The end of the most alluring aspect of the ultra-confidential swiss banking system appears to be near its end thanks to the U.S. Justice Department to require the Swiss government to disclose tens of thousands of U.S. taxpayer's tax records.
The following AICPA article provides the details of the recent developments in the Swiss government and UBS bank battle to retain account confidentiality:
Interestingly, the U.K. is taking similar action in Liechtenstein with respect to U.K. taxpayers.
These actions are a combination of post-9/11 enhanced government probing of banking activities as well as government efforts to close the "tax gap" (also see July 14th post)associated with offshore accounts and other international activities.
Based on a recently released Congressional report, the Internal Revenue Service collects approximately 96% of all federal gross receipts ($2.7 trillion for FY 08) through the "voluntary" income tax reporting system. The term "voluntary" refers to the fact that taxpayers are effectively on the honor system when it comes to reporting many income and expense items on their business and personal tax returns.
The IRS estimates that there is an 84% tax reporting compliance rate, which means that 16% of federal income taxes are estimated to be under-reported/ underpaid by taxpayers. These under-reported taxes, which total over $350 billion annually fall into the "Tax Gap" and even with IRS audit and other enforcement measures, less than 20% of the gross Tax Gap is ever collected by the feds.
The Tax Gap comes in three basic forms:
Under-reporting (not reporting one’s full tax liability on a timely-filed return). This can be from under-reported income, mis-characterization of income (e.g. ordinary vs. capital gains), over-reported deductions or a combination thereof;
Underpayment of tax liabilities reflected on the return - due to cash flow or other taxpayer issues,
Non-filing (not filing required returns on time and not paying the full amount of tax that should have been shown on the required return).
In light of trillion dollar annual deficits and record spending in Washington, Congress is increasing scrutiny on non-compliant taxpayers and are exploring a variety of ways to narrow the gap.
Following are the fiscal 2010 and 2011 proposals being evaluated by the Senate Finance Committee:
- Credit and debit card payments to businesses
. Starting in January 2011, organizations that process credit and debit card payments for merchants must annually report the amount of these payments to the recipient businesses and to the IRS.
- Cost basis reporting.
Starting in January 2011, brokerage firms must annually report cost basis and holding period information to customers and to the IRS in addition to gross proceeds from securities transactions.
-Payments to Corporations
. The FY 2010 budget proposals would require businesses to file information returns for payments to virtually all taxpayers, including all C and S Corps for any services, or certain gains aggregating to $600 or more per year. This would end current practice under a longstanding regulatory regime that exempts certain payments to corporations from general requirements for information reporting.
- Rental Property Expense Payments. The FY 2010 budget proposals would require taxpayers who receive rental income and deduct expenses on rental activities to file information returns for rental property expense payments to any service provider or contractor that performs work on rental properties.
- Certain Government Payments for Property and Services
. Some government vendors fail to meet their tax filing and payment obligations, and compliance would likely increase significantly if those payments were automatically reported by the governmental entity making the payment. The FY 2010 budget proposals would therefore require Federal, state, and local governments to report information on non-wage payments made for the procurement of property or services.
- Private Separate Accounts of Life Insurance Companies
. The proposals would require life insurance companies to report account information for any contracts invested in a private separate account. The reporting of this information would help the IRS determine whether earnings on investments in separate accounts are taxable income to the holder or are tax-free or tax-deferred.
- Requiring Certified Taxpayer Identification Numbers (TINs) from Contractors
. Without accurate taxpayer identifying information, the effectiveness of information reporting requirements is limited. Therefore, the FY 2010 budget proposal would require contractors to provide TINs to the businesses from which they receive payments, and require those businesses to verify the TINs.
-Increased Penalties for Failure to Properly Report Information.
Penalties for failure to properly report information have not been increased since they were first established in 1989. Increasing those penalties will provide a stronger incentive for compliance with information reporting requirements. Accordingly, the FY 2010 budget proposal would increase by 100 percent the current per-return penalties for failure to file most information returns.
