What are the Tax Policies of the Two Leading Republican Candidates?
As I was watching the coverage of the Florida primary last night, I started to wonder what the tax plans were for Newt Gingrich and Mitt Romney, the two leading Republican candidates in this years presidential election. So I did a little research. I write this blog purely to inform and not insert any personal feelings or politics at all. All the information I share is readily available on both candidates’ websites and you can go there to further your knowledge. My goal is to try and consolidate their tax plans into this blog post.
Newt Gingrich’s tax plan, in a nut shell, would give all individual taxpayers the choice between paying their taxes under the current tax system or a flat tax system of 15%. Corporate taxpayers would pay an income tax of 12.5% and be allowed to fully expense capital expenditures (subject to some exceptions).
Gingrich’s choice for individual taxpayers would slightly modify the current tax system by 1) making capital gains, dividends, and interest income tax free, 2) apply a standard deduction of $12,000 for each individual and dependent, and 3) eliminate most of the deductions and credits currently available except the deductions for mortgage interest, charitable deductions, child credits and earned income tax credit. Newt’s plan also repeals the AMT tax and the federal estate tax. It is unknown if the gift tax would be repealed or not. Note the individual “flat tax” is different than previously announced and publicized flat taxes because Gingrich’s flat tax maintains deductions and credits for his flat tax.
Based upon early estimates from the Tax Policy Center, Gingrich’s plan would reduce the federal governments revenue by about 35%. Please note these estimates can change greatly once the full policies are announced and disclosed.
Mitt Romney’s tax plan seeks to permanently extend the 2001-2003 tax cuts, eliminate taxation of investment income for most taxpayers, reduce the corporate income tax rate, eliminate the estate tax, reduce the gift tax and repeal the taxes implemented in 2010 with the health reform bill.
Romney’s plan would permanently extend all the 2001 and 2003 tax cuts and continue a patch on the AMT tax. The plan would eliminate the tax on long-term capital gains, dividends and interest income for married couples filing jointly with income lower than $200,000 ($100,000 for individuals and $150,000 for heads of households). Romney’s plan is to permanently repeal the estate tax but keep the gift tax with a maximum rate of 35% and lifetime exemption of $1 million.
Romney’s corporate tax plan will seek to 1) reduce the corporate income tax rate to 25%, 2) make the research and experimentation credit permanent and 3) extend for one year the full expensing of capital expenditures. The plan would also allow a “tax holiday” for the repatriation of corporate profits held overseas. This would allow companies to bring their profits back into the US without the profits being taxed. Currently, a business pays the income tax based upon the countries tax policy where the business is located. They then keep the money within that country to prevent it being taxed again when brought into the US due to the US’s current high corporate tax rate.
Based upon early estimates from the Tax Policy Center, Romney’s plan would reduce the federal governments revenue by about 16%. Please note these estimates can change greatly once the full policies are announced and disclosed.
To learn more on each candidates tax plan, go to their respective websites to find out more detailed information than I have provided here. Like I said, my goal was to summarize their proposals but not persuade you one way or another. I hope I was able to give you something to think about when it comes time for your state’s primary to take place.
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Well you may have heard yesterday that the “Super Committee” failed to reach an agreement on how to come up with 1.5 Trillion Dollars over the next ten years to reduce the nation’s debt. The “Super Committee” was formed earlier this year when Congress passed the spending bill to prevent the government shut down. Their mandate was to have a way to save money by November 23rd and then Congress had until December 23rd to pass a bill to enact the committee's recommendations.
The IRS today announced its 2012 items which are adjusted for inflation. This list usually is not published until closer to Thanksgiving but came out early this year. Full details can be found in Revenue Procedure 2011-52. However, some of the highlights are:
You will be hearing a lot about small businesses and having to give them tax breaks in order to increase the amount of jobs in the U.S. You hear this from both sides of the political aisle.
Why am I blogging about a bill that reforms the patent system? Because the bill signed by President Obama disallows attorneys from patenting an idea which is deemed to be a "tax strategy".
The IRS is providing tax relief to the victims of Hurricane Irene. Certain taxpayers in New Jersey, New York, North Carolina and Puerto Rico will receive tax relief and other places may be added to the list after additional damage assessments have been made by the Federal Emergency Management Agency (FEMA). Certain tax filing and payment deadlines will be postponed until October 31, 2011. Corporations and businesses are included, even if they received an extension until September 15, 2011 to file their tax returns from last year. Individuals and businesses that had an extension until October 17 will receive the same extension. The relief also extends to those owing an estimated tax payment for the third quarter of 2011 which is usually due on September 15. Individuals should go to www.disasterassistance.gov for more information on disaster recovery. 
