TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

The Washignton Post reported on the International Economic Summit. The governments are "taking action" which means a government-induced economic disaster. If it is anything like the "help" of FDR's "New Deal" it will extend economic dislocations for far longer than a normal business cycle. Here are excerpts from the article : [T]he gathering in Washington of the nearly two dozen nations -- from every region of the world -- reflected the new balance of power emerging in the aftermath of a financial crisis that has devastated even well-run economies, a wrenching process that British Prime Minister Gordon Brown has dubbed "the birth pangs of this new global order." Under the plans outlined by the leaders, countries such as China, Brazil and India would gain greater roles and responsibilities as part of a restructuring of the international financial system, while European leaders won a commitment to new regulations and controls on banks, rating ...

2009 Inflation Adjustments Announced The IRS has released Revenue Procedure 2008-66 announcing increases in deductions, exemptions, limitations, and credits for 2009, as well as widened tax brackets. Key changes affecting 2009 returns include the following: The value of each personal and dependency exemption increases to $3,650. The new standard deduction is $11,400 for married couples filing a joint return, $5,700 for singles and married individuals filing separately, and $8,350 for head of household. Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900. The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028. The income limit for the credit for joint return filers with two or more children is $43,415. The annual gift exclusion rises to $13,000, up from $12,000.

2009 Social Security Cost of Living Adjustments Beginning January 1, 2009, the maximum earnings subject to social security tax withholding increases to $106,800. The earnings needed for one quarter of coverage is $1,090. The threshold for coverage for domestic employees increases to $1,700.

The IRS announced the following inflation adjustments for 2009: The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008. The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes. Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008. The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return file...

IRS Form 1042 - Report Payments to Foreign Businesses Businesses paying U.S. source income ( including interest, dividends, rents, royalties, wages, fees) to any foreign company, foreign individual, foreign partnership, etc. (foreign persons”) must report the payments and the amount of U.S. tax, if any, that was withheld to the IRS on Forms 1042 and 1042-S. The IRS is enforcing withholding compliance associated with Forms 1042 and 1042-S. The IRS will attack businesses failing to withhold the correct amount of U.S. taxes. For example, if a business withheld the wrong amount of U.S. tax from a payment it made to any foreign persons, the U.S. taxpayer will have to pay the tax due plus penalties and interest. The IRS has shown its determination to intimidate taxpayers into compliance by releasing a new provision in its audit manual: IRM 4.10.21, "U.S. Withholding Agent Examinations -- Form 1042". This manual explains the procedures to be followed by the IRS during an examina...

The Internal Revenue Service has an onerous and expensive 2-step process for approval of exempt organizations. Because of the new IRS 990 annual filing requirement for non-profits, the IRS is changing the process. Instead of giving a 5-year preliminary approval requiring a review after 5 years to demonstrate the charity receives public support, the initial letter in now a final "Letter of Determination." This will eliminate the review but does not make up for the extra work of filing the 990,

The IRS seized $97,000 from Raceland, Ky. The Mayor told a startled city council at an emergency meeting Wednesday night that the Internal Revenue Service has seized close to $100,000 from the city coffers because of non-payment of 2006-2007 taxes. This means the muncipal employees will lose their jobs and leaves the town in a precarious position for supplying fire and police services. Read more about this IRS attack.