Based on these proposals, which will very likely be implemented in the next couple of years (assuming the IRS can effectively integrateate their IT systems and these databases), taxpayers who are under-reporting income and/or over-reporting expenses are being given fair warning to follow Vice President Biden's call to "perform their patriotic duty...and pay their fair share of taxes."
On the heals of $200 Billion in federal tax hikes and $9 Billion is California tax increases in the past 9 months, Congress is considering a major overhaul to the international tax structure of the Internal Revenue Code applicable to U.S. based companies operating in foreign jurisdictions.
Currently U.S. tax applicable to taxable income earned in a foreign subsidiary is generally deferred until the profits are repatriated to the U.S. (unless such earnings are classified as "Subpart F Income").
The Obama Administration has proposed revamping the system (with a proposed 2011 effective date) to accelerate the imposition of federal tax on these earnings, regardless of when the profits actually make their way into the U.S.. Therefore, growing businesses that re-investing their overseas profits will find this accelerated tax burden a significant cash-flow drain.
The vast majority of industrialized countries we compete with have lower federal tax rates and more liberal tax rules (click to read an excellent article comparing worldwide tax rates by my business partner Professor Chuck Swenson):
The economic, political and social landscapes are changing at warp speed. We are seeing dramatic increases in government bailouts, increases in social programs and rising tax rates and fees at the federal, state and local levels.
At this pivotal point in our history, it is a good time to look back at some of our key political figures and their words of wisdom. And let's hope this trend gets reversed in the near future.
This week's Strictly Business is written by Blake Christian, CPA, MBT who is a Partner in the firm Holthouse Carlin & Van Trigt LLP and he is also Chairman of the Board of the Long Beach Area Chamber of Commerce.
Arguably one the most famous political quotes in United States history is John F. Kennedy’s 1961 inaugural speech, which included the timeless: “Ask not what your country can do for you, but what you can do for your country”. Today, this brilliant quote may be even more appropriate, based on the worldwide political, economic and social environment.
The timelessness of this memorable quote is highlighted by the surprising fact that these words were penned approximately 36 years before the words were spoken by JFK (without proper attribution to the author). The real source of these words comes from the famous Lebanese philosopher and poet, Kahlil Gibran (1883 - 1931). This timeless question was appropriately directed to the politicians of Gibran’s era. Virtually the exact words were first used in Gibran’s 1925 Arabic-language article which translates into either: “The New Deal” or “The New Frontier”. A quick read of Gibran’s article should assure anyone that FDR did not use Gibran’s article as his “New Deal” blueprint.
Gibran’s article was directed at his Middle East contemporaries and challenged them to do away with their old selfish and corrupt ways and improve the lives of the masses. However, Gibran’s article and solutions were far from recommending socializing government. In fact he rhetorically asks: “Are you a governor who denigrates himself before those who appoint him and denigrates those whom he is to govern, who never raises a hand unless it is to reach into pockets and who does not take a step unless it is for greed? Or are you the faithful servant who serves only the welfare of the people?”
I suspect both Gibran and JFK would be terribly disappointed to see the level of entitlement of the masses and government intervention in the United States and many other countries today.
The irony here is that during last year’s Presidential campaign many parallels were drawn between JFK and President Obama, and the “Ask not…” question was quoted extensively, yet post-election, the vast majority of Americans have suddenly become very comfortable with the concept of the federal government bailing out their businesses, their homes, their student loans, their credit card balances and their cities and states.
Sadly, this quickly evolving “Entitlement Mentality” whereby the Gibran/JFK mantra has degenerated into: “Ask not what you can do for your country, but what your country can do for you” (regardless of the short-term and long-term costs).
President Lincoln, possibly the most highly regarded U.S. president in history, would clearly be disappointed with recent developments. To his credit, President Lincoln summed up his expectations of citizens with: “Let not him who is houseless pull down the house of another , but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built.” It is difficult to speculate how Lincoln might view housing subsidies, mortgage bailouts and ACORN’s business plan.