While businesses are outsourcing payroll duties, it is important for the businesses to remember that they are responsible for paying federal tax liabilities. This is very important for small businesses employers who do their own payroll. If you do not pay the IRS, they will come after you personally as you are the one responsible for the payment of the taxes.
It is important for students or parents paying tuition or other fees for students attending college to keep receipts for some possible tax benefits that may offset these costs. The benefits can usually apply to you, your spouse or a dependent you claim on your tax return. 
While tax returns are the last thing on your mind while you are enjoying your summer, it is a good time to start planning for next year’s tax return. Taking the time to organize your records makes preparing your tax returns easier. It may also help you remember relevant transactions, prepare a reply to an Internal Revenue Service notice, or validate items if you are chosen for an audit. The IRS has a few things they would like to taxpayers to know about their recordkeeping. 
For those individuals who are selling or have sold their home, the IRS has some important information to keep in mind. If you have own and used your house as your main residence for two out of the five years before the sale date, you are usually eligible to exclude up to $250,000 of the gain from your income ($500,000 for a joint return in some cases). If you have excluded the gain of another home during the two-year period before the sale of this home, then you do not qualify for the exclusion and the gain is taxable. If you are eligible to exclude the entire gain from the sale of your home, you do not need to include the gain on your tax return. If you are required to report the gain, you must include it on Form 1040, Schedule D, Capital Gains and Losses, but you cannot deduct a loss from the sale of your main home. You can determine the adjusted basis of your house by using worksheets provided in Publication 523. You may only exclude gain from your main home, which is the home you primarily live. You are also required to repay the first-time homebuyer credit if the property you purchased is no longer used as your principal residence within 36 months from purchase. The repayment is due the year the property is no longer your principal residence with your income tax return. Be sure that when you move that you update your address with the Internal Revenue Service and the United State Postal Service. 
The Internal Revenue Service has advice for soon-to-be-married and just-married individuals are rarely focusing on taxes after the wedding. First, it is important to notify any name change to the Social Security Administration so that when filing your next tax return the information will be correct. It is also important to report to the IRS if you have a new address by filling out Form 8822, Change of Address. Make sure to change your address with the United State Postal Service and report your name and address changes to your employer. Check the IRS Withholding Calculator to determine if you and your spouse will be placed in a higher income bracket. Be sure to select the correct tax form and choose the filing status that is best for you and your spouse to help save money. 
While moving can be expensive, the Internal Revenue Service has tips on deducting some expenses if your relocation is due to new employment or a new job location. To deduct your moving expenses, the move have occurred within one year from the date you started work at a new location and the job location is at least 50 miles farther from your previous residence than your former job location. You are required to work full time for 39 weeks during the first twelve months after you have moved to the area of your new employment location, or 78 weeks during the first 24 months if you are self-employed. You may deduct your expenses before you have fully satisfied the requirement if your income tax return is due. You may deduct the expenses for lodging while moving to your new residence, as well as transportation expenses, the cost of packing, crating and transporting your personal property, along with the expenses of disconnecting or connecting utilities. Use Form 3903, Moving Expenses, to determine your deduction for moving expenses. You will also most likely have to include any reimbursement your employer may provide for moving expenses. Be sure that when you move that you update your address with the Internal Revenue Service and the United State Postal Service. 
I just read an article talking about the best places to retire. This article focused on the cost of living and tax impact. There are many reasons why people retire in the locations they do. Weather, cost of living, health care availability and asset protection being a few of them.
With children on summer vacation, extra expenses arise, including summer day camp. The Internal Revenue Service has added summer day camp expenses to help you qualify for a tax credit. For children that are under 13 years old, most parents have to arrange some form of day care. Some things that the IRS wants parents to know about the tax credit that is available for these expenses are as follows. 
