Tag: Tax Credits

Who Would Have Guessed That Texas CPAs Would Oppose the Elimination of Oil and Gas Tax Breaks?

Next thing you know you’ll hear about CPAs in Iowa (with the exception of one with whom we’re acquainted) opposing the repeal of ethanol credits.

The Texas Society of CPAs’ Federal Tax Policy Committee addressed the issue in its “Analysis of Legislative Proposals to Repeal Certain Tax Treatments of Domestic Oil and Gas Exploration and Development”.The committee agrees that reducing the deficit is of utmost importance, but said that any effort to cut tax incentives for oil companies and raising taxes on oil and gas exploration and development should be weighed against its potential to exacerbate the current underemployment issue, and the need for a secure source of energy.

As noted in the analysis, the committee said it believes repealing tax benefits and allowances for the industry could adversely impact the state’s oil and gas industry, and the economies of Texas and the U.S.

Texas CPAs Oppose Elimination of Oil and Gas Tax Breaks [AT]

Office Depot Loses Tax Credits; CFO May Have Lost His Lunch

Office Depot CFO Mike Newman can’t handle – CAN’T HANDLE – the bad news handed down by the IRS:

“I’m sick about it,” Newman said of the mistake the company and its advisors made in thinking Office Depot could use tax credits of $80 million last year and $63 million this year, calling the mistake his responsibility. Office Depot and its tax advisors believed the company was eligible to use prior losses to get tax credits under the American Recovery and Reinvestment Act of 2009, but the IRS told the company that other tax rules superseded the ones under which Office Depot was using to determine eligibility.

Of course we’d love to know who this “advisor” is that Newman is referring to. Since Deloitte earned over $589k in tax fees for fiscal year ’10 you could conclude that he’s referring to D. It’s certainly possible that it’s someone else so we invite you to come up with some theories.

Office Depot Off; Explains Impact Of IRS Tax-Credit Denial [Dow Jones]

Making Work Pay Tax Credit May Make Taxpayers Pay

Filed under: ironic press releases from the Treasury that we love to get.

News from our favorite federal taxation authority this morning reveals that while the IRS believes they did everything they were supposed to, some taxpayers may have taken their Making Work Pay credits incorrectly, causing them to actually owe money instead of celebrating free money. Oops! The Treasury Inspector General did their best to warn everyone this could happen and, oh look, it did.

Overall, the Internal Revenue Service (IRS) implemented the Making Work Pay Credit as intended by Congress, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

However, the report also found that approximately 13.4 million taxpayers who received the credit may owe taxes because adjustments to the withholding tables did not take into consideration all taxpayer circumstances. For example, single taxpayers with more than one job, joint filers where both spouses work or one or both of them have more than one job, taxpayers who receive pension payments, and Social Security recipients who receive wages are among those who may be negatively affected.

The Making Work Pay credit is an economic stimulus provision of the American Recovery and Reinvestment Act of 2009 (Recovery Act). The credit is advanced to taxpayers by their employers through withholding reductions which results in an increase in taxpayers’ take home pay. The credit is effective for Tax Years 2009 and 2010.

“The Making Work Pay Credit is a key tax credit designed to increase spending and stimulate the economy,” said J. Russell George, the Treasury Inspector General for Tax Administration. “However, many taxpayers who are accustomed to receiving refunds when they file their tax returns may have owed taxes and incurred penalties in 2009 and may yet again in 2010 because they were advanced more of the credit than they were entitled to claim,” Mr. George added. “My office issued a report in November 2009 warning of this possibility and encouraging the IRS to increase outreach and waive penalties for taxpayers who may be negatively affected by the credit. We still believe further actions are needed to ensure no taxpayer is unfairly penalized.”

The November 2009 report warning this could go down mentions that some taxpayers were proactive and adjusted their withholding so as not to be impacted by the potential “free money” presented by this “credit” which, for some taxpayers, will turn into money owed back to the Treasury or even tax penalties.

The credit was advanced to taxpayers by their employers through withholding reductions that result in an increase in take home pay, in the hopes that $400 ($800 for joint filers) more in each eligible taxpayer pocket might help increase spending and stimulate the economy. Because of the nature of the credit, however, some taxpayers may have had their taxes underwithheld at the end of the year.

Intended to stimulate whose economy?

Iowa Sets the Bar on Film Tax Credit Inefficiency

From known tax credit antagonist, Joe Kristan:

Before the Iowa Film Tax Credit program exploded in scandal in September 2009, the state had granted $31,967,641 in transferable tax credits to filmmakers. Yesterday the State Auditor reported that $25,576,301 were issued improperly — a full 80% of the credits granted.