The shift to increased reliance on government programs, and increasing government intervention, seems to strongly resonate with today’s Millennials and Gen Y voters. And why shouldn’t it? If you can access a disproportionate amount of money and services while paying less than full price via your personal tax burden or fees, it sounds like a pretty good deal. But as Margaret Thatcher is attributed to saying: "The problem with socialism is that eventually you run out of other people's money [to spend]."
Until people figure out that there are massive hidden and deferred costs with these recent federal, state and local government trends, we will very likely see increased levels of government intervention for the foreseeable future.
The increasing entitlement mentality and government intervention is effectively eroding the entrepreneurial foundation which has made the United States the true land of opportunity for over two centuries. With technologies allowing virtually any business to operate internationally and a worldwide banking and economic network, business owners have the option to operate their businesses from any location. We are already seeing large numbers of companies moving from highly taxed and highly regulated cities, states and countries to lower-taxed and lower regulated jurisdictions.
Rest assured that the current worldwide recession will see certain countries evolve into “business centers of choice” based on their competitive tax rates and free-market regulatory approach – leaving highly taxed and highly regulated countries such as the U.S. with shrinking economic and tax bases. More mature businesses and their owners may have more difficulty moving their businesses offshore to escape the grasp of U.S. taxes and regulations due to complexities in tax laws and general mobility issues. However, the same Gen Y and Millennials who are embracing government hand outs will more easily be drawn to other more flexible countries to establish their businesses and residences.
With the daunting economic challenges at the federal, state and local level, this is not the time to sit on the sidelines and complain. Every citizen should be asking: “What can I do to improve my city, state or federal government?” By volunteering at your local school, church, homeless shelter or city commission, you can take an active role in your community and begin making positive changes. You should also reach out to your local, state and federal legislators via letters and phone to make sure they fully understand your position on various issues, including, deficit spending, tax rates, and social programs. Don’t assume that they “get it”. They do need and value your input, including suggested solutions. Today, the squeaky wheel truly does get the grease.
So the next time you hear or see the famous quote attributed to JFK, please remember that those insightful words have their roots in a Middle East philosopher. And take a hard look at the federal and your state and local political landscape and evaluate your personal contributions and how your legislators are facilitating with citizens being either net contributors or net beneficiaries of government programs. You can make a positive difference by getting involved...
Taxpayers continue to face multiple challenges from a slow economy, tight credit markets, and general uncertainty.
Attached is an AICPA article covering several ways taxpayers can capitalize on the current low asset and stock values, low interest rates and relatively low tax rates.
I. AICPA HEADLINES
--- "Optimizing Tax Strategies in a Challenging Economy". While recent government statistics are indicating that the economy may be getting "less bad," most economists believe we will experience more financial challenges this year before seeing any real signs of recovery. Click below for the full article:
One of the centerpieces of the 2009 American Recovery and Reinvestment Act of 2009 (Stimulus Bill) involves a variety of energy tax incentives and alternative fuels funding provisions focused on reducing America’s dependency on carbon-based energy.
The energy related tax provisions total approximately $20 billion of tax incentives and the energy funding provisions represent approximately $45 billion of the spending provisions.
Attached are articles summarizing the variety of new and existing tax credits and other incentives available for businesses and individuals for 2008 and later years.
March AICPA Corporate Taxation Insider Newsletter:
Our returning troops are coming back to one of the worst employment environments in decades. After giving so much for our country, we can show our gratitude by providing them a good job. In addition to "doing the right thing", employers will find a variety of federal and possible state hiring tax credits ranging from $4,500 to $13,000 per veteran hired.
Read more how veterans can use these programs to improve their job prospects and how employers can save tens of thousands of dollars annually:
No need take any extreme measures when it comes to your taxes.
Even if you have already filed your 2008 business or personal tax return it is not too late to get some of your prior taxes back. If you have extended your 2008 returns - read on and make sure you are not overpaying your state and federal taxes - since most taxpayers do.
