Guide to Calculating and Charging Sales Tax

Consumers complain about sales taxes, but they are an even bigger headache for businesses who must calculate and remit these funds on a broad range of products – in some areas services as well – to a dizzying array of government entities. Even if there is no state levy, you may find that cities, counties or special taxing jurisdictions (e.g., lodging, transportation areas) demand you collect and remit sales taxes.
There are three steps you can take to ensure that your business meets its sales tax responsibilities:

Understand general sales tax concepts
Find the specific rules for your state and locality
Turn to a specialty sales tax firm

IRS Failed to answer their phone 22.4 million times in 2008 - that's a lot

During the 2008 Filing Season, 75.7 million total dialed attempts were made to the IRS toll-free telephone lines. Through automation and assistors, the IRS answered 35.8 million (47.3%) calls during normal hours of operation. However, 22.4 million calls were not answered during normal hours of operation because the taxpayers hung up, were courtesy disconnected5 by the IRS, or received a busy signal. IRS officials stated that the 22.4 million calls included calls from taxpayers who called back and received service, dialed the IRS repeatedly, or hung up for reasons outside the IRS' control. The IRS experienced high call demand during the last two filing seasons. Nevertheless, even when the IRS achieves more than an 80% Level of Service, millions of calls are not answered by IRS assistors.

John R. Dundon, EA -- Taxpayer Advocate - Enrolled with the United States Department of Treasury to Practice before the IRS - Under contract with the United States Department of Treasury as a Certified ITIN Acceptance Agent - Direct phone # 720-234-1177

 

 

Tax Consequences of President Obama's Nobel Prize

Ellen Aprill (Loyola-L.A.) comments on the tax consequences of President Obama's receipt of the 2009 Nobel Peace Prize:

At the end of the President's comments on his being awarded the Nobel Peace Prize this morning, a reporter shouted out, "What are you going to do with the money?" The President didn't answer.

The prize this year is estimated to be $1.4 million. The ceremony takes place in December; I assume the prize is awarded then and that thus the amount is included in income for 2009.

My guess is that, since his 2009 tax return will surely be made public and given the content of his remarks this morning, the President will give a great deal of the prize money to organizations eligible for the charitable contribution deduction (although which ones to choose must be a challenge; I wonder if he might choose to make the gift to the United States for public purposes).

His AGI for 2008 was $2,656,902, mostly from sale of his books. Leaving aside the Nobel Prize award, this figure is likely to be higher this year because his candidacy encouraged book sales. If so, he will have no trouble giving away the Nobel Peace Prize money without running up against the 50% AGI limits on charitable deductions.

But if he did run up against the 50% AGI limits, § 74(b) would allow him to transfer money directly from the Nobel Prize Committee to a charitable or governmental recipient without the amounts becoming part of his gross income. Publication 525 now contains detailed guidance on the application of § 74(b) to winners of "Pulitzer, Nobel, and similar prizes."

But even if the 50% AGI limit were a problem, the President would nonetheless decide not to use § 74(b) because he would as a political matter need to show both that he took the Nobel Prize money into income and that he made charitable contributions of it on his publicly disclosed tax return -- the tax benefit of § 74(b) would be too great a public relations detriment to him. That is, using § 74(b) might look to the public, as it did to the foreign government, that he was somehow sheltering income. Often, we think that that exclusions from income have advantages over deductions -- exclusions do not figure into AGI in calculating limitations for the charitable contribution deductions, the medical deduction, etc. But ironically, public disclosure and its public relations function may constrain the use of legitimate and beneficial tax provisions.

John R. Dundon, EA - Taxpayer Advocate - Enrolled with the United States Department of Treasury to Practice before the IRS - Under contract with the United States Department of Treasury as a Certified ITIN Acceptance Agent - Direct phone # 720-234-1177

 

What if You Made More than the Maximum Income?

You will still get a check, but it will be reduced by 5-percent of the amount you earned above the AGI income caps of $75,000 for single filers and $150,000 for couples.

For example: A single filer with no children and an adjusted gross income of $80,000, or $5,000 over the AGI cap, will see their rebate check reduced by $250 (5% of $5,000), and will get a check for $350, instead of $600.

At some income point above the AGI income caps, the rebate checks will phase out completely.

For example: A single filer with no kids and an adjusted gross income of $87,000, or $12,000 over the AGI cap, will not get a rebate check because it would be reduced by the full $600 (5% of $12,000).

 

How Much Will You Get?

Qualifying single filers (AGI less than $75,000) will get rebates of up to $600. Qualifying couples (AGI less than $150,000) will get rebates of up to $1,200, plus $300 per dependent child, with no maximum on the number of eligible children.

Persons who owe no income taxes, but earned at least $3,000 in income from Social Security and veterans disability will get rebate checks of $300 for individuals and $600 for couples.

 

Who Will Get Tax Rebated Checks?

Tax rebate checks will be mailed to about 117 million middle- and low-income taxpayers. Thanks to amendments made to the bill in the Senate, some 20 million retirees living on Social Security and 250,000 U.S. veterans receiving disability benefits will also get checks.

Single tax filers with adjusted gross incomes (AGI) less than $75,000 and couples filing jointly with AGIs less that $150,000 will qualify for full rebates.

Remember that your AGI is not your annual salary or income. Your AGI is your taxable income from all sources including wages, salaries, tips, interest, dividends, etc. minus IRS-allowed adjustments to income.

 

Tax Rebate Checks are Scammer's "Bait"

The IRS is warning taxpayers of a new telephone identity theft scam that uses the Tax Rebate checks as the bait.
In this scam, the caller identifies himself as an employee of the IRS or the Treasury Department. The caller then tells the victim that he is eligible for a large rebate check for filing a 2007 tax return as early as possible. The catch is, the caller must have the victim's bank account information so that the rebate check can be directly deposited by the IRS. If the victim refuses, he is told he cannot receive the rebate.

If you get this call -- hang up! All you need to do to get the 2008 Tax Rebate check is file a tax return. If you qualify for a rebate check, the IRS will mail it to you.