The concept of cancellation of debt (sometimes referred to as discharge of indebtedness) as income that must be reported on your tax return is, to me, not at all intuitive. A TaxProf Blog post that discusses reported cases on the subject illustrates some of the ins and outs of the concept, and when cancellation of debt is, or is not, reportable as income on your federal income tax return.
WHY IS THE SECTION OF THE IRS WEBSITE ABOUT ESTATE AND GIFT TAXES UNDER THE HEADING “SMALL BUSINESS AND SELF-EMPLOYED?”
Businesses don’t pay estate and gift taxes, nor do they file estate tax or gift tax returns. Individuals pay estate and gift taxes and file estate tax returns (Form 706) and gift tax returns (Form 709). So why is the section of the IRS website about estate and gift taxes under the heading “Small Business and Self-Employed,” where no one who knows those basic facts is going to think to look? Is it because the IRS thinks that most taxpayers have the (mistaken) impression that only business owners need to be concerned about estate and gift taxes?
Most government agency web sites are poorly designed, but this is a particularly egregious example.
I guess there has been some criticism of the law that allows the State Department to deny your passport application if you have an unpaid federal tax liability of more than $51,000. I could be wrong, but I don’t think it’s a violation of anyone’s constitutional rights. I don’t think you have a constitutional right to a passport. It seems to me that Congress can put limitations on who gets a passport, and that’s what happened here. IF you think it’s objectionable, persuade Congress to change the law.
Via TaxProf Blog.
Unless it’s a family member, in which case my caller ID tells me that’s who it is, I just plain don’t answer the phone at home, period (that’s at home; at the office is different). If it’s important, the caller will leave a message on my answering machine identifying themselves and leaving a number for me to call back.
That approach means that the scammers that Coyote is talking about in his recent post on scammers posing as IRS collection agents (I have written about those scammers as well, more than once) have no opportunity to get through to me, although it has occasionally in the past resulted in them leaving some creepy messages on my answering machine.
The larger lesson here is this: how often do government agencies, and particularly taxing authorities, initiate contact with individual taxpayers by telephone? The answer is almost never. They communicate with taxpayers in writing (and I don’t mean email). That’s why I can confidently say: if you don’t know who is calling, don’t answer the phone.
DID YOU KNOW THAT THE GOVERNMENT CAN DENY YOUR PASSPORT APPLICATION IF YOU OWE MORE THAN $51,000 IN BACK TAXES?
I’m just trying to keep you informed. Read the details about the circumstances under which the State Department can deny your passport application due to “seriously delinquent tax debts,” and what you can do about it, in the IRS news release on the subject, IR-2018-7.
A HIGHER STANDARD DEDUCTION IS GOOD FOR LOWER INCOME TAXPAYERS, ISN’T IT? AND IF YOU’RE GOING TO TALK ABOUT A “NATIONAL OBSESSION WITH TAX CUTS,” HOW ABOUT THE GOVERNMENT’S OBSESSION WITH SPENDING?
An essay by one tax law professor has this as its thesis:
“New tax legislation enacted in December 2017 exacerbates the extent to which various itemized deductions, such as the charitable contribution deduction and the home mortgage interest deduction, disproportionately benefit high income individuals.”
A presentation by another has this as its title:
“Anti-Tax America: The Origins Of Our National Obsession With Tax Cuts”
I’m not going to link to them. They are linked at TaxProf Blog if you want to read more.
Are these representative of what tax law professors spend their time thinking, writing and speaking about?
I went to a presentation last week by a CPA who posts at currentfederaltaxdevelopments.com.
His topic? The new federal tax legislation, aka the Tax Cut and Jobs Act, of course. That is the current federal tax development.
My takeaway from that presentation is this: anybody who is not an expert cannot possibly speak authoritatively about the impact of the new federal tax legislation. Anyone who claims to have a simple explanation of the impact of that legislation doesn’t know what they are talking about.
The presenter I heard last week did a great job, but even in a room full of tax lawyers and CPAs, there were lots of questions.
When wage withholdings go down, paychecks go up. You’d think that development would get more attention than it has thus far.
This article from the AP that appeared on Tucson News Now had me nodding in agreement until the writer referred to the “significant limitations [in the new tax law] on long-cherished deductions, such as the federal deduction for state income, property and sales taxes.” I don’t think I have ever heard of any federal tax deduction, and certainly not one that probably benefits mostly higher-income taxpayers, as ”long-cherished.”
The mortgage interest deduction could be called “cherished,” maybe (and they did reduce that one for people with new mortgages of over $750,000), but the deduction for state and local taxes is “cherished?” Really?
Are states really going to shift their personal tax levies from income taxes to payroll taxes just to preserve the unlimited deductibility of state and local taxes on their residents’ federal income tax returns?
You’d think that the new federal tax legislation had eliminated entirely the deduction for state and local taxes (“SALT, as the acronym mavens have dubbed it). Remember, however, that isn’t what happened. All the federal tax legislation did was limit the state and local tax deduction to $10,000 per year. As I have alluded to previously, my hunch is that there aren’t all that many taxpayers who pay more than $10,000 in state and local taxes and have more than $24,000 in itemized deductions. You have to have more than $24,000 in itemized deductions to benefit from the state and local tax deduction. Those who do fit that profile are probably owners of expensive houses with big mortgages in high-tax localities.
I could be wrong, but I doubt that there’s a big enough constituency for a shift to payroll taxes that the idea will go anywhere, all the pontificating by politicians and academics notwithstanding.
IRS IS WORKING ON NEW WAGE WITHHOLDING GUIDELINES, BUT DON’T EXPECT ANY CHANGE IN YOUR PAYCHECK UNTIL NEXT MONTH
One of the recent changes to the federal income tax that has received less attention than you might expect is the revamp of the individual tax rates. That change, along with the increase in the standard deduction, will probably have a noticeable impact on the tax liability of many individual taxpayers. As a result, you might expect amounts withheld from your wages for federal income tax could be reduced.
To implement those changes, the IRS says, in a statement issued on December 26, that it is working on “new 2018 withholding guidelines [that] will allow taxpayers to begin seeing the changes in their paychecks as early as February.” In other words, don’t expect to see any change to the federal tax withholding in your first couple of paychecks this year. The IRS statement adds this helpful advice for your payroll department: “In the meantime, employers and payroll service providers should continue to use the existing 2017 withholding tables and systems.”
The contents of this blog, this web site, and any writings by me that are linked here, are all my personal commentary. None of it is intended to be legal advice for your situation.