Status of Some Expired Income Tax Breaks

A pile of special deductions and credits expired at the end of 2013. We expect most of them to be retroactively re-enacted. Some of these are narrowly targeted at specific industries but some have a broader impact and affect mainstream taxpayers.
These include the ability of individual income taxpayers to deduct their sales taxes instead of their income taxes. This break is important to residents of states that have no income tax like Texas, Florida, Nevada, Washington, South Dakota and Alaska.
Another important expired tax break is the exclusion from taxable income for up to $2 million of forgiveness of indebtedness in relation to foreclosure of a personal residence.
I have at least one client that is hoping for reinstatement of the provision allowing direct distributions from taxpayers individual retirement accounts (IRAs) to charities.
Bonus depreciation and the credit for research and development are important to many businesses, both large and small.
Action by congress on these expired tax provisions is not expected until late in 2014.
I guess that congress likes to keep taxpayers guessing.

- Mark S Gleason CPA
  www.lakes-cpa.com 

IRS and MN Dept of Revenue Announcements on Heartbleed

Both the IRS and the Minnesota Department of Revenue issued announcements proclaiming themselves unaffected by Heartbleed , the recently discovered coding flaw that lets hackers steal passwords from websites.

The IRS announcement:

The IRS continues to accept tax returns as normal. Our systems continue operating and are not affected by this bug, and we are not aware of any security vulnerabilities related to this situation. We continue to monitor the situation and remain in contact with our software partners. The IRS advises taxpayers to continue filing their tax returns as they normally would in advance of the deadline.

The Minnesota Department of Revenue announcement: 

The Minnesota Department of Revenue systems have not been affected by the “heartbleed” virus.  We are accepting tax returns as normal and we encourage taxpayers to file their returns in advance of the April 15 deadline.  We continue to monitor the situation and will remain in contact with the IRS and software vendors.  If the situation changes we will provide an update. 

For those of us who depend on the internet to get our daily work done, this has been an unwelcome distraction, especially coming right before the April 15 tax filing deadline.

- Mark S Gleason CPA
  www.lakes-cpa.com

Who are the One Percent?

We hear about the top 1% all the time.  Who are the 1%?
The most frequently represented occupations of taxpayers in the top 1% of US taxpayers, according to IRS data, includes corporate executives,  financial professionals, doctors, lawyers and a broad category of occupations that including technical, scientific, computer, math and engineering jobs.

In 2011 a taxpayer mades the cut and is included in the top 1% at $379,000 annual income.
Most of these people should be given medals for their productivity and their contribution to society in the form of all the taxes they pay.
The top 1% earned 19% of all the income reported to the IRS (2011) and paid 35% of all federal income taxes.
Thank you!

- Mark S Gleason CPA
  www.lakes-cpa.com

The IRS: A Historical Perspective

A review today in the Washington Post talks about a recent lecture by Donald Korb, a former Chief Counsel for the IRS and former Assistant Commissioner of the Internal Revenue Service.

He talked about some of the changes in our federal income tax system over the years and how the system of taxation has evolved.

Here are some interesting highlights from his talk:

• Today the highest income tax rate for an individual is 43.4% and for a corporation its 35%. Although there is still a lot of whining about our rates, in 1974 the top rates were 70% for individuals and 48% for corporations.
• There are over 5,000 pages in today's Internal Revenue Code when in 1974 there were only about 1,500 pages.
• In 1974 the IRS administered approximately 12,100 pages of Treasury Regulations. Today they have over 44,000 pages of regulations to work with.
• The IRS had about 78,000 employees in 1974. Today there are about 89,500.

Mark S Gleason CPA
- www.lakes.cpa.com