost of carbon emissions because "it would be bad for the economy."Those are not normally considered to be fighting words. The statement was relatively banal and, without much scrutiny, could easily pass as common sense. What made me so angry? The guest's opinion -- the notion that anything with short-term adverse economic effects must be bad public policy -- is the epitome of everything wrong with our current political discourse. It suggests that Congress should avoid doing anything with short-term costs, even when the long-term benefits are potentially huge. That's dangerously wrong. To explain why, let me make some comparisons to other aspects of life:Medicine: "I'm not going to let my daughter have chemotherapy to treat her leukemia. That will make her feel nauseous, and she'll lose her hair."Education: "We're not going to save for college. Then we won't be able to go out to dinner as often."Business: "We can't build a new plant to expand production. That would lower our profits this quarter."Health: "I'm not going to exercise. It makes me tired and sweaty."Military: "I'm not going to storm that beach. People will shoot at me."The Current Financial Crisis: "Why should I borrow less? Then I won't be able to afford this big house."As in the rest of life, everything worth doing in public policy -- all of the investments that have enabled us to build a great nation and all of the things we must do in the future -- involves some sacrifice in the present. This is now the case with carbon emissions.All reasonable evidence suggests that climate change poses serious, long-term harm. Any solution must involve raising the cost of carbon emissions, either through a carbon tax, or through cap and trade legislation (which does the same thing in a more roundabout, less transparent way). The economics are quite simple: If you want to discourage some activity, make it more expensive. We know that people use less energy when prices go up. Did you see what happened when gas went to $4 a gallon last year?Enough Sloppy ThinkingIf you're not persuaded by the fusillade of evidence on climate change, a carbon tax is still a good idea because it's a "better" tax than the alternatives, which discourage productive activities like working, saving, or investing. Taxing carbon discourages traffic congestion, it ameliorates more traditional air pollution, and it helps to wean us from nasty foreign oil producers. Even the notion that a carbon tax would be bad for the economy in the short run is debatable. I have argued repeatedly (including as part of a Congressional campaign) that any tax on carbon-based fuels or CO2 emissions should be at least partially offset by cuts in the income tax or the payroll tax. Or we could simply use the carbon tax revenues to give a lump-sum rebate to all American households. In that case, households whose carbon emissions were lower than average would come out ahead; their rebate would be larger than what they would pay as the result of the new carbon tax. Households with a larger-than-average carbon footprint -- meaning that they are imposing disproportionate harm on the rest of us -- would end up worse off; their carbon tax bill would be larger than their rebate. This does not strike me as one of the great social injustices of the 21st century.The cuts in the income or payroll tax (or the rebate to households) would help to offset the economic impact of higher energy costs. And with advance notice, households and businesses could minimize the impact of a carbon tax by investing in conservation and non-carbon-based energy sources. That's the kind of tax avoidance we like.Given the current deep recession, we could even introduce the income or payroll tax cuts now and then phase in the carbon tax in a year or two, after the economy has recovered. We would get a stimulus in the present while guaranteeing higher government revenues in the future (to begin paying down our staggering national debt). The phase-in would also give firms and families time to prepare for the rising cost of non-renewable, carbon-based fuels.There is a lot to discuss about a more sensible energy policy beyond "it would be bad for the economy." As someone who has spent a lifetime in public policy, I have a lot of tolerance for disagreement. That's what informed, thoughtful people do, and we're better for it.But I have virtually no tolerance for what I would describe as sloppy thinking.


