News provided by: State Tax Initiatives Receive Mixed Results on Election Day CCH Issues Special Briefing on President-Elect Obama's Tax Proposals PwC Pays $97 Million to Ohio Pension Funds in AIG Case IRS Announces Record-Breaking 2008 E-File Statistics IRS Seeks Applications for TE/GE Advisory Committee Five Business IT Tips to Make Your Firm a Green Champion Results were mixed for environmental and energy related initiatives but in Minnesota, a state where ballot initiatives are uncommon, voters approved a proposed constitutional amendment to set aside a percentage of the sales tax for environmental and arts funding. More citizens cast "Yes" ballots for the amendment than voted for any candidate for president or senate, Minnpost.com reports. Colorado voters rejected Amendment 58, which would have substantially raised the amount of severance taxes oil and gas companies had to pay through the removal of a property tax credit. An effort to alter state spending limits under Colorado's Taxpayers' Bill of Rights (TABOR) law was also defeated. Results for other tax measures by state are: California – Measure to authorize incentives for purchasers and developers of high fuel economy vehicles – Defeated. Measure to finance high speed train system with bonds and federal funds – Passed. Florida – Amendment 3 creating property tax exemptions for residential improvements that increase renewable energy use or resistance to wind damage. -- Passed. Amendment 4: Conservation property tax break -- Passed. Amendment 6: Working waterfront tax break -- Passed Maine – Repeal of a 2008 law that increased excise taxes on beer, wine and soda -- Passed Missouri – Increase in state tax on casinos to 21 percent and elimination of the $500/two- hour loss limit for individual gambling losses. – Passed Oklahoma – Amendment requiring a person or a business to file an application before receiving a tax exemption. – Passed Oregon – A measure that would allow unlimited deductions for federal income taxes on state income tax returns – Defeated.
"Recent history supports the likelihood that there will be a major tax bill in 2009, but historical data suggests that no first-term tax law will pass until May, and usually not until late July," according to George Jones, JD, CCH senior tax analyst. "But, when legislation is passed, it's likely that many tax provisions will be retroactive to January 1," Jones said. Middle-class Benefits Middle-class and working-class families would benefit under Obama's tax proposals from the continuation of the 10-percent bracket past its scheduled expiration date in 2011 and a $500 per-wage earner tax credit based on the first $8,100 in payroll taxes. Obama has also promised to eliminate income taxes for seniors with incomes under $50,000 a year. Other proposals discussed with little elaboration during the campaign include a refundable mortgage interest credit, enhancing and making refundable the child and dependent care credit, new education credits, and expanding the Earned Income Tax Credit. Tax-free unemployment benefits for 2008 and 2009 have also been mentioned, and may be part of a second stimulus bill if Congress returns for a lame duck session this year. High Incomes Affected Obama's tax policy for individuals also entails a partial retreat from the Bush tax cuts for high-income taxpayers. Obama would make the 10-, 15-, 25- and 28-percent brackets permanent, but he would bump the 33-percent bracket up to 36 percent and the 35-percent bracket up to 39.6 percent, The President-elect also has proposed restoring the personal exemption phase-out (PEP) and itemized deduction limitation (Pease deduction) for individuals making over $200,000 and families with incomes above $250,000, provisions set to expire under Bush's tax plan. "Taking into account restoration of PEP and the Pease limitation, the top marginal individual income tax rate would effectively be above 40 percent," Jones observed. "Because of this, 2008 year-end tax planning should consider such things as accelerating some income into 2008 and deferring some deductions until 2009 or beyond." High-income wage earners would also see an increase in FICA tax, in the form of a payroll surtax, possibly as high as four percent, on earnings above $250,000. As with other proposals that have yet to be cast into concrete legislative language, the potential tax increases for high-income taxpayers are open to a certain amount of interpretation, however, as well as temporary modification in response to the nation's financial crisis. "Obama's statements so far have left unclear whether the cut-off amounts, for example, apply to wages, gross income, adjusted gross income, or taxable income," Jones noted. "There's a fair amount of wiggle room between these different tax categories, leaving the next President and Congress some ability to fine-tune the actual impact on individuals and on the federal budget." The CCH Special Tax Briefing notes that a repeal of the alternative minimum (AMT) tax is unlikely to be proposed, but that some attempt will probably be made to continue, and possibly make permanent, the "patch" that keeps millions of taxpayers free of the AMT. Dividends, Capital Gains, Retirement Issues Obama would continue to give dividends the same favored treatment as capital gains, but would increase the top capital gains rate for individuals earning more than $200,000 and families over $250,000 from 15 percent to 20 percent. "Taxpayers in the 10- and 15-percent brackets should still benefit from a zero-percent capital gains rate, and Obama has proposed a zero rate for all investors for certain small business stock, but hasn't provided many specifics," Jones said. The Briefing notes that Obama has supported relaxing penalties for early withdrawals from retirement plans and temporarily suspending required minimum distributions. Obama has also proposed pegging the estate tax at 45 percent, but with a $3.5 million per-person, $7 million per-couple exemption. This would effectively eliminate the tax for 99.7 percent of estates, according to the President-elect. A "Mixed Bag" for Business, Energy The CCH Special Tax Briefing predicts that business can expect a mixed bag of provisions under an Obama administration, with tax cuts keyed to domestic job creation, extension of $250,000 in first-year expensing, and making the research and development credit a permanent fixture of code offset by provisions to discourage moving jobs offshore, closing of unspecified "loopholes" and possible limits on executive compensation. Small businesses may also benefit from a tax credit for providing health benefits to their employees. Tax provisions are likely to feature in Obama's energy policy, as well. The CCH Briefing notes that at various times, Obama