April 18 Filing Deadline Approaching; IRS Offers Tips to Taxpayers

The Internal Revenue Service today reminded taxpayers that they have two weeks remaining until the April 18 filing deadline and that they can use IRS Free File to do their taxes or file an extension.
As of March 25, the IRS has received more than 82 million individual income tax returns, which is 58 percent of the 141 million returns expected this year. The IRS has received about the same number of returns so far this year as it did at this time last year, while processing of returns is up 3 percent from the same time last year.
Numerous economic recovery tax credits are also still available. The IRS reminded taxpayers that for some credits, such as the Making Work Pay Credit, individuals must claim the $400 ($800 for married couples) in order to receive it. (Use Schedule M to calculate your Making Work Pay credit.)
Usually, 20 to 25 percent of all taxpayers file in the final two weeks of the tax season. And, usually, about 7 percent of taxpayers seek a six-month extension to file.
Taxpayers have an extra weekend to file this year because of a District of Columbia holiday. The deadline for 2011 is Monday April 18, instead of April 15.
The IRS offered these filing tips as the final countdown begins:
Start now to gather information and prepare your return to avoid hasty and possibly costly errors;

• Many tax credits from the American Recovery and Reinvestment Act (ARRA) are available. There’s an expanded American Opportunity Credit of up to $2,500 for tuition, books and fees; a larger energy credit of up to $1,500 and an expanded Earned Income Tax Credit for larger families of up to $5,666. The $8,000 first-time homebuyer credit is still available for people who entered into a binding contract by April 30, 2010, and went to settlement by September 30, 2010;
• Consider using IRS Free File, which is brand-name software or online fillable forms, to prepare and e-file your returns – at no charge. Software is available to the 70 percent of taxpayers – those who earn $58,000 or less. And, fillable forms have no income limitations. Get started at IRS Free File;
• File electronically to get a faster refund, have secure, encrypted transmission and a more accurate tax return. You can e-file through your tax preparer, through commercial software or through IRS Free File;
• If you cannot meet the April 18 deadline, file an extension, Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. All taxpayers can use Free File to submit a Form 4868 for an automatic six-month extension. And, Free File will be available through the October 17 extension deadline for late filers.
• The six-month extension is to file a return only; it is not an extension to pay taxes due. If you are unable to pay your taxes, file a tax return anyway to lessen the penalties and pay all that you can. Then work with the IRS to set up a payment plan or you can go to IRS.gov and use the Online Payment Agreement Application.

In addition to Free File, the IRS offers other free tax help services through volunteers at 12,000 sites nationwide. The Volunteer Income Tax Assistance (VITA) sites serve taxpayers whose 2010 incomes were $49,000 or less. Tax Counseling for the Elderly sites serve taxpayers who are 60 and older.
Note to editors, PSA directors and Web managers: Multi-media products are available. Public Service Announcements to support IRS Free File and the Earned Income Tax Credit are available in video and audio formats. Both IRS Free File and EITC have Spread the Word campaigns that offer tax-day countdown widgets, electronic banners and posters.

2011 FILING SEASON STATISTICS
Cumulative through the weeks ending 03/26/10 and 03/25/11
Individual Income Tax Returns	2010		2011		% Change
Total Receipts	82,533,000		82,276,000		-0.3%
Total Processed	77,812,000		80,318,000		3.2%
E-filing Receipts:
TOTAL	66,542,000		71,067,000		6.8%
Tax Professionals	42,354,000		44,712,000		5.6%
Self-prepared	24,188,000		26,355,000		9.0%
Web Usage:
Visits to IRS.gov	141,109,467		151,305,611		7.2
Total Refunds:
Number	68,587,000		69,955,000		2.0%
Amount	$204.260	Billion	$206.477	Billion	1.1%
Average refund	$2,978		$2,952		-0.9%
Direct Deposit Refunds:
Number	54,738,000		57,251,000		4.6%
Amount	$175.038	Billion	$179.827	Billion	2.7%
Average refund	$3,198		$3,141		-1.8%

Tax On Funk Food

In an effort to alter bad eating habits of its citizens, the Hungarian government plans to bring in “tax on hamburgers.”

“Ministry of studying the likely effects of introducing taxes called” hamburger tax ‘, “said economics minister Gjergi Matolči on the site of the Assembly.