Kamis, 07 Januari 2010

Smart Year-End Tax Moves

Laura SaundersMonday, November 9, 2009

This article is part of a series related to being Financially Fit
Time to Review Your Taxes — Before It's Too Late
Year-end tax planning always makes sense, but this year it's especially vital.
Convulsions in the markets and the economy have shifted the ground beneath many taxpayers, and next year may bring major tax changes as lawmakers confront the record deficit.
Bottom line: review your taxes before it's too late. "Too often, I can't do anything for people who come to me in February," says Douglas Stives, an accountant with Curchin Group in Red Bank, N.J.
Here are areas especially relevant now. (For more details, go to www.irs.gov.)
First-Time Home-Buyer Tax Credit
Congress has just extended and altered this benefit, making it more generous for many. The new rules took effect on Nov. 6. The provision is a true dollar-for-dollar tax credit of up to $8,000 for 10% of the cost of a home. The credit is also refundable, meaning that even if a buyer doesn't owe $8,000 of tax, she can claim the full benefit and receive a refund check.
The new law has more generous phase-outs. The credit now begins to disappear for single taxpayers with modified adjusted gross incomes of $125,000 and married couples with incomes of $225,000. It is available for purchases through July 1, 2010 if the buyer has a contract in place before May 1, 2010. Unlike the prior law, however, this credit is capped: those buying homes for more than $800,000 get no credit at all, as of Nov. 6.
The new law also authorizes a similar $6,500 credit for buyers who already own a home. It too is a refundable credit for 10% of the purchase price of a house costing no more than $800,000.To qualify the buyer has to have owned and lived in the same home for five of the eight years preceding the new home purchase, and the new home must become the buyer's principal residence.
There are interesting twists. Two or more unmarried people buying a house together may be able to allocate the credit as they wish, say to the lowest earner. Taxpayers who buy this year may also claim the credit on either a 2008 or 2009 return, and those who buy in 2010 can claim the credit either in 2009 or 2010. Some people claim the credit in one year rather than another to avoid phase-outs.
Unemployment Benefits
Alas, these are subject to income tax. But this year there is an exemption of $2,400 per individual. Still, many unemployed taxpayers receiving benefits may need to estimate and pay quarterly taxes or risk penalties when they can least afford them. IRS spokesman Eric Smith points out that all recipients can choose to have 10% of benefits withheld by the payer. "That should protect many," he says.
American Opportunity Credit
In the roster of fiendishly complex and highly limited education incentives, this one is more useful than most. It is a tax credit for as much as $2,500, generated by spending on tuition and other education expenses (books, possibly a computer) up to $4,000. Currently this credit is available for 2009 and 2010 to single taxpayers with less than $80,000 of modified adjusted gross income and married couples earning less than $160,000. Amounts paid in 2009 for the spring of 2010 are eligible for a 2009 credit.
New Car Purchases
Taxpayers who buy new car before Jan. 1, 2010, may deduct sales and excise taxes and other fees on as much as $49,500 of the purchase price. This provision has generous phase-outs: It disappears between $250,000 and $260,000 of modified adjust gross income for married couples and $125,000 and $135,000 for singles.
Retirement Savings
Have you just started a job? Remember that you can still put in an entire year's 401(k) contribution, which is $16,500 ($22,000 if you're over 50). "Some workers who begin a job in the last quarter arrange to have an entire paycheck or two go into the plan," says Melissa Labant, an attorney with the American Institute of CPAs.
Charitable Gifts
Unless Congress acts, this will also be the last year for taxpayers over 70 1/2 to make a charitable contribution directly from an IRA. This provision is useful: without it, the donation would have to be withdrawn from the IRA, claimed as income and then deducted as a donation. That, in turn, can trigger deduction limits or jack up Medicare premiums in the future.
Take losses! Even after the run-up following the lows of last March, many investors still have long-term capital losses on investments held longer than one year. Taxpayers may deduct up to $3,000 of these losses per year against ordinary income, with the excess carried forward for use in future years. The assets must be held in cash accounts, as opposed to IRAs and other tax-sheltered retirement plans.
Capital losses also may be matched dollar-for-dollar against long-term capital gains—so if you have $20,000 of long-term losses on some investments and $15,000 of gains on others, after the $3,000 deduction, you'd only have a net loss of $2,000 to carry forward. What's more, if you are bullish on an investment with gains and you sell it to soak up losses, you may buy the winner back right away. The tax code's "wash sale" rules only apply to losers, which can't be purchased for 30 days either before or after a sale. Note: The IRS also prohibits selling a loser from a regular account and then repurchasing it within an IRA inside of 30 days.
The current top capital-gains tax rate of 15% is the lowest in decades, and it is almost certain to rise at some point as the government scrambles to pay down the deficit. "If you have a buyer and a decent price, think about selling," suggests Mr. Stives of the Curchin Group.
Medical Expenses
This has long been one of the least useful deductions in the tax code, unless a taxpayer is seriously ill or in a nursing home, because the taxpayer must spend more than 7.5% of adjusted gross income to claim any deduction. But rising insurance costs and diminishing coverage plus this year's economic tumult may qualify more people for this deduction.
In general, taxpayers may deduct all un-reimbursed medical expenses recognized by the IRS. This category includes after-tax dollars spent on insurance premiums, Medicare Part B and D premiums, and co-payments for drugs and treatments. It also extends to costs that insurance almost never covers—such as weight-loss plans (if prescribed for a medical condition), lead abatement, bandages, wigs after chemotherapy, acupuncture, and medical travel (19 cents per mile for the first six months of 2009, 27 cents for the rest of the year). But it typically does not cover expenses for over-the-counter drugs such as aspirin or antihistamines, which some Flexible Spending Plans reimburse.


Selasa, 15 September 2009

The History of Income Tax

They say death and taxes are the only two certain things in life. Alas, this wasn’t always the case. Well, at least for the income tax.

Our great nation came into existence in fits and starts. Following the revolt against the British, a federal government was elected and the fun began. This “fun” inevitably led to the situation where not everyone could agree on what the United States should stand for, much less what laws should be enacted. As a result, there was no federal income tax for nearly 100 years. Ah, the good ole days!

fit = kb. 1 serangan tiba-tiba. 2 pas. -ks. 1 pantas, patut, layak. 2 sehat. 3 dapat, siap. 4 baik. -kk. to see f. memutuskan. -kkt. (fit atau fitted) 1 cocok dengan. 2 mencocokkan / menyusun kembali. 3 menjadikan. fitings kb., j. benda-benda, perabot.
revolt = kb. pemberontakan. -kki. 1 memberontak (against terhadap). 2 berrevolusi. 3 bangkit (against menentang). -revolting ks. memuakkan, menjijikkan.
inevitable = ks. tak dapat dielakkan/dihindarkan. -inevitably kk. yang tak terelakkan, pasti jadi.
led = lead = kb. timah. l. pencil potlot. lead-colored ks. lebam(-hitam), kelam(-lebam). Inf.: lead-pipe cinch a) kepastian, hal yang sudah pasti. b) gampang mudah.

enact = kkt. 1 membuat, menjadikan. to e. a law menjadikan undang-undang, mengundangkan. 2 memainkan, memerankan. to e. a role (in a play, film) memainkan peranan.