Many students have started summer jobs now that school is out. The IRS is sending a little reminder to these students that some of the money must be withheld by your employer for taxes. When first starting out a job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate, which is used to determine the money withheld from each paycheck. Also make sure that each employee is withholding the correct amount of taxes if you have more than one summer job. If you receive tips, remember that they are subject to federal income tax. Even money earned from odd jobs, such as baby-sitting and lawn jobs, are subject to federal income tax. If you are self-employed and have net earnings of $400 or more, you will have to pay self-employment tax to pay for your Social Security benefits. The self-employment tax can be figured on Form 1040. Food and lodging payments to ROTC students involved in advanced training are not taxable, but active duty pay during summer advanced camp is taxable. There are special rules if you are a newspaper carrier or distributor. If you are in the business of delivering newspaper, your entire pay relates to services instead of hours worked, and you execute services under a written contract then you are a direct seller and will be treated as self-employed for income tax purposes. 
While same-sex couples can get married in the District of Columbia and five states, they are still unable to file a joint federal tax return, share their retirement benefits, protect each other’s assets from estate taxes, or benefit from multiple tax breaks provided through federal law. Because of this, married same-sex couples must do more financial planning than individuals who are not married. In 2008, there were about 565,000 same-sex couples across the United States, including an estimated 32,000 who were married. 
Receiving a gift of stock from a family member can become difficult when you decide to sell it. The tax on capital-gains due from the sale of stock is determined on what the original owner paid for the shares, along with mergers, spinoffs and stock splits that may have occurred since the purchase. Sometimes, however, finding the original basis can be made more difficult with time. Inheriting shares is significantly easier because the basis of the stock is based on the stock value at the time the individual who bequeathed it died. To solve the mystery of the original basis of stock, look at family archives for original investment statements. The library or internet may even have some clues. Even a copy of an original bank statement showing the amount the shares were purchased may help in some cases. If you plan on gifting shares of stock, make sure to give the cost-basis information too. 
Congress allowed individuals to transfers their IRA account or 401(k) to a Roth IRA last year without the restriction that barred the conversion to those earning $100,000 or less. Individuals are allowed to give up to $5 million to their grandchildren without encountering the generation-skipping tax. The exemption is planned to end in 2013. Grandchildren will benefit more from a Roth IRA due to a longer life expectancy than a child. Due to the fact that Roth holders are not required to take distributions after the age of 70.5, the Roth IRA is the best way to save assets for their successors. Individuals are not required to pay income taxes on assets moved from another retirement account. Congress may end this estate-planning option before 2013, so take advantage of this deal while you can. 
An increase in the optional standard mileage rates for the final month of 2011 has been announced by the Internal Revenue Service. For all business miles driven after July 1, 2011 through the end of the year, the rate will increase to 55.5 cents a mile, which is a 4.5 cent increase. While the IRS usually updates the mileage rates once a year in the fall for the next year, the IRS made this change due to the raise in gas prices affecting individual Americans. The standard business mileage rate can be used to compute the deductible costs instead of tracking actual costs, which can also be used by federal government and many businesses that reimburse employees for their mileage. Also, there is an increase by 4.5 cents to 23.5 cents a mile for computing deductible medical or moving expenses. There is still the option for taxpayers to calculate their actual costs instead of using the standard mileage rates. 
Taxpayers with undeclared offshore accounts will be allowed by the Internal Revenue Service to apply for a 90-day extension of the August 31 deadline for coming forth. This extension would let individuals request the extension in writing by showing a “good-faith attempt” to meet the August 31 deadline and detail the missing information. The taxpayers would need to detail the steps they are taking to retrieve the missing information. The IRS will allow taxpayers to avoid criminal prosecution and pay any penalties relating to accounts that were undeclared. Those individuals that come forward will pay as much as 25% of the highest annual amount in the account between 2003 and 2010. This announcement also includes a category of taxpayers who could quality to receive a 5% reduced penalty applying only to unreported financial assets. Non-U.S. residents who had $10,000 or less and comply with home-country tax laws can qualify for the 5% rate. 
Current measures being taken to close the tax gap (the difference between taxes paid and tax owed) has begun to disproportionately affect small businesses. Part of this may be attributed to an increase in audits and information reporting requirements for small businesses, such as the new 1099 reporting requirement. 
With Florida unemployment rates at high levels, many displaced employees – executives as well as workers – are examining opportunities to start their own businesses. Deciding on the right structure for that business is an important step in starting the new business off on the right footing.
A “compromise” package has been signed by President Obama. The estimation of the 10-year cost of the Act is to be about $858 billion with most of the provisions of the bill sunsetting at the end of 2012. This means there is fuel for the fire already for the 2012 Presidential election.