Quite the field of dreams. Read more over at Tax Update Blog.

Also see:
What Are Your Taxes Buying Hollywood?

Accounting News Roundup: Pols Line Up Against the Estate Tax; PCAOB Threatens to Stonewall Foreign Audit Firms; RubinBrown Forms LifeSciences Practice | 10.14.10

Estate-Tax Rises Again as Issue on Trail [WSJ]
“More than 250 current congressional candidates, mostly Republicans, have signed a pledge this year to support elimination of the tax, according to the advocacy group sponsoring the effort. The signers include 53 incumbents and more than half of Republicans running for House and Senate. During the 2008 elections, when the group first began seeking supporters, only 30 candidates signed up.

The estate tax has become a particularly hot issue in the West, including in Washington state’s Senate contest, and some rural House districts where Democratic incumbents appear vulnerable. a hotter issue in rural areas because it raises particular concerns among farmers and landowners.”

Religious group took alleged terrorist money [WaPo]
“A group of Ohio ministers has asked the Internal Revenue Service to investigate the organization that sponsors the National Prayer Breakfast because it received money six years ago from an alleged Islamic terrorist organization trying to finance illicit lobbying.

ClergyVoice, the activist group that wrote to the IRS commissioner Wednesday, complained that the Fellowship Foundation violated its obligation as a tax-exempt organization not to deal with such entities.

The foundation, an Arlington-based religious enterprise associated with a house at 133 C St. SE where several members of the House and Senate have rented rooms, acknowledged Wednesday that it had received two $25,000 checks, in May and June 2004, from the Missouri-based Islamic American Relief Agency.

The charity was included on a Senate Finance Committee list of terrorist financiers in January of that year.”

Dell’s Settlement of SEC Accounting-Fraud Claims Approved by U.S. Judge [Bloomberg]
“Dell Inc., the world’s third-biggest maker of personal computers, won a judge’s permission to pay $100 million to settle accounting-fraud claims brought by the U.S. Securities and Exchange Commission.

The accord reached in July allows founder Michael Dell to remain chief executive officer after paying a $4 million fine. U.S. District Judge Richard Leon approved the settlement today at a hearing in Washington.

Dell, 45, and the personal-computer maker failed to tell investors about “exclusivity payments” received from Intel Corp. in exchange for shunning products made by rival chipmaker Advanced Micro Devices Inc., the SEC said in a complaint filed in July. The payments allegedly helped Dell reach earnings targets from 2001 to 2006.”

US regulator threatens ban on Euro-firms [Accountancy Age]
“The US audit watchdog, the Public Company Accounting Oversight Board (PCAOB), is considering de-registering non-US audit firms based in countries where it has no power to conduct inspections, including Europe.

Rhonda Schnare, international affairs director at the PCAOB, said de-registering firms was one option on the table if nations did not co-operate with US audit inspectors.

‘Bringing enforcement proceedings against non-US audit firms is one option and the board is evaluating all of its options… The issue is one of the [PCAOB’s] highest priorities,’ she said.

‘The board cannot de-register firms without going through an extensive process that would involve bringing individual disciplinary hearings against the firms, and that is certainly one of the options the board has.’ “


President Obama Proposes More Tax Credits for Higher Education [Tax Foundation]
“Even ignoring the possible issue of economic incidence and whether or not this credit would mostly lead to higher tuition instead of lowering the net price faced by students, one of the problems with this credit is the downside of tax credits known as “buying out the base.” The credit will indeed entice some additional amount of people at the margin to go to college. However, it will mostly give a huge windfall to those who were going to go to college in the first place. If more people in college is truly what you want, there are likely better ways to do it than via a refundable tax credit that doesn’t target those at the margin.”

Accounting firm RubinBrown forms team for life sciences [KCBJ]
“RubinBrown LLP, which is based in St. Louis and has offices in Kansas City and Denver, created the Life Sciences Services Group earlier this month.

The firm has identified about 15 existing team members to serve on the life sciences group, about five of whom are in Kansas City, said Todd Pleimann, managing partner of the firm’s Kansas City branch.

However, he said, the firm probably will add more to the team in the future, possibly hiring from outside.

‘We really feel that the life sciences, and particularly animal health, is really key for the Kansas City metropolitan area,” Pleimann said. “We know there is going to be a lot of growth in this area.’ “

Does Overstock.com CEO Patrick Byrne Know When to Shut Up, Especially While the SEC Investigates his Company? [White Collar Fraud]
Apparently not.

Accounting News Roundup: Americans’ Irrational Demands on Policy; Number of Women CFOs Same as ’09; Summer Camp Tax Credits? | 07.14.10

We Can’t Always Get What We Want: Why Governing Americans is So Hard [TaxVox]
Basically it’s because as a group, we’re children. We throw tantrums until we get what we want and stomp around the living room when we don’t.