If there was no income tax during this period, you are probably wondering how the government functioned. It did so by collecting use and sales taxes. Taxes were charged on liquor, tobacco and imports to mention just a few. Many people in our modern society would like to return to just such a system.

liquor = kb. minuman keras. 2 cairan (of pickles).
mention = kb. sebutan. honorable m. sebutan terhormat. -kkt. 1 menyebutkan. 2 mengatakan. not to m. belum lagi.

Contrary to popular notions, the first income tax was not put into law in the early 1900’s. In fact, the first President to institute an income tax was Abraham Lincoln. In 1861, President Lincoln and Congress passed an income tax law to assist with funding the Civil War with the south. When the war came to an end, the tax was phased out. Imagine a tax being phased out now? That should bring a tear of laughter to your eye.

contrary = kb. kebalikan. -ks. 1 suka membantah/berlawanan/menentang. 2 bertentangan. 3 berlawanan.
notion = kb. 1 dugaan. 2 ide, gagasan. 3 pikiran. 4 pikiran, maksud. -nations j. barang kelontong.
institute = kb. institut, lembaga. -kkt. mengadakan (law, investigation). a newly instituted post sebuah jabatan yang baru diadakan.
phase = kb. 1 tahap. new p. tahap baru. 2 bentuk (of the moon). 3 Elec.: keadaan perubahan aliran. -kkt. membuat bertahap-tahap. to p. out menghapuskan setahap demi setahap.
tear = kb. air mata. -kki. berlinang. tear-stained ks. dibasahi.

The income tax as we know it was first instituted in 1913. Congress passed a law establishing a graduated tax rate of one to seven percent on all income taxes. I can say honestly and truthfully that I would kill to pay one percent in taxes these days. Heck, I am willing to take on the burden of paying seven percent!

heck =kb. to give s.o. h. mengomeli seseorang. -kseru persetan, buset.
burden = kb. 1 beban. 2 pokok. -kkt. menyusahkan.

In establishing the income tax system, the Constitution was amended to add a 16th Amendment. This Amendment gave the federal government the right to collect taxes. The politicians primarily responsible for this were President Roosevelt and President Taft. I mention two Presidents because the bitter debate over the subject took some time to work out.

bitter = ks. 1 pahit. 2 tidak enak. 3 sengit. 4 dingin. -bitters j. sesuatu yang memberikan rasa pada minuman keras, minuman pahit. -bitterly kk. 1 dengan sengit. 2 sekali.

If you’re looking to blame a particular political party, Presidents Roosevelt and Taft were both Republicans. Of course, the Democrats haven’t exactly made much of an effort to repeal the tax, so both parties deserve a whack upside the head in my opinion. Nonetheless, this is how we came to be burdened by the income tax in the United States.

blame = kb. kesalahan. -kkt. menyalahkan. -blamed ks. Inf.: jahanam, terkutuk.
repeal = kb. pencabutan (of a law). -kkt. mencabut (a law).
deserve = kkt. 1 berhak mendapat. 2 pantas, patut menerima.-deserved ks. well-d. honor penghargaan yang selayaknya (diperoleh).-deservedly kk. sdh sepatutnya.-deserving ks.1 yg pantas di tolong.2 yg berjasa.

WHACK = kb. pukulan keras. Sl.: to have/ take a w. at mencoba. -kkt. memukul. -whacking Inf.: ks. amat besar.
UPSIDE = kk. u. down terbalik. to turn a room u. down membolak-balik seluruh isi kamar. to turn a pillow u. down membalikkan bantal.


Kamis, 10 September 2009

New Tax Breaks for Medical Expenses

By Amy Goldstein
Washington Post Staff Writer
Wednesday, January 25, 2006

President Bush will propose that Americans be allowed to take tax deductions on more of their out-of pocket medical expenses, as part of an initiative the White House believes will rein in soaring health costs by shifting responsibility toward individuals, according to congressional and other sources familiar with the administration's thinking.

rein = kb. tali kekang, kendali. -kkt. to r. in mengekang (a horse).
soar = kki. 1 membumbung tinggi. 2 memuncak. 3 melonjak, membubung. -soaring kb. Av.: peluncuran. s. mountain gunung yang menjulang tinggi. s. prices harga-harga yang membubung tinggi.

The new tax breaks for personal health spending, to be included in the 2007 budget Bush will release in less than two weeks, are designed to help the uninsured and to allow people with insurance to write off a greater portion of the money they spend on co-payments, deductibles and care that is not covered. Under current tax rules, people can deduct medical expenses only if they exceed 7.5 percent of their adjusted gross income.