“Psychoanalysis of dietary habits in recent years and their effects on health shows that eating too much fatty and salty food reasons more problems,” noted the minister.

“To stop this process, various ministries are studying taxes that could be introduce, their economic effects, but it is still unclear which products will be to relate, and how to used the profits from these taxes,” he added.

If being a “hamburger tax”, a fast food restaurant chains will be able to protest to him as a discriminatory measure, since the Hungarian cuisine is not easy.

IRS Announces VCAP Relief from Debt Extinguishment for Certain Issuers of Tax-Exempt Bonds

Internal Revenue Service (“IRS”) Announcement 2011-19 provides relief from debt extinguishment for certain issuers purchasing and holding their own tax-exempt securities under the Tax Exempt Bonds Voluntary Closing Agreement Program (“TEB VCAP”).

Notice 2008-41, modified by Notice 2008-88, and extended by Notice 2010-7 to December 31, 2010, provided temporary rules allowing state and local governmental issuers to purchase and hold their own tax-exempt obligations for temporary holding periods. This rule prevented extinguishment of the purchased obligations under § 103 and §§ 141-150 of the Internal Revenue Code (“Code”). These temporary rules provided relief from liquidity constraints in the tax-exempt bond market during the financial crisis.

For various reasons, some issuers that purchased their bonds under the temporary rules were unable to resell their bonds by December 31, 2010. Other issuers are experiencing an ongoing need to purchase and hold their own tax-exempt obligations due to certain financial challenges.

Closing agreements executed under this program provide that the extinguished bonds are treated as remaining outstanding for purposes of § 103 and §§ 141-150 beginning from the later of January 1, 2011, the expiration of the temporary rules, or the date the issuer purchases its obligations.

The closing agreement will require the issuer to:

(1) submit a resolution of its intent to resell or currently refund the extinguished tax-exempt bonds no later than 180 days after the closing agreement is signed;

(2) submit representations or an unqualified bond counsel’s opinion the bonds are outstanding legal, valid and binding obligations of the issuer under State law and, if treated as outstanding under the closing agreement, will qualify as tax-exempt obligations of the issuer under § 103 of the Code;

(3) pay a fee based on the formula described in the Announcement. The TEB VCAP requests are due no later than December 31, 2012 under the operating procedures described in section 7.2.3 of the Internal Revenue Manual.

Simplifying federal tax code will decrease fraud

USA TODAY's article "Inmates stole $39 million from the IRS in 2009" serves to highlight that the wealthy are not the only ones trying to get extra money back, avoid taxes or pay less than their compulsion under the current federal tax system. Income tax evasion and fraud cut across all income tax brackets.

A complex system of exemptions, deductions and credits creates a state of mind that others aren't paying their fair share, so why should I? It creates a false insight of tax evasion and fraud as victimless crimes. But the victims are the countless taxpayers who pay and file their taxes in a timely, precise manner. They are supporting financially all the tax cheats.

It is time to make simpler the tax code and stop using it to advance political agendas or to accomplish social engineering.

Every year, I pay my Pennsylvania income tax, and I am reminded how simple and fair it is. Take your income and increase it by the current tax rate, a flat 3.07%, and arrive at your tax obligation. Simple. There are very few adjustments, credits or exemptions. The system is fair. Low-income Pennsylvanians have their tax compulsions forgiven. For Pennsylvania retirees, Social Security and pension income do not count as taxable income.

By using the Pennsylvania income tax system, much of the fraud and abuse that occur with the current federal income tax system could be eliminated

Obama to recommend break for states on jobless aid

President Obama is expected to recommend easing the burden on states that on loan to provide jobless benefits during the economic downturn by allow them to postpone debt payments to the federal unemployment trust fund for two years.

The proposal in his upcoming 2012 budget is likely to be embraced by states frantic for help as they struggle to shore up budget shortfalls. But it is being disapproved of by congressional Republicans as a job-killer that will eventually inflict higher taxes on employers who pay the cost of most jobless aid.

Obama is likely to discuss the suggestion with Republicans on Wednesday, when House Speaker John A. Boehner (R-Ohio) and other House GOP leaders join him for lunch.

