Estimate: Millions Could Owe Taxes Due to Making Work Pay Underwithholding

by | Nov 23, 2009 | Archives

The Treasury Inspector General for Tax Administration estimated in a report released Nov. 16 that more than 15.4 million taxpayers could unexpectedly owe taxes for tax year 2009 as a result of having their taxes underwithheld for the Making Work Pay credit.

The credit, created by the American Recovery and Reinvestment Act of 2009, is in effect for tax years 2009 and 2010. The credit is advanced to taxpayers through their wages by modified income tax withholding tables, TIGTA said. This decreased federal withholding “creates the vulnerability that some taxpayers may have their taxes underwithheld at the end of Tax Years 2009 and 2010,” it said.

TIGTA’s analysis of the new withholding tables and the credit amount taxpayers are supposed to receive identified individuals who would receive more of the credit than they were entitled to get, TIGTA said. The modifications to the withholding tables do not take into account situations such as:

• dependents who receive wages,
• single taxpayers holding more than one job,
• taxpayers who receive pension payments, and
• Social Security recipients who receive wages, among others.

More than 1.2 million taxpayers who fall in these categories may have to repay some or all of the tax credit and may be assessed the estimated tax penalty or an increased tax penalty as a result of the credit, TIGTA said.

IRS is going to notify taxpayers that they can request a waiver if they are assessed the penalty or if they believe it will affect them, according to an IRS spokesman, but it is not sure what form such guidance will take.

The full text of the TIGTA report, Millions of Taxpayers May Be Negatively Affected by the Reduced Withholding Associated With the Making Work Pay Credit, No. 2010-41-002, is available at: http://www.treas.gov/tigta/auditreports/2010reports/201041002fr.pdf.

IRS settles with 14,700 over foreign accounts

IRS settles with 14,700 over foreign accounts

by | Nov 19, 2009 | Archives

MIAMI (AP) — More than 14,700 U.S. taxpayers came forward to disclose billions in offshore bank accounts in 70 countries under a voluntary Internal Revenue Service program allowing most to avoid criminal prosecution as long as they pay what they owe, IRS officials said Tuesday.

A flood of people came forward in the last days before the amnesty program expired Oct. 15, IRS Commissioner Doug Shulman said. The final total far surpasses the number who disclose offshore accounts in a typical year — about 100 — and comes amid a broad U.S. crackdown on international tax evasion at Swiss bank UBS AG and other institutions.

“To put it simply, this is a historic milestone for the nation’s hardworking taxpayers,” Shulman said in a conference call from Washington.

The total in taxes, interest and penalties collected from those in the voluntary disclosure program will be in the “billions of dollars,” Shulman said. The disclosures involved accounts on every continent but Antarctica.

Taxpayers flocked to the amnesty program after the U.S. reached an agreement in August with the Swiss government and UBS to obtain names of 4,450 U.S. taxpayers believed to be hiding assets in secret bank accounts. Earlier this year, UBS paid a $780 million penalty under a deferred prosecution agreement filed in a Florida federal court that included disclosure of an additional 150 names.

Seven of those people have been charged criminally, with at least two getting sentenced to prison time.

Shulman said the combination of the UBS disclosures and the amnesty program have fundamentally changed the offshore tax landscape, particularly in Switzerland where bank secrecy was the tradition for centuries.

“It shows we are serious about piercing the veil of bank secrecy,” he said. “The whole game has changed.”

Also Tuesday, the IRS and Swiss unveiled the criteria being used to determine which American UBS accounts will be disclosed under the August agreement.

Accounts being targeted include those that contained 1 million or more Swiss francs at any time between 2001 and 2008; instances in which there was clear fraudulent actions, such as false documents; and accounts that earned an average of 100,000 francs a year for at least three years.

The equivalent amounts in U.S. dollars vary widely depending on the year, as the dollar lost over a third of its value against the Swiss franc during that period. One million francs was worth about $600,000 in 2001, compared with about $900,000 seven years later.

U.S. Sen. Carl Levin, who chairs Senate Permanent Subcommittee on Investigations, called the criteria “disappointing” because it means some of Switzerland’s bank secrecy will remain intact.
“It complicates and muddies what should have been a straightforward agreement by UBS and the Swiss government to disclose Swiss accounts hidden from the United States by U.S. account holders,” said Levin, D-Mich.

The Swiss have until the end of August to hand over the names. Swiss officials said the first 400 names will be chosen by the end of this week, with another 100 expected to be ready by the end of the month. Those taxpayers who are picked for disclosure can appeal to Switzerland’s top administrative court.

By Curt Anderson, AP Legal Affairs Writer On 1:16 pm EST, Tuesday November 17, 2009
Market Update – Will The Bull Keep Up?

Market Update – Will The Bull Keep Up?

by | Nov 16, 2009 | Archives

LARGE CAPS BACK

The stock market’s huge rally since March was initially led by smaller stocks, because small caps were hit the hardest on the way down. But small caps aren’t looking that cheap anymore, and in October, the Russell 2000 index of small-capitalization stocks sank 6.9%, snapping a seven-month winning streak, while the Dow closed at its highest level in 2009.

CAN THE BULL OF 2009 LAST?

Since March, the Dow has jumped 57% and the S&P 500 has gained 62%, but there is a problem. What will the markets do when the very thing that has boosted the market dries up? The U.S. government has spent nearly $1 trillion to stimulate the economy and the Federal Reserve has maintained a policy of keeping interest rates near zero. Those will disappear as the economy’s health improves, potentially halting the bull market by taking away what has been its crutch…cheap and plentiful money.