The president also plans to call for an expansion of health savings accounts, an idea long favored by conservatives and approved by Congress slightly more than two years ago, in which people who buy bare-bones insurance policies are allowed to put money into tax-free accounts for their medical expenses.

favor = kb. 1 kemurahan/kebaikan hati. 2 hadiah, tanda-mata. 3 surat. 4 tolong. -kkt. 1 menyokong. 2 berlaku berhati-hati. 3 menyerupai. 4 memperlakukan lebih baik daripada yang lain-lain. 5 menyukai/lebih suka 6 berbaik/bermurah hati. -favored ks. kesayangan.
slight = kb. 1 (neglect) pelalaian. 2 (snub) sikap yang meremehkan. -ks. 1 langsing, ramping, lampai (person). 2 sedikit. 3 enteng, kecil (wound). 4 tipis (of chances). -slighting ks. yang menghina (remarks). -slightingly kk. enteng/rendah.
bare = ks. gundul. 2 kosong. 3 nyata, terang. 4 yang paling sederhana. 5 tak bersepatu. 6 telanjang. -kkt. 1 membuka. 2 memperlihatkan.
bone = kb. 1 tulang. 2 duri, -kkt. menulangi (a fish, chiken). -kki. Sl.: mempelajari bone-dry ks. kering sekali. b. meal tepung tulang.

In addition, Bush intends to propose changes to allow people to keep their insurance, without extra cost, if they change jobs or decide to start a business, building on a decade-old law that was designed to make health coverage more "portable."

intend = kkt. 1 bermaksud untuk. 2 memaksudkan, memperuntukkan. -intended kb. bakal suami atau istri. ks. 1 bakal. 2 yang diharapkan.

The three proposals -- and possibly others -- are part of a renewed effort by the White House to tackle medical costs, a theme that administration officials said yesterday Bush intends to emphasize in his State of the Union address next week. The health initiative also represents one of the few areas in which the president will try to create new domestic policies through what he and aides have said will be an austere budget.

tackle = kb. 1 katrol, takal. 2 alat. -kkt. 1 memegang, menangkap (s.o.). 2 mengerjakan, melakukan. 3 Sport : menggasak, mentackle.
address = kb., 1 alamat. 2 amanat, pidato 3 berbicara, menegur. 4 memanggil, menyapa, menyebut.
through = ks. 1 selesai, siap. 2 terus(an). -kk. 1 dari permulaan sampai habis. 2 terus. 3 menyambung. -kd. 1 melalui. 2 melewati, lewat. 3 karena. 4 terus. 5 diluar.
aide = kb. ajudan, pembantu.
austere = ks. keras, tegang, cermat. My favorite professor was an a. man Profesor kesayangan saya adalah seorang yang keras.

Part of the initiative recycles proposals that the White House could not push through Congress, including tighter limits on medical malpractice lawsuits and changes that would allow small businesses to band together to buy insurance in ways that bypass state insurance rules.
But the new components would propel the nation's health care system in a direction that many Republicans and business groups embrace: lightening the burden of insurance cost on employers to some degree, while creating financial incentives for individual patients to restrict how much care and medicine they use.

tight = kb. tights j. celana (panjang) ketat. -ks. 1 sempit (of clothing, chair). 2 kikir. 3 mabuk. 4 sukar, sulit (of money). 5 ketat (of string, knot, shoe, dress). -kk. rapat. 2 kuat-kuat.
propel = kkt. (propelled) 1 mendorong. to p. a raft down stream mendorong rakit ke hilir. 2 menggerakkan. to p. by steam menggerakkan dengan uap.
embrace = kb. pelukan, rangkulan. -kkt. 1 memeluk (a child). 2 mencakup. -kki. berpelukan. Mother and daughter embraced Ibu dan anak berpelukan.
burden = kb. 1 beban. 2 pokok. -kkt. menyusahkan.
restrict = kkt. 1 membatasi. 2 melarang (s.o. from leaving). -restricted ks. 1 terbatas. r. material bahan yang terbatas. 2 terlarang (of an area).

Even before most people on Capitol Hill learn of the proposals, several senior congressional aides and health policy experts predicted yesterday that Bush may have a difficult time winning support. They said that fiscal conservatives may balk at the expense, and that many Democrats will argue the changes are inadequate for poor people, who are most likely to be uninsured.
White House officials would not confirm the decision to allow tax breaks on consumer health spending, and it remains unclear how large a deduction the president envisions.

balk = kki. 1 menolak keras. He balked when he was asked to do that job Ia menolak keras ketika diminta mengerjakan pekerjaan itu. 2 mogok.The horse balked at crossing the stream Kuda itu mogok waktu menyebrangi sungai itu.
argue = kkt. 1 memperdebatkan, menentang, membantah. 2 mendesak, menganjurkan (dengan kuat).3 membuktikan, memperlihatkan. --kki membantah. to a. against menentang, membantah. to a. for mengusulkan, mendesak.
envision = kkt. memimpikan. to e. o's son a general memimpikan puteranya sebagai jenderal.

In an interview yesterday, however, Allan B. Hubbard, director of the White House's National Economic Council, said the current system is flawed because it gives employers tax deductions for the health insurance they buy for workers, but no similar tax preferences for people who buy coverage because their company does not provide it.

flaw = kb. 1 cacat, kerusakan (in garments, china, etc.) 2 kekurangan.
coverage = kb. ulasan, cara pemberitaan, pencakupan. news c. ulasan pemberitaan/pers. insurence c. jumlah jaminan asuransi.