Please scan through this entire blog and the "Library" Section of this site to find hundreds of tax refund opportunities for businesses as well as individuals.
With tax developments at both the federal and state level, it is time to make sure that you pay no more than your fair share of the growing tax burden. I'm sure you can put your hard earned dollars to more effective use than the government - so get educated on all the existing, legitimate tax breaks available to you and your business.
Nationally, over 20 percent of businesses have one or more locations that fall within a Location Based Investment Credit (LBIC) zone and of this eligible pool of businesses, less than 10 percent of these qualifying companies actually claim the benefits they are entitled to. As a result, CPAs, CFOs and tax directors have an excellent opportunity to dramatically increase shareholder value by taking advantage of the valuable tax incentives. Since the federal programs allow up to three years of amended return refunds and many states also allow retroactive benefit claims, immediate tax advantages can be secured along with favorable EPS impact.
These benefits range from $500 to $15,000 per employee, depending on the specific state and federal program.
In addition to these location-based credit programs, there are a number of federal programs which apply to virtually any business. These programs include the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work (WtW) programs which can generate federal hiring credits ranging from $2,400 to $8,500 per qualified employees. The 2009 federal Stimulus Package and California Budget Package expanded these programs even further.
These programs apply to a fairly wide range of employees, including many veterans, laid off/ unemployed candidates and those individuals with economic or medical challenges.
These programs are seldom accessed by taxpayers due to their unfamiliarity with the program specifics. The significant tax reductions (including refunds) available under these programs should encourage every employer to start utilizing these state and federal programs immediately.
In addition to saving taxes, by hiring these economically challenged individuals, employers are contributing to their community. Download Focusing on Unemployment 12.2008
Click here for my various 2009 CNN News Reports on the Stimulus Package, Tax and Economic Issues: http://www.hcvt.com/media.aspx
For various videos regarding economic, tax and job outlook, please check out myLos Angeles Business TV videos in the "Video Vault" at: www.losangelesbtv.com
Please scroll through blog and "Library" section for additional tax credit articles including business depreciation increases for business vehicles in my February 15th blog.
http://www.autobloggreen.com/
The 2009 Federal Stimulus Package which was signed into law on February 17th contains a favorable incentive for purchasers (but not lessees) of a new car, motorcycle, truck, or SUV weighing less than 8,500 pounds [(determined based on Gross Vehicle Weight (GVW)], which includes passenger and cargo capacities, as well as Recreational Vehicles of any weight.
To illustrate, Hummer models H1 and H2 are ineligible since they have GVW's exceeding the 8,500 threshold. However, Hummer H3 models are under the weight limit, therefore are eligible for the new sales/ excise tax deduction.
To determine the GVW of the vehicles on your target list, check out: http://auto.howstuffworks.com/auto-parts/towing/towing-capacity/vehicle/gvwr.htm
The purpose of this tax provision was to jump-start the ailing auto industry - both manufacturers, as well as retailers.It might be a little too late, but auto dealers are certainly seeing people on their lots making reference to this tax break.
Months after enactment, there continues to be a fair amount of taxpayer confusion regarding the specifics of this new incentive.Since the legislation started off as a tax credit, but morphed into a tax deduction (which is only worth approximately 1/3 the value of a credit) in the Senate, most vehicle shoppers still think this is a tax credit.
The new federal tax deduction allows non-business taxpayers to deduct the sales or excise tax attributable to the first $49,500 of the new vehicle purchase. Taxpayers with Adjusted Gross Incomes (AGI) of less than $250,000 (Joint Filers) or $125,000 (Single) can claim the full benefit on both domestic and foreign vehicles purchased on or after February 17, 2009 and no later than December 31, 2009.Those making more than these thresholds will be subjected to phased-out benefits.Therefore, family members who might be over these limits should evaluate who will be using the vehicle and who should make the purchase in order to maximize the benefit.
Business taxpayers will generally not benefit under this provision since they are generally required to capitalize the sales or excise tax as part of the acquisition of the vehicle.The capitalized costs will then be eligible for Section 179, bonus, or regular depreciation expense.
