Posts Tagged tax
Could Your Offshore Jurisdiction Go Bankrupt? Part I
Posted by Tetyana Matychak in Investing on July 20th, 2010
Offshore centers now face a perfect financial storm. In more prosperous times, revenues from the offshore sector, along with tourism, helped fuel these countries’ economies. Their governments emulated more developed nations by borrowing heavily to build up their infrastructure. They also bought votes with social programs and bloated government payrolls.
When the global economy tanked, tourist revenues fell, along with revenues from their offshore sectors. But the social programs and bloated payrolls remained.
Blame Offshore Tax Havens! (Again)
The economic crisis also led to worldwide drop in tax revenues, with the biggest losers big industrialized countries like the United States. Politicians in these countries found a convenient scapegoat to blame for falling tax revenues: dozens of mostly tiny offshore centers.
Using the economic crisis, the world’s richest and most powerful governments had the perfect opportunity to achieve a long-term goal: forcing offshore jurisdictions to enforce their tax laws. They acted through non-governmental organizations they control, such as the Organization for Economic Cooperation and Development (OECD). The OECD has the authority to issue supposedly non-binding “best practices” guidelines. And, the OECD now decrees that “best practices” meant becoming tax collectors on behalf of these rich and powerful governments. Read the rest of this entry »
Nineteen Billion Dollars Is A Big Deal
Posted by Tetyana Matychak in Banks on July 2nd, 2010
The blogosphere is having conniptions over Scott Brown’s announcement that he won’t vote for final passage of FinReg because of the $19 billion tax on banks that was incorporated at the last minute. The recurring theme is that $19 billion is a small amount of money and that anyway it’s going to be levied on the big banks that have benefited from government efforts to keep the financial system afloat.
Here’s what Ryan Avent has to say:
The fee in question was introduced during the conference session and is designed to cover the cost of the bill, that is, to make sure it’s deficit neutral. It’s a modest amount, and it’s levied on entities that have benefitted significantly from the massive government intervention deployed to keep the financial system afloat during the financial crisis.
And Joe Weisenthal jumps on the subject with this:
This whole thing is a bit silly. $19 billion, levies across the financial system, on various players based on their size is tiny. We repeat: tiny. And beyond that, this isn’t some kind of punitive tax; it’s designed to pay for the enforcement of the bill, which presumably Scott Brown is in favor of, if he likes the rest of the bill. Read the rest of this entry »
Does The Tax Code Penalize Savings?
Posted by Tetyana Matychak in Budget on June 4th, 2010
Larry McDonald has a mini crusade on adopting a flat tax. The proposal most likely encounters more political issues than purely economic ones. But a flat tax is one way of looking to solve the large economic issue. Mainly, we are a society wedded to the urgency of consuming now and have become terrible savers as a result. While politicians may be setting up financial literacy task forces and regulating the financial industry, it may best spend more time looking at how the tax code promotes us the wrong type of behavior (unless, conspiracy minded people think this is exactly the type of society leaders want…).
For example, the American estate tax is a punitive tax (the Federal tax is 55% in 2011 with an exclusion amount of $1 million assuming Congress does not pass other legislation) which implicitly encourages people to spend it in life rather than pass it onto generations. The larger, more global problem, is that interest income on savings is taxed higher than any other form of investment income.
The reason for this policy used to make sense. When North American society actually saved and the economy was in a long boom period, the tax code was attempting to discourage the taxpayer from stashing money in high-interest savings accounts and, instead, encourage investment in industry by investing in equities. This policy works if you assume: (i) the population is saving; and (ii) the demographics were aligned in such a way that a taxpayer could enter into the risk-reward of investing in equities. Read the rest of this entry »
Mortgage Data Leaves Bankers Uncertain of Trend
Posted by Tetyana Matychak in Banks on May 24th, 2010
Any way you look at it, extraordinary numbers of people are having trouble paying their mortgage. What is less clear is the extent to which the problem is getting worse, better or is simply holding its own.
Data released Wednesday by the Mortgage Bankers Association showed the mortgage delinquency rate rose in the first quarter to 9.38 percent of all loans outstanding, from 8.22 percent in same period last year.
When adjusted for seasonal variations, the default rate rose over 10 percent for the first time.
Seasonal adjustments are used to smooth out data in ordinary times, but in these extraordinary times the bankers’ group said it was not sure how much they could be trusted. In the first quarter the seasonal adjustments showed the delinquency rate worsened considerably. The raw data, on the other hand, indicated a marked improvement.
Warning that “fundamental market factors” might be exercising undue influence over the seasonal numbers, the mortgage bankers said they did not know whether the optimistic or pessimistic sequence was more accurate.
“We may be at a point where the market is changing for the better, but we can’t be sure because of the confounding effect of seasonal differences,” said Jay Brinkmann, the group’s chief economist. Read the rest of this entry »
Whistle-Blowers Become Investment Option for Hedge Funds
Posted by Tetyana Matychak in Fund Markets on May 21st, 2010
Hedge funds have found a new market to invest in: whistle-blowers.
Informants who turn in tax cheats have to wait years to get their share of any reward from the I.R.S.’s recently expanded whistle-blower program. So hedge funds, private equity groups and other big investors are offering an alternative. They are essentially agreeing to buy a percentage of those future payouts in exchange for a smaller amount upfront to the whistle-blowers.
The surging size of the potential awards is driving all the interest. Three years ago, the I.R.S. began offering bigger rewards — 15 percent to 30 percent of whatever money the government recovered — in a move that has turbocharged the agency’s whistle-blower program.