"That's not fair. It's really almost backwards," Hubbard said. He said that inconsistency concerns Bush, adding: "Normally, when he's got concerns, he tries to find solutions."
Hubbard said Americans are not as careful consumers of health care as they are in shopping for other services, because insurance masks from them much of the cost. He said the price and quality of health care would improve if consumers were given greater financial incentives and had to decide for themselves how much care they really need.

backward = ks. 1 terbelakang. 2 miskin. -kk. 1 kebelakang. 2 terbalik.
concern = kb. 1 perhatian, keprihatinan. 2 firma, perusahaan. 3 soal, urusan. -kkt. menyangkut, mengenai, penting bagi. -concerned ks. kuatir, gelisah, prihatin, risau. -concerning kd. mengenai.
mask = kb. 1 topeng. death m. topeng mati/ mayat. 2 kedok. 3 Sport : masker, penutup atau pelindung muka. -kkt. menembunyikan, menutupi (o's feelings, o's intentions). -masked ks. bertopeng. m. ball pesta topeng, balmaski.

The idea of tax breaks for out-of-pocket medical expenses is borrowed from a recent book by three academics, including two with whom Hubbard has close ties: R. Glenn Hubbard, a former chairman under Bush of the White House Council of Economic Advisers, and John F. Cogan, a White House economic adviser when Ronald Reagan was president. Their book, "Healthy, Wealthy & Wise," calls for all such spending to become tax-deductible. The authors estimate that the revision in tax law would cost $28 billion a year when phased in completely, although they predict much of that lost revenue would be regained through ripple effects the change would create in the health care system.

tie = kb. 1 dasi. 2 pertalian, tali. 3 RR.: balok landasan/rel, ganjal rel. 4 seri. -kkt. (tying) 1 mengikat (o's shoelaces). 2 mengikatkan (s.t. to or around s.t.). 3 bermain seri melawan. 4 menghubungkan, mempertalikan. 5 mengikat (an artery).
phase = kb. 1 tahap. new p. tahap baru. 2 bentuk (of the moon). 3 Elec.: keadaan perubahan aliran. -kkt. membuat bertahap-tahap. to p. out menghapuskan setahap demi setahap.
riple = kb. 1 riak. 2 reaksi, suara. -kki. berdesir.

Several outside health policy experts, both Democrat and Republican, speculated yesterday that the president is unlikely to make such a large financial commitment at a time when the administration has pledged to halve a $400 billion budget deficit during the next several years. Joseph R. Antos, a scholar at the conservative American Enterprise Institute, predicted that Bush will "open this particular door. But how far does it open? We'll see."

PLEDGE = kb. janji, cagar, ikrar. -kkt. menjanjikan (a donation). 2 berjanji.
halve = kkt. membagi dua. I'll h. this candy bar with you Saya akan membagi dua batang gula-gula ini dengan kau.
SCHOLAR = kb. 1 sarjana. Greek s. sarjana bahasa Yunani. 2 pelajar. He's good s. Dia seorang pelajar yang baik.
PARTICULAR = kb. particulars j. fakta-fakta, keterangan-keterangan. -ks. 1 teliti. 2 khusus. -particularly kk. terutama sekali, (ter)istimewa.

An administration official, speaking anonymously because he was not authorized to discuss the budget in advance, said Bush is focused on both the deficit and medical costs. "He feels . . . there may need to be some additional investment to deal with the cost" of health care, the official said. "The overall gain, not only to the federal budget but the family budget, is worth that."

WORTH = kb. harga. -ks. 1 bernilai, cukup baik, bermanfaat. 2 berharga. 3 seimbang.

Allan Hubbard said Bush also thinks the government has not done enough to help people keep insurance when they change jobs. Under a law passed in 1996, an insurer may not penalize people who change jobs -- by charging them more because of preexisting medical problems -- as long as they began a new job within about two months. Hubbard said the protection should be extended to include people who take longer before they begin a new job or who go to work for themselves.
Hubbard also said "it would not surprise me" if Bush proposes to expand health savings accounts, although Hubbard would not describe the changes the White House would like.

Sumber: http://www.washingtonpost.com/wp-dyn/content/article/2006/01/24/AR2006012401838.html

Rabu, 09 September 2009

Identity Theft, The IRS and You

You come home from work one day and pry out all the junk mail from your mail box. Bills. Junk mail. IRS notice. You owe $10,000 in past due tax? This could be a sign of identity theft.
When you think of identity theft, what comes to mind? For most of us, it is a visual of some scumbag opening credit cards and buying flat screen televisions using our names. At the rate retailers are going out of business, this may not be a problem for long, but I digress.

digress = kki. menyimpang, melantur. to d. from the subject menyimpang dari pokok pembicaraan.

The new trend in identity theft is not to run up debt. Instead, thieves are selling stolen identities to illegal immigrants or individuals who really would like to leave there old identity behind. In either case, these people assume your identity using addresses you are unfamiliar with. They don’t steal money or credit from you, but they are going to work sooner or later. When they do, they may not file taxes on their earnings.

Now think this through. The IRS receives filings from employers telling it how much individuals made. If you report a figure on your tax return that is less than what the IRS receives from employers, red lights start flashing and auditors come sliding down the emergency audit pole like firemen. Okay, bad example. Regardless, the IRS is going to want to know why you are not declaring all your income and it is really going to want to know why you didn’t pay the full tax due on that income.

through = ks. 1 selesai, siap. 2 terus(an). -kk. 1 dari permulaan sampai habis. 2 terus. 3 menyambung. -kd. 1 melalui. 2 melewati, lewat. 3 karena. 4 terus. 5 diluar.


