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Tax Hikes: An Economic Time Bomb

Wall St. Journal: “if the Democratic economic policies continue nevertheless, this year will be nothing like the bitter economic January we will be living in a year from now. Government spending has already hugely increased, and so has the size and scope of government, but next year there will also be substantial tax increases for a great many Americans. The first reason will be the expiration of the Bush tax cuts . The top personal income tax rate will rise next Jan. 1 to 39.6% from 35%, a hike of nearly one-eighth. The dividend tax rate will rise to 39.6%, more than 2½ times the current 15%. And the capital gains tax rate will rise by a third, to 20% from 15%. If the House health care bill had passed, all three of these rates would have risen to 45%.”

Alternative Minimum Tax Bomb Exploded 1/1/10

The Alternative Minimum Tax bomb exploded January 1, 2010, because Congress failed to pass legislation that would have prevented the tax from affecting millions of taxpayers. The number of taxpayers affected by the AMT will jump from 4 million in calendar year 2009 to 27 million in 2010. As the reach of the AMT grows under current law, many taxpayers will face a fundamentally altered tax structure. If nothing is changed this year, one in six taxpayers will be affected by the AMT, paying on average an additional $3,900 in tax, and nearly every married taxpayer with income between $100,000 and $500,000 will owe some alternative tax. Because of the particular tax preferences and exemptions disallowed under the AMT, that tax structure is more likely to affect married couples, large families, and taxpayers in states with high state and local taxes. See the Congressional Budget Office’s January 15, 2010, report called “The Individual Alternative Minimum Tax.”

Fighting the IRS

The Blog of Legal Times: “Your chances of winning a fight with the IRS are about as great as your chances when fighting City Hall. National Taxpayer Advocate Nina Olson, in her recently-released annual report to Congress, listed the 10 tax issues most litigated in the federal courts. Of the 923 cases involving those issues, taxpayers prevailed in whole, or in part, in 132, or roughly 14 percent. Taxpayers who were represented by counsel did somewhat better when the numbers were broken down—they won 20 percent, or 54 of 265 cases; pro se taxpayers prevailed in 12 percent, or 78 of 658 cases.”

IRS Rarely Audits the Poor

The Tax Lawyer’s Blog: “President Obama has famously defined the rich as those making in excess of $250,000 per year. Well, now we find out from the Associated Press that the IRS rarely audits anyone who makes less than $200,000.”

12 IRS Non-Filer Enforcement Stories

The Tax Lawyer’s Blog: “Each year the IRS publishes examples of its non-filer enforcement actions. Below are the examples for fiscal year 2010. They are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted.”

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