Many of the world’s wealthy enjoy the luxury of having a vacation home, or perhaps several vacation homes. Some people have homes in a sunny paradise, while others choose mountain locations where they can get away for a great ski vacation. One popular spot in the U.S. for vacation homes is Rhode Island. However, for those who own vacation rentals in the state, the tax burden is going up.
According to the budget that was just passed in June, lawmakers have voted to expand the definition of hotel to also include private home rentals and bed and breakfasts in that category. The new tax increase is expected to add an additional $700,000 to the fiscal budget in 2016. Despite opposition from the Rhode Island Association of Realtors, the governor signed the budget proposal and the changes are now in affect. One of the arguments against the increase was that the tax would kick in right as the summer season begins. That could prove to be a problem for many vacationers who had not planned for the extra taxes in their vacation budget.
The president of the Rhode Island Association of Realtors, who had asked lawmakers to reject the proposal, claimed that many vacationers would instead choose different states for their vacation, thus costing the state more income. He also claimed that fewer people would be willing to purchase vacation homes in Rhode Island because of the extra tax. Time will tell if he is right, but regardless, if you have a vacation home in Rhode Island then you will now have to start paying more to rent it.
Chicago is known as the Windy city and for good reason. However, thanks to a recent vote by Cook County commissioners, where Chicago calls home, it could now be called the tax city. That’s because Chicago, which already had a sales tax rate of 9.25 percent is jumping into the double digits after county commissioners voted to raise the sales tax rate by 1 percent, to a whopping 10.25 percent, which is the highest city rate in the entire country.
The new sales tax rate will take effect on January 1 of next year, and is expected to give the sales tax in the county a $474 million boost every year. Officials said they passed the increase proposal because they need the additional funds to help fix the pension system for Cook County employees. According to Cook County officials, there is already a shortage in the retirement of about $6.5 billion and the problem is getting worse every year, as it is reportedly increasing by $360 million annually.
With the increase, Chicago will now pass four counties in Alabama that all had sales tax rates of 10 percent, to become the city with the highest rate. Time will tell if the increased sales tax income will be enough to make a difference in the pension shortfall, but Chicago can now claim it’s number ranking for a rather dubious distinction.
The NBA finals are now in the rear view mirror, as is the league’s draft. In fact, the free agency period has largely ended as well, as far as the big-time impact players are concerned. It was an unusual year for free agency, as some of the most recognizable and marketable teams were mostly shut out in the free agent frenzy, including the New York Knicks and Los Angeles Lakers.
The Warriors and Clippers were able to keep their big name players that could have flown the coup for so-called greener pastures, but one of the most successful franchises in the history of the game could not get anyone to bite. Could it be that the Lakers have completely lost their mojo? That’s a debate for the sports experts, but what is up for open debate is whether or not California’s taxes played a role in where players chose, or didn’t choose to sign.
There are several possible reasons that this year’s crop of free agents could have chosen other teams besides the Lakers. However, there is also a definite possibility that the state’s huge income tax rate had something to do with it. California has the nation’s highest state income tax at 13.3 percent. Could that have been a deciding factor for some of these athletes? We can’t know for sure, but when you look at the case of free agent forward LaMarcus Aldridge, you can’t help but wonder.
Aldridge left the Portland Trailblazers for the San Antonio Spurs. Aldridge twice met with the Lakers before ultimately selecting San Antonio. The difference in his tax bill is huge when you consider that Texas has no state income tax. At four years and $80 Aldridge would’ve paid roughly $10 million in state income taxes had he signed with the Lakers. That’s a huge difference. While Aldridge may have chosen the Spurs for many other reasons, it’s very likely that the tax equation had something to do with his decision.
According to the IRS, “if you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).”
In other words, anyone who has money in a foreign bank account that exceeds $10,000 at any time during a given year will need to report that income to the IRS via an FBAR. However, recently, the IRS issued some new guidance regarding the penalties for those who don’t file an FBAR. According to reports, the IRS released a statement that noted: “For each year for which it is determined that there was a willful violation, examiners must fully develop and adequately document in the examination work papers their analysis regarding willfulness.”