How Long Until I Receive My Tax Refund?

You’ve got through the dreaded tax deadline and have your return into the IRS. Now the fun part – how long until I receive my tax refund? Show me the money!

through = ks. 1 selesai, siap. 2 terus(an). -kk. 1 dari permulaan sampai habis. 2 terus. 3 menyambung. -kd. 1 melalui. 2 melewati, lewat. 3 karena. 4 terus. 5 diluar.
dread = kb. rasa takut, ketakutan. -kkt. takut (kepada).

Before we get into your tax refund, it is vital that you understand something very important. A big tax refund is not really a good thing. Why? Well, it means you over paid your taxes throughout the year. This effectively acted as a free loan to the federal government. Instead of waiting a year to get your money, try cutting down your tax payments during the year to the point where you will pay in what you actually owe instead of a lot more.

How Long?
Okay, let’s get to the heart of the matter. How long does it take to get your tax refund? The answer is all in how you filed your tax return. We’ll start by assuming you filed on time and don’t have any penalties or what have you awaiting at the IRS. If you filed your tax return electronically, it usually takes two to four weeks to get your tax refund. An electronic filing is processed quickly. You can also speed up the process by forgoing a tax refund check and instead asking the IRS to simply wire the money into your bank account.

Many people are nervous about the tax refund wiring option. Why? Well, do you really want the IRS to know about your bank account? At least, that is the thinking on the issue. The truth is, of course, the IRS already knows about your bank account. If it wants to find yours for some reason, it will just run your social security number through the banks to find the accounts. Giving the IRS the number to process a wire of your refund is not the equivalent of giving the IRS the keys to the castle.
Okay, what if you mailed in your tax return? The majority of people still do it his way. Unfortunately, it slows down the refund process. The IRS has millions of paper returns coming in all at the same time. It has to organize them all and then scan everything into a computer. As you can imagine, that takes a while. Once everything is process, the agency will then cut your check. It can take anywhere from one to three months with the mid point being the most likely delivery date.

No Refund Arrived
What if you don’t get a refund? It usually doesn’t mean you are getting audited. The IRS treats the two subjects differently. It could mean you owed the IRS money in the past, and said amount has been deducted from your refund. If so, you’ll usually receive a letter telling you as much.
If you don’t receive anything from the IRS, that means there is a big problem. It usually boils down to one of two things. First, the IRS may not have received your return and thus isn’t processing a refund. Second, you’ve moved and failed to notify the IRS. Tax letters are generally not forwarded by the post office. In either case, you need to contact the agency to find out what is going on.
How long does it take to receive a tax refund? Anywhere between two weeks and three months unless there is a problem.


Selasa, 08 September 2009

How To Save On Taxes

You just got done paying taxes or filing an extension and are grumpy. If you are smart, you will use this miserable event to teach yourself how to save on taxes next year.

grumpy = galak
miserable = ks. 1 tidak senang. 2 yang menyedihkan. 3 miskin, sengsara. -miserably kk. sangat buruk, tidak keruan.

How To Save On Taxes
For most people, preparing and filing taxes is the equivalent of sticking a pin in a body part. It simply is not fun. Heck, it is not even amusing. One of the reasons is you inevitably find some part of the process where you wonder how you could possible not have more deductions or credits. You fully realize you should tweak your finances to maximize certain expense areas and, by God, you are definitely going to figure out how to save on taxes next year. This admirable goal, much like a New Years Resolution, fades into antiquity after about a month. You should not let this happen!

stick = kb. 1 (walking) tongkat. 2 batang. 3 potongan. 4 (golf, hockey) getokan. 5 Av.: kemudi. -kkt. (stuck) 1 menikam. 2 menusuk. 3 memasukkan. 4 melekatkan. 5 menempelkan. menyuntingkan. 7 menjulurkan. 8 Inf.: menipu. 9 memancangkan. 10 mencocokkan.
pin = kb. 1 peniti. 2 lencana. -kkt. (pinned) 1 menyematkan (a dress). 2meletakkan, menggantungkan. 3 menjepit.
heck = kb. to give s.o. h. mengomeli seseorang. -kseru persetan, buset.
amuse = kkt. 1 membuat orang tertawa, menggelikan hati. 2 memikat, menawan, menarik
perhatian. 3 geli. --amused ks. girang, terhibur, senang hati. --amusing ks. lucu.
inevitable = ks. tak dapat dielakkan/dihindarkan. -inevitably kk. yang tak terelakkan, pasti jadi.
twear = kkt. menjewer (an ear).

admirable = ks. mengagumkan, terpuji, dpt dikagumi.
fade = kkt. memudarkan. -kki. 1 meluntur, menjadi pudar. 2 menghilang. 3 layu. to f. away 1 menjadi kabur, berangsur hilang. 2 mati, wafat. 3 menghilang, berangsur pergi. -fading kb. 1 kehilangan warna. 2 TV, Tel.: kehilangan kekuatan suara atau gambar.