White House Press Secretary Robert Gibbs said the president thinks the steps future in his budget outline would reduce the burden on states providing jobless aid, and would give state officials time to "reduce what they offer and how they pay for it." Obama's budget is expected to be revealed Monday.

The proposal is not the only gauge to help states run the fiscal fallout from persistent unemployment, said one person familiar with the discussion.

Yet Republican leaders in the House and Senate have made it clear they have little interest in providing federal help to cash-strapped states, as Democrats did last year when they forbidden Congress. At the time, Obama approved a states' aid bill to keep teachers on the job and give medical care for lower-income residents.

"There will be no post security of the states," Rep. Eric Cantor (R-Va.), the House majority leader, said recently.

Thirty states owe almost $42 billion to the federal unemployment insurance trust fund, and the president's proposal would congeal for two years their interest payments to the federal government. Obama's plan would also halt the tax adds to that kick in automatically to pay it off.

Congressional Republicans say the Obama proposal would obstruct job growth by allowing states to eventually increase the tax on employers who pay for unemployment benefits.

IRS Announces 2011 Air Transportation Tax Rates

The Internal Revenue Service today announced the 2011 inflation adjustments to the excise taxes on air transportation.

Excise taxes apply to the domestic segments of taxable air transportation and to the use of international air facilities. The Airport and Airway Extension Act of 2010, Part IV, signed into law on Dec. 22, 2010, extends these excise taxes to air transportation that begins or is paid for no later than March 31, 2011.

These excise taxes are adjusted annually for inflation:
•    For 2011, the excise tax on the domestic segment of taxable air transportation is $3.70, unchanged from 2010.
•    The excise tax for 2011 for international flights that begin or end in the United States is $16.30, up from $16.10 in 2010.
•    The tax on use of international air facilities also applies at a reduced rate to departures of interstate flights that begin or end in Alaska or Hawaii. For 2011, the international air facilities tax on these flights is $8.20, up from $8.10 in 2010.

The new rates take effect Jan. 1, 2011.

Tax cut deal: What to expect in your paycheck

Come January, you'll start to see some changes in your paycheck, as the new Social Security tax break that President Obama signed into law Friday takes result. The measure, part of a sweeping package of tax cuts, will decrease the amount of money workers pay into Social Security in 2011, which will mean more take-home pay for many workers, although not for all.

Workers normally pay 6.2% on their first $106,800 of wages into Social Security. As a result of the tax cut deal passed by the House on Thursday night, they will only pay in 4.2% in 2011. So, for every thousand dollars in wages per paycheck up to the cap, one would only have $42 withheld (4.2% x $1,000), rather than $62 (6.2% x $1,000).

But given how late in the year it is, it may take employers a pair of pay periods to get everything working as it should. Employers typically need a few weeks to program and test their new payroll systems. The IRS just issued guidance on Friday morning, a few weeks later than normal because Congress waited until the very last minute to render its decision on tax policy for 2011.

"It could be the third paycheck of the year before you see a 'normal' check," said Scott Mezistrano, senior manager of government relations of the American Payroll Association.

Here's what that might mean:

Say you make $1,000 a paycheck. Your first paycheck in 2011 may have $62 withheld -- or $20 too much -- because your employers' payroll tax system has not been fully re-programmed, Mezistrano said. To compensate you for that, only $22 may be withheld in your second paycheck (4.2% x $1,000 - $20).

And, with any luck, by your third paycheck in 2011, everything will be set to the right dial. The IRS on Friday asked employers "to adjust their payroll systems as soon as possible but not later than Jan. 31, 2011. For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible, but not later than March 31, 2011."

How much more they will net relative to this year depends on whether they qualified for the expiring Making Work Pay credit. That credit provided up to $400 to any working individual making less than $75,000 (or up to $800 for working couples making less than $150,000).

For instance, individuals who make $50,000 will see a bump of $1,000 in take-home pay, which is $600 more than the Making Work Pay credit they got this year. For a couple at that income level, it will mean $200 more than they received under Making Work Pay.

For people making less than $20,000 (or couples making less than $40,000), they may actual see a drop of about $210 on average in their take-home pay relative to this year, because the payroll tax break will be worth less to them than the Making Work Pay credit was.

The IRS noted that the Social Security tax break for 2011 will have no effect on your future Social Security benefits, which are based on your career earnings.