The Relationship Between Capital Gains And Economic Growth

Find Out whether or not lower taxes on capital gains promote economic growth.

Mitt Romney admitted on Tuesday that he pays less tax because most of his income is derived from his investments rather than from his wages. Investment incomes are only subjected to 15 percent withholding tax as opposed to the 35 percent tax rate that top employees pay. Romney’s concession reignited the debate as to whether the tax rate on capital gains should be that low.

Jared Bernstein is of the opinion that there is no clear way of showing that low taxes on capital gains promote investments. James Pethokoukis, on the other hand, claims that reduced tax on capital gains spur investment which create more jobs and improves the economy.

The last eight decades has seen a significant reduction of tax rate on investment income. The tax rate for this type of income was highest in 1977 at 39.9 percent. The prevailing rate is now just 15 percent. From these figures, it is clear that people still make investments regardless of the prevailing tax rate.

The New York Times also published an article about this very issue. Warren Buffet claimed that the prevailing tax rate does not make much difference for real investors. From the thousands of investors he has worked with in his long career, Buffet claims that investors never shied away from investing, even when the rates were highest in 1977.

Len Burman and Troy Kravitz of the Urban Institute have shown that over the last five decades, there hasn’t been any relationship between economic growth and tax rates on capital gains.

Tyler Cowen, an economist also has the same take on the issue. He claims that changes to the tax rate on capital gains usually affect investments that have already been made rather than new ones. Some people are of the opinion that a change in rates of taxes might increase 2012 taxes.

Simple Tips To Help You When Determining Your Filing Status

Eight Tips to Help You Determine Your Filing Status

Before you file your federal income tax returns, you must first determine you filing status. There are 5 filing statuses: Married Filing Jointly, Single, Married Filing Separately, Qualifying Widow or Widower with Dependent Child and Head of Household. Your filing status is normally used to determine your standard deductions, filing requirements, eligibility for certain deductions and credits. It also helps in computing correct taxes.

It is important to note that some people may have more than one status. The following are 8 tips to help you when filing your returns. These tips will help you determine your status according to IRS regulations.

Your marital status for the entire year is determined by your marital status on the final day of the tax year.

If you qualify for several filing statuses, choose the one with the lowest tax obligation.

Single filing status applies to you if you are divorced, unmarried or legally separated.

The filing status for married couples is Married Filing Jointly.

If your spouse passed away during the year, you can still use Married Filing Jointly as your filing status for that year.

A married couple might use Married Filing Separately as their individual filing statuses when filing their returns individually.

If your spouse died during the tax year and left you with children who still depend on you, you can choose Qualifying Widow or Widower with Dependent Child provided you did not remarry during the same year.

There is a lot of information regarding tax return filing that the average taxpayer may not know about. For more information about filing your federal return, visit www.irs.gov.

The Effects Of Budget Cuts In The IRS

Budget Cuts Have Affected The Performance Of The I.R.S., Report Claims

Due to budget cuts and an ever increasing workload, the IRS is unable to carry out its primary duty of tax collection effectively. This is according to a report in Wednesday’s issue of the Internal Monitor, a publication of the IRS.

Budget cuts have led to staff reductions causing a huge backlog of work. Hundreds of billions of dollars in taxes are not being collected every year because of these changes. This is what the taxpayer advocate, Nina Olson claims in her report to Congress.

In order to discharge its mandate more effectively, the IRS has come up with a number of automated software to enable taxpayers file their returns without having to deal with costly audits.

A study showed that even when taxpayers file their returns correctly using the software, their refunds took too long to process.

Ms. Nelson claims that the due to budget cuts, the agency has resorted to using short cuts that undermine the rights of taxpayers. She now wants the agency’s budget to be increased and the tax code streamlined to make it easy for the average taxpayer to understand.

On the other hand, senior officials at the agency claim that while budget cuts might have reduced service quality, the tax collection system remained fair and balanced.

A senior official at the agency refuted claims that there is a link between erosion of taxpayer rights and the challenging budget environment as baseless and inaccurate.

The report came at a time when the mandate of the IRS has been extended to oversee the health care scheme proposed by the President and Congressional Democrats.

Do Not Fall For Trecherous Tax Scams

Do Not Be Deceived By Cyber Criminals’ Tax Scams!

The U.S. Internal Revenue Service (“IRS”) fields thousands of  complaints annually from taxpayers concerned about suspicious faxes, e-mails, phone calls, and printed notices. Parties initiating such correspondence invariably purport to be IRS representatives. Many such scams even employ forged IRS insignia to entice a response. Known as “phishing,” the common objective of these scams is tricking unsuspecting taxpayers into disclosing sensitive financial and personal data. This info is then used to steal your money or identity.

Following are five facts to know about all forms of phishing:

– Legitimate IRS communications never solicit in-depth personal or financial data like passwords, PIN codes, or other such sensitive information.

– The IRS never initiates taxpayer contact via e-mail in order to obtain financial or personal information. Any email that purports to come from the IRS or attempts to direct you to an alleged IRS website should be handled as follows:

– Never respond to such message(s);
– Never open any attached file(s), as they typically conceal malware codes that could infect your entire system.
– Do not click any internal links. If you have already clicked on any such suspicious email link(s) or revealed sensitive information, promptly visit the official IRS webpage and conduct an internal site search for “identity theft” to glean further assistance.

The official IRS website is “www.IRS.gov.” Do not be misled or deceived by IRS impersonators whose URLs end with “.com,” “.net,” “.org”, or any domain or designation other than “.gov.” If you encounter a suspicious site that purports IRS affiliation, do not supply any sensitive or confidential personal or financial data. Report its URL and all other relevant information to the IRS immediately.

If you get a fax, letter, or phone call from any party claiming to be with the IRS that seems suspicious in any way, call the IRS hotline at 1-800-829-1040 immediately to learn if any legitimate need for IRS contact with you currently exists. Report any false communications immediately. Forward phishing emails promptly to [email protected]

You can do your patriotic duty and serve a valuable public service by preventing victimization of your fellow citizens. Full details and further information about reporting procedures for specific tax scams may be found at www.IRS.gov. Click on the “phishing” hyperlink featured within the website’s homepage.  Complete the brief form with all requested information. Such “small” individual steps are imperative to effective stamping out of tax scams.