There is no better time than now to proactively plan how to save on taxes for next year. Having just completed your taxes, you inherently know where you got hurt. Even if you do not, you inevitably felt like you paid more than your fair share. To avoid this, you need to do some tax planning.

inherent = ks. yang melekat, yang menjadi sifatnya. his i. honesty kejujurannya yang menjadi sifatnya itu. -inherently kk. sudah menjadi sifat. He's inherently lazy Malas sudah menjadi sifatnya/pembawaannya.

Stop groaning. Tax planning may sound boring, but it actually very exciting if you think about it the right way. If I told you a trip to Vegas would definitely result in $2,000 in your pocket, would you be excited to go? Of course you would. Well, tax planning has the same the result. You need to focus on the amount of money you will save.

groan = kb. rintihan, erangan, resah. -kki. 1 merintih, mengerang. 2 berkeluh keberatan. -groaning kb. suara mengerang/merintih, erang, rintihan.

The best way to go about tax planning is with a proactive accountant. Yes, they cost money, but they will save you far more than you spend and you can write off their fees. A win-win if ever there was one.
When selecting a CPA, you want a proactive one. You want them to look at your tax return and tell you where money can be saved. Then you want to know exactly how much you would have saved last year if you had taken the recommended steps. Yes, it will be painful, but it will also motivate you to get on board with their plan and stick with it.
Paying taxes this year was undoubtedly a painful experience. Analyze the specific areas that caused you pain to figure how to save on taxes next year.

pain = kb. perasaan sakit, kesakitan. -kkt. 1 menyakitkan. 2 menyedihkan (of news).


Minggu, 06 September 2009


Tax is withheld on your income because our tax system is in actuality a "pay as you go" system. Many look at taxes as something due all at once in April, but that is simply not the case. What you pay in April is the shortfall between the total amount of tax that you owe and your year-long payments. A withholding tax is imposed on salary and wage income, tip income, certain gambling winnings, pensions, and retirement distributions. You may avoid withholding on retirement payments. Withholding is also imposed on interest and dividends if you do not give your taxpayer identification number to a payer of interest or dividend income.

Income Taxes Withheld on Wages
The amount of income tax withheld for your wage bracket depends on your marital status and the number of allowances you claim. You file a withholding certificate, Form W-4, with your employer, indicating your status and allowances. Without a Form W-4, your employer must withhold taxes as if you are a single person with no exemptions. Back to top
Form W-2
By February 2, 2009 (January 31, 2009, is on a Saturday), your employer must give you duplicate copies of your 2008 Form W-2, which is a record of your pay and the withheld income and Social Security taxes. If you leave your job during the year, you may ask your employer for a Form W-2 by making a written request within 30 days of leaving the job. Back to top
Withholdings Should Cover Estimated Tax
You may find that you are withholding too much tax or too little. You can adjust your withholding at any time by filing a W-4 with your employer. In fixing the rate of withholding on your wages, pay attention to the tests for determining whether sufficient income taxes have been withheld from your pay. A penalty will apply if your wage withholdings plus estimated tax payments (including prior year overpayments credited to current estimated tax) do not equal the lesser of 90% of your current tax liability or the required percentage of the prior year's tax.

Taxes are withheld from payments made to you for services that you perform as an employee. By filing Form W-4, you claim allowances for yourself, your spouse, and dependents. The number of allowances claimed will either decrease or increase the amount of withholding. On Form W-4, you also may claim withholding allowances for itemized deductions and credits such as the child tax credit, child and dependent care credit, education tax credits, adoption credit, retirement savings credit, prior-year AMT credit, credit for the elderly and disabled, the foreign tax credit, credit for home mortgage interest, the general business credit, and earned income credit (if you have not filed for an advance payment of the credit on Form W-5).
If you need to increase your withholding, such as to cover investment or self-employment income, you can choose not to claim all of the allowances allowed on Form W-4. You can also direct your employer on Form W-4 to withhold an additional flat amount from each paycheck. Back to top
Are You Withholding the Right Amount?
You do not want to withhold too little from your pay and you do not want to withhold too much. You may need to withhold more to avoid a large tax payment or an estimated tax penalty when you file your return, especially if you have substantial income from investments or a business. On the other hand, if you have been receiving large refunds from the IRS, you may want to consider reducing your Form W-4 allowances to avoid over-withholding. Balance the loss of the use of your earnings during the year against the value of receiving a substantial refund check from the IRS after you file your return.
Working couples filing jointly should figure withholding allowances on their combined wage income, deductions, adjustments, and credits, but can divide the total number of allowances between them in any way they wish. On separate returns, the allowances must be figured separately.
If you work for two or more employers at the same time, you figure your withholding allowances based on the total income, and then split the allowances between the two jobs in any way you wish. Do not claim the same allowances with more than one employer at the same time.
File a new Form W-4 each year for withholding allowances based on your anticipated deductions and credits. Furthermore, you may have to file a new form to increase your withholding if withholding allowances you had been claiming are no longer allowed. Back to top
Part-Year Employees May Avoid Overwithholding
Starting a new job in the middle of a year presents a withholding problem. The amount of tax withheld from your paycheck is figured by taking your weekly pay and multiplying this by a 52-week pay period. To alleviate this problem, you may ask your employer to calculate withholdings on what is known as the "part year" method if your work days during the year are expected to be 245 or fewer. As an alternative, you may elect to claim extra exemptions on Form W-4, which has the same effect of reducing the amount withheld each week from your paycheck. Back to top
When to Change Withholdings
Adjust withholding if there will be a significant change in the tax you owe for 2009. Credits such as the child tax credit, Hope scholarship credit, and lifetime learning credit may reduce your 2009 tax. By decreasing your withholding now, you can get the benefit of the lower taxes throughout the year. On the other hand, a withholding increase may be advisable if previously claimed deductions or credits will not be available to you, or if you expect an increase in nonwage income such as capital gains. Check the instructions to Forms W-4 and 1040-ES for 2009 to help you adjust your withholdings. Back to top
The amount of income tax withheld for your wage bracket depends on your marital status and the number of allowances you claim.
You may increase or decrease withholdings on your wages by submitting a new Form W-4 to your employer. Withholdings may be reduced by claiming allowances based on tax deductions and credits.
Make sure that tax withholdings meet or help you meet the estimated tax rules that require withholdings plus estimated tax payments to equal 90% of your current-year liability or the required percentage of the prior year's liability
If you are a part-year employee, you may ask your employer to calculate withholdings on what is known as the "part year" method.