Where it once handled only a trickle of tips, often involving relatively small amounts of unpaid taxes, I.R.S. offices now receive a torrent of big money claims. Accountants and company employees have taken to trooping in bearing computer records and boxes of documents to back up their claims of underpayment by big companies.
In what is believed to be the first of these structured tax payouts, an I.R.S. informant who reported that an overseas multinational corporation had underpaid its taxes by billions of dollars received $4 million last month from a private equity firm. In exchange, the firm will receive a portion of the award the informant expects to collect eventually. Read the rest of this entry »
Hedge funds, private equity expect tax hike
Posted by Tetyana Matychak in Budget on May 19th, 2010
Private equity, real estate and hedge fund managers are increasingly resigned to a tax increase on their profits as U.S. lawmakers get set to vote next week on a long-delayed measure.
At issue is a change in the tax treatment of profits earned by partnership fund managers, known as “carried interest.” The measure would treat the profits as ordinary income subject to a 35 percent rate, more the double the 15 percent rate they are currently taxed at as capital gains.
The tax change, which lobbyists have managed to beat back for three years, has gained steam as lawmakers hunt for revenue to fund other popular tax breaks for business that have expired. Many lobbyists and former opponents now see passage of an increase as inevitable.
“Many people are resigned because it is round four,” said Francois Hechinger, a partner at BDO Seidman advising private equity and venture capital clients..
He added that they are still putting up a fight to try to soften the impact. “If it was really their choice they wouldn’t give up on it at all.”
The $20 billion or so of revenue that the tax change could raise over a decade would help pay for a politically popular group of tax breaks for individuals and business, including a corporate research and development tax credit. Read the rest of this entry »
How to Prepare for an Audit
Posted by Tetyana Matychak in Budget on May 13th, 2010
It’s the last thing most people want to see at this tax-paying time of the year: A plain brown envelope marked “Official Government Business” with the return address of the Internal Revenue Service. But don’t panic. The news might not be as bad as you think.
While a full-blown tax audit might be your first thought, that notice might be the extent of your contact with the IRS. The agency might be telling you that you’ve made a math error on your return that must be fixed. Or maybe something on your W-2 doesn’t agree with your tax return. In such correspondence-audit situations, you usually can clear up the discrepancy with a couple of exchanges of information via the mail.
Then again, the worst could happen and that envelope could be a notice that one of your past tax returns is being audited in full. In this case, what do you do?
Sharon Tabor Warren, an enrolled agent and author from Amherst County, Va., says, “If I have prepared the client’s tax return for the year under audit, I ask them for an IRS power of attorney, Form 2848, and to forward their audit notice to me. Then, I tell them to sit back and relax — I’ll handle it from there.”
This makes a good case for having a professional prepare your tax returns! Read the rest of this entry »
What If Your Tax Refund is Wrong?
Posted by Tetyana Matychak in Budget, Favourites on May 12th, 2010
Most of us get refund checks at tax time. And most of the time, those refunds are just what we had been eagerly awaiting. But occasionally, the amount on an IRS check is not what we expected. In some cases, it’s less than we figured on our 1040s. Every now and then, it’s more.
Regardless of whether the refund discrepancy goes against you or favors you, some steps can be taken to resolve the matter. That way, even if you and the tax collector aren’t necessarily satisfied with the eventual amount, you’ll at least understand the mathematical misinterpretation.
Explanation en route
First, don’t panic. There’s usually a logical explanation for why you and the Internal Revenue Service came up with different numbers.
The IRS will send you a written explanation for the unexpected amount. The only problem is that the explanation doesn’t always accompany the check. Such coordination of cash and comment is particularly difficult with directly deposited refunds, which are likely to show up unexplained in your account first.
Why your refund might be an unexpected amount: Read the rest of this entry »
Energy Efficient Home Improvement
Posted by Tetyana Matychak in Budget on May 4th, 2010
Tax breaks for energy efficient home improvement purchases are set to expire in 2010, leaving taxpayers with just enough time to take advantage and save money.
This year is a good time to make green home improvements. This is because — unless Congress extends the tax breaks again — the advantages offered by green home improvements will be disappearing. 2010 is the year they expire, so if you want to get an advantage for upgrading your home with green improvements, now is the time to do it.
Available Tax Breaks Related to Home Improvement
You can get a tax credit for 30% of the cost of making small upgrades to your home, up to $1,500. This is a credit that will reduce the amount of money you owe on your 2010 tax return (to be filed in 2011), kind of like a gift card. These small upgrades include the following:
High efficiency heating and cooling systems.
Better insulation.
Energy efficient windows.
Energy efficient doors.
New water heater.
Duct seals. Read the rest of this entry »
Where’s My Refund
Posted by Tetyana Matychak in Budget on May 3rd, 2010
Still waiting for a 2009 tax refund? Millions of people filed their tax return on April 15. With so many returns to process, the IRS has many refunds queued up waiting to be sent out to taxpayers.
Now that April 15 — Tax Day — has come and gone, millions of people are waiting to receive a tax refund from the IRS. It’s an anxious time for many taxpayers who could use the help of a government tax refund to pay their bills. How can you find out when your refund will arrive?
Tax Refund Status
You can check the status of your refund online. In order to this, use the refund status tool provided by the IRS. You must provide the following:
Your Social Security Number (or Individual Taxpayer Identification Number)
Your Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er))
The exact whole dollar amount of your refund
If you are unable to check your status online and you believe there may have been a problem with your tax return or your tax refund, then call the customer service line at the IRS. Automated information is available 24 hours a day. Read the rest of this entry »
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