“[O]ur demands on policymakers are so inconsistent and irrational that we make governing nearly impossible. We hate big deficits, but oppose the actual tax increases or spending cuts that we need to dam the flood of the red ink. We are furious that government passed an $800 billion stimulus last year, but feel lawmakers are not doing enough to get the economy going. We want government to “do something” about the gulf oil spill but reject government interference in private business.”

Women CFOs Holding Steady [CFO]
In the Fortune 500, there are 44 woman CFOs, the same number as last year.

“What are the prospects for women breaking the 10% barrier? At least some are hopeful the numbers will climb in coming years, albeit not dramatically. ‘Anecdotally, I am seeing a next generation of female finance leaders who can and want to rise to the CFO role,’ says Lorraine Hack, executive recruiter with Heidrick and Struggles. She adds, ‘I have seen a lot of companies becoming more cognizant of diversity, or the lack thereof, and making a conscious effort to recruit, retain, and grow such talent.’ “

U.S. Business Groups Air Policy Concerns [WSJ]
“Washington’s major business groups plan a united front Wednesday in their confrontation with the Obama administration over economic policy, calling on the White House to cut taxes and curb its regulatory agenda.

Business groups including the U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Businesses will air a list of concerns about government policy at a “Jobs for America Summit” at the Chamber’s offices Wednesday.”


Wall Street Fix Seen Ineffectual by Four of Five in U.S. [Bloomberg]
“Almost four out of five Americans surveyed in a Bloomberg National Poll this month say they have just a little or no confidence that the measure being championed by congressional Democrats will prevent or significantly soften a future crisis. More than three-quarters say they don’t have much or any confidence the proposal will make their savings and financial assets more secure.

A plurality — 47 percent — says the bill will do more to protect the financial industry than consumers; 38 percent say consumers would benefit more.

‘Banks and the government are making out, not the ordinary person,’ says Lenore Critzer, a 70-year-old retiree and poll participant who lives in Nelson, Ohio, about 40 miles from Cleveland. ‘We’re going to have another crisis and worse.’ “

A tax credit for summer camp? IRS says it’s true [Kansas City Star]
Unfortunately, expenses for overnight camps do not qualify. So parents will have to squeeze the sex in during the day somehow.

Lazarus Was a Piker or: How the Extenders Bill Resurrects Bad Tax Provisions Year After Year

The Book of John says that Lazarus emerged from his tomb four days after his death. While impressive, Lazarus has nothing on the Section 41 Research Activities Tax Credit. While Lazarus is credited with only one extension, the Research Credit, first enacted in 1981 as a temporary measure, it has been extended at least 12 times — several times after it had expired.

If it’s such a wonderful tool for our economy, as its beneficiaries always say, and if it isy isn’t it just made permanent? There are two main reasons, one only slightly less cynical than the other.


First, the credit costs the government a lot of revenue. The one-year extension in H.R. 4213, the current “extender” bill, is scored as a $6.6 billion revenue-loser. By extending it only a year at a time, the Congresscritters disguise the real cost of the credit, which they have no intention of allowing to expire. Remember this phony accounting the next time some corporate shmoe trembles while Henry Waxman berates his accounting methods.

Even more cynical: it forces the lobbyists for the credit to pay tribute to their Congressional patrons every year to keep their pet corporate welfare provisions alive. A former Congressional staffer explains (my emphasis):

I never understood the “why” about expiring tax provisions until one very late night markup of the “extenders bill” several years ago while I was working for the Ways and Means Committee. Bleary-eyed, one of usually twinkly-eyed members plopped down in a chair next to me in back of the dais–just to take a little rest away from his member’s seat. I asked him “why do we have to do this every year?…why can’t we just pass these things permanently?”

His eyes suddenly twinkled again, as he looked at me with a combination of amusement and disbelief. He said: “Are you kidding me?… We couldn’t do that!… Why, I’d lose all my friends!…Who would come visit me and say kind things to me and do nice things for me then, if they didn’t have to come back every year to ask for these tax provisions?!!”

The research credit is just one of 70 or so “temporary” provisions included in this year’s omnibus “extender” bill. Other tax breaks critical to the continued robust functioning of the economy include the Indian employment tax credit, the special short depreciation life for qualified leasehold and restaurant improvements, subsidies for biodiesel, and the all-important “7-year recovery period for certain motorsports complexes.”