States With No Income Tax

If you are considering relocating to a new state, taxes should be something you consider. Specifically, there are a number of states with no income tax.

States With No Income Tax

As you well know, paying taxes is a grind. Paying federal taxes is the biggest burden, but state income tax can quickly add up as well. There are, however, some states with no income tax. Depending on your earnings, this can save you hundreds or thousands of dollars a year when tax time rolls around.

There are seven glorious states with no income tax. In no particular order, they are:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

There are two other states that technically collect income tax, but do not for all practical purposes. They are Tennessee and New Hampshire. These two do not collect a tax on your earnings, but they do collect tax if you receive dividends. Under tax law, dividends are technically considered to be income, thus neither Tennessee nor New Hampshire are technically

At first glance, a lack of income tax may seem like a great thing. Generally, this is true, but you need to watch out. Many of these states make up the difference by collecting taxes in other ways. They may crank up their sales tax or property taxes for example. The particular approach varies from state to state, but they generally do something. The exceptions to this rule are Alaska and Nevada. Alaska derives most of its money from the oil companies. As you can probably guess, Nevada makes up the difference from the casinos.

If you are considering moving to another state, taxes are something you should definitely take into consideration. While a factor, they should probably not be the overriding one in your decision.


Taxing Rich Wouldn't Close the Gap, but Would Shrink It

by David Wessel
Thursday, September 3, 2009

provided by

President Barack Obama projects the federal deficit will be $9 trillion over the next 10 years even if his policies prevail — undoing the Bush tax cuts for upper-income Americans, auctioning carbon-iission permits, and enacting a health-care plan that doesn't widen the deficit over the next decade.

He also continues to promise to limit tax increases to incomes above $250,000 a year for couples and $200,000 for individuals — "the rich."

Talking about tax increases usually dissolves into shouting matches. The right says tax increases will choke off growth and massacre small business. The left says tax increases are vital to finance much-needed investments and that the rich can pay more.

Hard numbers and recent history suggest two facts. One, the deficit is too wide to be closed exclusively by raising taxes on "the rich." Two, "the rich" do have a lot of money, even after the bust, and raising their taxes would raise significant sums without hampering the economy

Start with some rough arithmetic. The three million or so fortunate taxpayers whom Mr. Obama counts as rich are projected to earn about $27.5 trillion from 2010 through 2019, according to the Tax Policy Center, a Washington think tank, and about $23.9 trillion after deductions. They are projected to pay $7.4 trillion in taxes. That's 31.1% of every dollar of taxable income, on average.

To squeeze an additional $9 trillion out of these taxpayers would require boosting that to 68.9%. And that assumes these taxpayers wouldn't find tax shelters to hide their income or work less. There isn't enough money in the over-$250,000 crowd to stick thi with the $9 trillion tab.

Shrinking the deficit will require slowing the growth of spending, particularly on health care. But neither politicians nor their constituents show any willingness to cut spending enough to avoid tax increases. So the issue is whose taxes, and the arithmetic suggests it won't only be those who make more than $250,000 a year.

The best-off Americans do pay a big chunk of taxes. The Tax Policy Center estimates that the top-earning 1% of households will earn 16% of all the income this year and pay 23% of all federal taxes. But that doesn't mean the government couldn't raise more from thi, even if some stay-at-home spouses of well-off Americans might be less inclined to work and others maneuvered to shield income from the IRS.

Congressional estimators — taking account of the propensity of people to dodge taxes when rates rise — say that for every percentage-point increase in the marginal tax rate levied on those with taxable incomes above $372,950, the government would raise $73.5 billion over 10 years. (Before the bailouts, that used to sound like a lot of money. It still is.)

There is and will be a heated argument over how much the economy would suffer if those tax rates went up. But tax rates on those Americans were about three percentage points higher during the Clinton years.

"The 1990s suggests we could raise more money from high-income people...and still have a strong economy," says Joel Slirod, a University of Michigan tax economist. But the first half of the 2000s suggested the economy also can grow when their taxes are cut. And the latest recession, unlike some others, didn't coincide with any change in tax rates.

Which is another way of saying that tax rates matter — to taxpayers and to the government's revenue. But they are far from the only factor in the pace of economic growth.

Write to David Wessel at capital@wsj.com