If a California based non-business taxpayer purchases a Cadillac Escalade (a 7,200 pound "lightweight" SUV) for $75,000 in Los Angeles County, they would be entitled to a sales tax deduction of $4,579 ($49,500 limit times 9.25% sales tax rate). The $4,579 deduction represents a federal tax savings of approximately $1,511 (2% of the purchase price or 3% of the $49,500 maximum purchase price) for a taxpayer in the 33% tax bracket. This example presumes that the purchaser uses the vehicle solely for personal purposes. Sales tax associated with the business-use percentage of vehicle will generally reduce the Schedule A or “above the line” deduction and such amount must be capitalized and will impact the annual business depreciation deduction.
One tricky element associated with this new tax incentive may limit the tax savings to a very small number of taxpayers.If the taxpayer is subject to the federal Alternative Minimum Tax (AMT) for 2009, and the taxpayer claims this deduction on Schedule A, along with other allowable deductions, the sales/excise tax might yield no federal tax benefit since the AMT system will add this deduction back to AMT Taxable Income. Non-itemizers who are allowed to deduct this expense "above the line" (without the use of Schedule A), will be allowed to deduct the full amount for both regular and AMT purposes. However, from a practical perspective very few non-itemizers are subject to AMT anyway, so the exemption from AMT will be very limited.
While we are on the subject of vehicle deductions, it is worth noting that as part of the federal Stimulus Package, Congress also increased the first year auto depreciation limit for business vehicles by $8,000 for a revised 2009 limit of $10,160, and $11,160 for light trucks and vans.These revised limits are the same as the temporary 2008 increase and will only apply to new and used vehicles placed in service during calendar 2009.Of course this presumes 100% business-use, the personal use will proportionately scale back these new limits.
A number of hybrid and alternative fuel vehicles also continue to be eligible for federal and state tax credits (see below) – but watch out for production limits and caps on the credits.
Despite the turmoil in the auto industry, and potential limits on the new sales/use tax deduction, it is a good time to consider purchasing a new vehicle in order to save some federal taxes.
Vehicle Credit Summary
NEW for 2009
The federal Stimulus Package added a newPlug-In Electric Vehicle Credit – Base credit of $2,500 per vehicle for purchaser with phase-down after 200,000 units produced.The vehicles will not be eligible for the Section 30B hybrid credit.
The following detailed listing of vehicles and summary of the rules was provided by Commerce Clearing House (CCH):
The credits allowed for new advanced lean burn technology motor vehicles and new qualified hybrid motor vehicles were phased out for vehicles manufactured by Toyota Motor Corporation (viz., Toyota and Lexus models) and purchased on or after October 1, 2006. No credit may be claimed on post-September 30, 2007 purchases of these vehicles. The credit for Honda vehicles purchased on or after January 1, 2008 is also subject to a reduced amount and no credit is allowed for purchases on or after January 1, 2009.
Hybrid or lean technology Toyota vehicles (including Lexus vehicles manufactured by Toyota) purchased before October 1, 2006 qualify for 100 percent of the credit. Taxpayers buying qualifying Toyota vehicles on or after October 1, 2006 and on or before March 31, 2007 may claim 50 percent of the otherwise allowable credit. Vehicles purchased on or after April 1, 2007 and on or before September 30, 2007 are eligible for 25 percent of the credit. The credit is not allowed for vehicles purchased on or after October 1, 2007 (IRS News Release IR-2006-145, September 20, 2006). The allowable credit for Toyota and Lexus hybrid vehicles purchased on or after October 1, 2006 and before October 1, 2007 are provided in the ending charts below.
50 percent of the otherwise allowable credit may be claimed for Honda vehicles purchased in the first two quarters of 2008 and 25 percent in the last two quarters of 2008. No credit will be allowed for purchases after 2008 (Notice 2007-98, 2007-50 I.R.B. 1160). The reduced hybrid credit amounts for Honda vehicles purchased in 2008 are in the ending charts below.