For any case that involves willful violation for several years, it is up to the examiner to recommend the penalty length for each year the violation was determined to be willful. The IRS stated that typically the total penalty for the combined years under examination would not exceed ‘50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination.”
Meantime, an examiner can recommend more or less than the 50 percent threshold, but the total penalty cannot “exceed 100 percent of the highest aggregate balance.” There are obviously many possible scenarios and each case will be treated separately on its own merits and circumstances. The bottom line is you should still report your FBARs each year and report them on time. If you need help planning for and filing your FBAR then contact GROCO today at 1-877-CPA-2006, or by clicking here.
Everyone loves the Internet and most people couldn’t live without it. There are a lot of great things about the Internet; with one of those things being that fact that there are no state and local taxes to use it. Over the years, they have been many arguments back and forth as to whether or not there should be taxes on Internet use, with most people siding against it, especially consumers.
In the latest effort to put a permanent stop to the talk of taxing the Internet, the U.S. House recently passed a bill that would put the possibility of Internet taxes to rest for good. That’s the good news. The bad news is the Senate is not expected to agree with the House and therefore the Permanent Internet Tax Freedom Act (PITFA) is not expected to pass in the Senate and become law.
The original Internet Tax Freedom Act has been around since 1988 and it has already been renewed five times since its inception. However, the latest iteration is set to expire on October 1 of this year if it is not extended again. The burden could be huge for consumers, especially those from lower income households if it is not renewed. Even though most lawmakers from both parties are opposed to Internet taxes, the latest bill is not expected to pass because the Senate has tried combining the PITFA bill with other bills.
The Senate is concerned about the ability of states to charge sales tax between in-state and out-of-state retailers. As long as that continues to be an issue the PITFA will likely not pass by itself.
Tagged with: internet
, tax ban
Just about anyone could benefit from a tax-differed retirement account. These accounts, most commonly known as 401Ks or IRAs, are a great way to save for retirement and in many cases save on taxes. The real question is when do you plan on cashing out that retirement fund? While you will always see immediate savings in your paycheck by deferring some of your income into a retirement account, the time will eventually come when the taxman comes calling.
However, there are some measures you can take to reduce your tax bill. You can convert your 401K plan, which could save you some money in retirement, rather than leaving the money in the tax-deferred account and withdrawing it later. If you do this then your funds will be taxed at the tax rate during the year you withdraw the funds. On the other hand, when you convert these accounts they will be taxed at the tax rate of the year you convert them. That means if this year’s tax rate will be lower than the normal tax rate when you are retired then now might be a good time to convert your funds to a Roth account.
Each person’s situation will vary and timing is the key to a successful conversion. There are also many variables to keep in mind, which is why it’s a good idea to speak with a certified account or experienced financial planner. At GROCO we can help you with your retirement planning to ensure that you get the most out of your retirement savings and keep your tax bill down. Just click here to contact us for help or call us at 1-877-CPA-2006.
How high is your tax bill? Would you say you spend more on taxes than you do on food? What about clothing and shelter; do you spend more on them than you do on your taxes? The answer might surprise you. That’s because in actuality you probably spend more on your taxes every year than you spend on all three of those things combined. That’s according to the Tax Foundation, which claims that Americans pays more in taxes every year than they do for essential necessities.
According to the Tax Foundation, Americans will pay $4.85 trillion in taxes in the year 2015 between federal and state taxes. That is approximately 31 percent of the country’s total income. Meanwhile, based on data from the Bureau of Economic Analysis the Tax Foundation estimates that the country will spend about $4.3 trillion in 2015 for basic necessities such as food, clothing and housing.
So do these numbers represent a real issue for the country and its citizens? That depends on how you look it. On the down side, the difference between spending on the basic essentials and taxes is getting worse. Whereas in 2012, the difference was about $150 billion, in 2015 it will likely be about $550 billion. That’s not a good sign. However, the Tax Foundation does not decipher spending between the different classes, so the number could be somewhat misleading.