To “pay for” these “temporary” provisions, Congress each year reaches deeper into its bag of tricks for permanent tax increases. The chumps this year: private equity, hedge funds, and small professional corporations. When these things “expire” a year later, this year’s victims will continue to pay their higher tax without Congress having to pass another bill; they will be forgotten while Congress is busy looking for its next revenue fix. And like any junkie, it will give up the addiction only when it’s impossible to score.

Joe Kristan is a shareholder of Roth & Company, P.C. in Des Moines, Iowa, author of the Tax Update Blog and Going Concern contributor. You can see all of his posts for GC here.

New Healthcare Tax Credit Should Help Small Businesses, Nonprofits

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The Internal Revenue Service recently released some information to help companies take advantage of a tax credit provided by the health reform law.

The IRS estimates that about 4 million businesses qualify, and is sending out notices to as many as possible advising them of the tax break. If you haven’t received anything but believe your company may qualify, here’s what you should know:


The credit is available to companies with fewer than 25 employees with average wages of $50,000 or less. The full credit goes to companies with 10 or fewer employees and average annual wages of $25,000 or less. It is not available to self-employed individuals.

The credit covers 35 percent of an employer’s contribution to employee health premiums, so long as that doesn’t exceed 35 percent of the average cost of a health plan in the small group market. For a tax-exempt organization, the credit is 25 percent. Once the health exchanges are set up, the credit increases to 50 percent for businesses and 35 percent for nonprofits. At that time, the credit will only be available to companies purchasing insurance through the exchange.

A company can use the credit to reduce income tax owed and can carry the credit forward 20 years or back one year after 2010. Nonprofits can use the credit against withholding and Medicare taxes owed on behalf of their employees.

A key caveat is that employers must pay for half of the premium. For most workers, especially low-wage employees, a company that does not pay for at least half the premium is offering insurance that is essentially unaffordable. Even 50 percent is most likely not enough to do low-wage workers much good, especially at small companies where health care premiums are more expensive.

The amount of the credit is based on the premiums an employer pays for, so the more generous the coverage, the greater the credit. While premiums paid for owners and their families cannot be counted, those paid for seasonal workers can be. And the IRS has defined “premiums” broadly: not only does it cover premiums for standard medical insurance but it also applies to dental, long-term care and vision insurance-though again, an employer must pay 50 percent of each premium to count it toward the credit.

Calculating the credit probably requires any small employer to consult an accountant to see if the benefits are worth the cost of providing insurance. The tax credit is in effect, allowing employers who are already thinking about health insurance for their employees to factor in the savings as they plan ahead.

As an observer, I think the key issue is whether the credit is enough to offset the rising cost of health insurance. Those costs have hit small employers the hardest. We’ll see if the tax credit makes a difference in reversing the trend among small employers of dropping health insurance for their employees altogether.

Refundable Tax Credits: They’re for Trust Fund Babies Too!

So 47% of our nation’s households will pay no federal income tax this year. Well, stick it to those rich people, then! Help the deserving poor, like Buffy Richgirl.

Buffy is a struggling 26-year single mom with three kids and a checkered romantic history. Yet she does the best she can, earning $16,500 in various jobs in 2009 while taking courses in applied tattoology at the local college, while Mom helps with the kids.

Let’s see how a beneficent tax law helps this struggling mom make ends meet.


Some key facts:

Name: Buffy Richgirl.

Age: 26

Filing status: Head of Household, because of 3 dependent kids – Biff, Cloyd and Muffy.

Income: $16,500, all salary, no withholding.

Housing status: Daddy gave her $200,000 in 2008 to buy a house, which she bought in December 2009. She formerly lived in various apartments or with Daddy.

Educational status: She’s taking tattoo technology courses half-time at the local college (her Mom helps out with the kids), where she ran up $3500 in qualified expenses.

Prospects: She’s the beneficiary of a trust from late Grandpa that will kick out $5 million when she hits age 30, but which distributes nothing right now.

Other cash sources: She gets occasional non-taxable child support, and she has a non-interest bearing checking account with some Daddy cash.

The tax results? Adjusted Gross Income: $16,500. Taxable Income: $0. Taxes withheld and paid: $0. Tax refund: $17,009.

So how did our heroine double her income via her 1040? Through the miracle of “refundable credits” – tax credits that generate a refund even if your tax computes to zero. She wins with:

• An $8,000 First-time homebuyer credit.
• A $5,634 earned income credit.
• $2,025 in additional child credits
• $950 refundable education credit.

Don’t believe me? Look at her 1040 for yourself:

So what’s the point? It’s very hard to fine-tune the tax law. That’s especially true with refundable tax credits. No matter how carefully you try to “target” a group with tax benefits, there will be collateral unjust enrichment.

Now don’t you feel better about that check you have to send IRS next week?

RICHGIRL_1040