has endorsed expanded tax breaks for alternative energy production, tax rebates to help pay home heating costs, and a windfall profits tax. "Some of these proposals were made when energy prices were much higher than they are now," Jones said. "Nevertheless, they may still surface in legislation this year or next." Change Written Into Law The road from tax proposal to amendment of the Internal Revenue Code can be a long and tortuous one, but with the swearing in of Obama, for the first time in three years, the same party will control the White House and both Houses of Congress. "The theme of Obama's campaign was change and in the realm of taxes, that theme is likely to be written into law within the near future," Jones said. The settlement stems from a suit filed against AIG in 2004 by three Columbus-based pension funds: the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, and the Ohio Police & Fire Pension Fund. The pension funds wanted damages for shares bought between October 1999 and April 2005. AIG was forced to restate earnings by almost $4 billion in 2005 after an investigation by the SEC and former New York State Attorney General Eliot Spitzer, which led to ouster of CEO Maurice "Hank" Greenberg. The pension funds contend that PwC violated securities laws in its audits of AIG's financial statements during those years. "We have decided to settle the case at this stage to avoid the enormous litigation costs that would be incurred if the case continued against the firm, while at the same time eliminating any potential exposure," said a PwC spokeswoman in a statement to The Am Law Daily. The payout is one of the 10 highest to be paid by an accounting firm to settle a securities fraud class action, Chris Geidner, Ohio's principal assistant attorney general, told the Guardian. "Auditors are not 'non-speaking actors' and they have to issue opinion letters which are part of a company's SEC filings," he said. The PwC settlement must be approved by U.S. District Court Judge John Sprizzo in Manhattan. PwC continues to serve as AIG's independent auditor. The case is not related to AIG's $122.8 billion bailout by the federal government. "More people with home computers and businesses embraced electronic filing this year," said IRS Commissioner Doug Shulman. "Every year, more people realize that electronic filing is the safe, accurate way for taxpayers to complete their taxes and get faster refunds." Tax Returns Filed by Individuals While the total number of returns has increased by 23 percent during the past decade, the number filed electronically has increased by 206 percent. This year, almost 27 million returns were filed by individuals from their home computers, up from 22.6 million last year - a 19 percent increase. Filings from home computers accounted for 30 percent of all returns e-filed by individuals. Even though individual tax filings were spurred to unprecedented levels by the economic stimulus payments, the percentage of those e-filed increased to 58 percent. Free File During 2008, taxpayers with an adjusted gross income of $54,000 or less, or about 70 percent of individual taxpayers, had the option of choosing to e-file for free through IRS Free File, a partnership between the IRS and some software manufacturers. Almost 4.8 million tax returns were filed through Free File, an increase of 24 percent over last year's total of almost 3.9 million returns. Refunds: Direct Deposit and IRS.gov Set Records More taxpayers chose to receive their refunds through direct deposit during 2008. The agency made 66 million direct deposit payments in 2008, up 8 percent from 61 million payments at the same time in 2007. Overall, the IRS issued 107 million tax refund payments in 2008, up almost 2 percent from 105 million refund payments for the same time in 2007. As of Oct. 31, the average refund for 2008 was $2,371, up 4 percent from $2,280 at the same time in 2007. IRS.gov Popularity of the IRS Internet site, IRS.gov, continues to increase. As of October 18, IRS.gov had been visited 326,522,488 times. Tax Returns e-Filed by Businesses Businesses also broke e-file records during 2008 by filing almost 2 million corporate and partnership income tax returns, an increase of more than 50 percent over the prior year. Partnership e-filings saw the steepest increase. Large partnerships, those with more than 100 partners, e-filed more than 27,000 returns during 2008, up 156 percent compared to the prior year's total. Corporations and partnerships e-filed 1,944,421 tax returns during 2008, up 50 percent from last year's total of 1,294,475. The total number for e-filed returns that were not filed by individuals was 3,365,757, up 65 percent from last year's total of 2,172,753. This number includes forms e-filed by exempt organizations. ACT members represent employee plans, exempt organizations, tax-exempt bond issuers, Indian Tribal governments, as well as federal, state, and local governments. ACT provides the IRS will regular input regarding the policies and procedures of the agency’s Tax Exempt and Government Entities Division. Nine vacancies exist for these customer segments: Employee Plans – two vacancies ACT members are appointed by the Secretary of the Treasury and serve two-year terms, with new terms to begin in June 2009. All applications should reflect relevant qualifications. A notice in the Federal Register contains more details about ACT and the application process. Applications will be accepted through Dec.1, 2008. Applications should be sent to: Steven Pyrek or by fax to 202-283-9956. 1. Install Local Cooling, a freeware application that lowers your computer's power consumption and allows you to customize the amount of power you want to save. It tells you how much KWh you save and even the equivalent of trees. 2. Use a laptop rather than a desktop. Desktops, especially Intel P4 computers shipped between 2003 and 2005, are notorious for being power drains. Switching to a laptop will allow you to decrease as much as 75% of your power consumption. 3. Switch off computers and peripherals when not in use. When leaving your office, make sure that computers and screens are switched off as well as printers and other peripherals, with the exception of any backup devices. 4. Do not buy a full-fledged server/computer if you do not need one. Low power, low cost Multi Purpose Network Attached Storage (NAS) products are a perfect substitute for bulky servers. Alternatively, you could recycle an old computer into a fully functional NAS. 5. Recycle your paper instead of dumping it onto the street and possibly into the hands of crime gangs. Check your local paper and directory for green companies. Source: 5 IT tips to make your company a green champion
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