In any case, there is no question that Americans are paying a hefty tax bill every year and the numbers would appear to indicate that that tax bill is only going to continue to rise. If you are interested in learning more about keeping your tax bill as low as possible, then contact us at GROCO today at 1-877-CPA-2006, or click here.
How many of you remember the Comedy Central game show: “Win Ben Stein’s Money?” The host, Mr. Stein, would challenge his opponents in answering trivia questions and actually give away his own money to those who beat him. That show has long been off the air, but the game show host, turned conservative commentator is apparently still OK, with giving away his money…sort of.
According to a recent commentary, from Mr. Stein, he says that even if the democratic presidential candidates take more of his money and give it to the poor, it won’t help the poor get out of poverty. Mr. Stein noted that he is happy to pay his taxes and has no problem signing his income tax check, as he should. However, he says even if you gave the poor all the money from the rich, it still wouldn’t help the poor long-term. He claims it wouldn’t be long before they most likely returned to their bad habits.
That’s because according to Mr. Stein, it takes hard work, dedication and discipline in order for people to be successful and become rich. Mr. Stein’s comments come after Hillary Clinton, and Vermont Senator Bernie Sanders, who are running fro president, both recently made comments about wealth inequality in America. Mr. Stein noted that there has “never been a time in history when the poor were made rich by making the rich poor, and I don’t think it will work this time either.”
Mr. Stein also noted that he is all for people making money and becoming wealthy in the U.S., but he does not believe it should come at the expense of those who are currently wealthy. Those who obtain wealth typically reach that status by getting an education, working hard and living with self-discipline.
The California tax code is about as healthy as the federal tax code. In other words, it needs a lot of work. Of course, there are many interested parties that are all hard at work trying to create plans that will help improve the state’s economy and tax revenue while helping those from the lower and middle class improve their overall financial outlook.
There’s no end to the powers that are trying to push their agenda to keep California moving in the right direction. The state has shown several positive signs of recovery, thanks in part to the governor’s Proposition 30 that raised the top income tax rate by nearly one-third and increased the state sales tax by about 3 percent. As for the increase on the state’s top earners, that gave California the highest personal income tax rate in America. The sales tax increase pushed means the state also has one of the country’s highest sales tax rates.
The sales tax boost in Prop 30 is set to expire in January of 2017, while the income tax increase is set to phase out two years later. While governor Jerry Brown has stated that he does not favor an extension of Proposition 30, there are other powerful groups and lobbyists that are already proposing such extensions. Meantime, many others are working on other proposals to help improve the tax volatility in the state.
Two panels of tax experts, the Think Long Committee and the Commission on the 21st Century Economy, are proposing completely revamped tax codes that will smooth out California’s revenue and promote growth at the same time. While opinions differ on how the state should continue to promote growth and keep a steady flow of tax revenue coming in, the real issue is fixing California’s entire tax code.
Just when you thought you were safe to access important and confidential information via the IRS website, it turns out scammers are at it again. According to reports from the IRS, thieves have managed to break into one of the government agency’s website services and steal the confidential information of thousands of taxpayers.
In fact, according to reports, the IRS says that the personal information of more than 100,000 taxpayers has been compromised. The idea behind the scam is to steal people’s private information in order to use the victims’ identities to then file false tax returns. The scam occurred through the IRS’s “Get Transcript” service, where taxpayers are able to access their returns and other filings from prior tax years.
According to IRS Commissioner John Koskinen these scammers are not amateurs. They appear to part of a large criminal syndicate that is attacking the entire financial industry in an effort to defraud both taxpayers and the government of millions.
The IRS discovered the issue after technicians noticed a large bump in the number of taxpayers that were asking for transcripts. While this kind of elaborate tax fraud continues to increase, the IRS claims that so far this year tax scammers have successfully claimed less than $50 million via false tax returns. However this new threat appears to very complex and the information that has been stolen could also be used in future tax seasons to defraud the IRS and taxpayers out of even more money.
Tagged with: hack