2005 Model Year
l2005 Ford Escape 2WD HEV Hybrid --$2,600
l2005 Ford Escape 4WD HEV Hybrid --$1,950
l2005 Honda Accord Hybrid AT and Navi AT --$650**
l2005 Honda Civic Hybrid CVT and MT --$1,700**
l2005 Honda Insight CVT --$1,450**
l2005 Toyota Prius --$3,150*
2006 Model Year
l2006 Chevrolet Silverado 2WD Hybrid Pickup Truck --$250
l2006 Chevrolet Silverado 4WD Hybrid Pickup Truck --$650
l2006 Ford Escape Hybrid 2WD Front Wheel Drive --$2,600
l2006 Ford Escape Hybrid 4WD --$1,950
l2006 GMC Sierra 2WD Hybrid Pickup Truck --$250
l2006 GMC Sierra 4WD Hybrid Pickup Truck --$650
l2006 Honda Accord Hybrid AT and Navi AT --$1,300 ($650 credit if vehicle does not have updated control calibration)**
l2006 Honda Civic Hybrid CVT --$2,100**
l2006 Honda Insight CVT --$1,450**
l2006 Lexus RX400h 2WD and 4WD --$2,200*
l2006 Mercury Mariner 4WD Hybrid --$1,950
l2006 Toyota Highlander 2WD and 4WD Hybrid --$2,600*
l2006 Toyota Prius --$3,150*
2007 Model Year
l2007 Chevrolet Silverado 2WD Hybrid Pickup Truck --$250
l2007 Chevrolet Silverado 4WD Hybrid Pickup Ttruck --$650
l2007 Ford Escape 2WD Hybrid --$2,600
l2007 Ford Escape 4WD Hybrid --$1,950
l2007 GMC Sierra 2WD Hybrid Pickup Ttruck --$250
l2007 GMC Sierra 4WD Hybrid Pickup Truck --$650
l2007 Honda Accord Hybrid AT and Navi AT --$1,300**
l2007 Honda Civic Hybrid CVT --$2,100**
l2007 Lexus GS 450h --$1,550*
l2007 Lexus RX 400h 2WD and 4WD --$2,200*
l2007 Mercury Mariner 4WD Hybrid --$1,950
l2007 Nissan Altima Hybrid --$2,350
l 2007 Saturn Aura --$1,300
l2007 Saturn Vue Green Line --$650
l 2007 Toyota Camry Hybrid --$2,600*
l2007 Toyota Highlander Hybrid 2WD and 4WD --$2,600*
l2007 Toyota Prius --$3,150*
2008 Model Year
l 2008 Chevrolet Malibu Hybrid --$1,300
l2008 Chevrolet Tahoe Hybrid 2WD and 4WD --$2,200
l2008 Ford Escape 2WD Drive Hybrid --$3,000
l2008 Ford Escape 4WD Drive Hybrid --$2,200
l2008 GMC Yukon Hybrid 2WD and 4WD --$2,200
l2008 Honda Civic Hybrid CVT --$2,100 (for purchases in 2007)**
l2008 Mazda Tribute Hybrid 2WD --$3,000
l2008 Mazda Tribute Hybrid 4WD --$2,200
l2008 Mercury Mariner 2WD Hybrid --$3,000
l2008 Mercury Mariner 4WD Hybrid --$2,200
l2008 Nissan Altima Hybrid --$2,350,
l 2008 Saturn Aura Hybrid --$1,300
l2008 Saturn Vue Green Line --$1,550
2009 Model Year
l2008 Ford Escape 2WD Drive Hybrid --$3,000
l2008 Ford Escape 4WD Drive Hybrid --$1,950
l2008 Mercury Mariner 2WD Hybrid --$3,000
l2008 Mercury Mariner 4WD Hybrid --$1,950
*Credit Amounts for Toyota and Lexus Vehicles Under Phaseout Rule
Credit amounts for Oct. 1, 2006 - March 31, 2007 purchases of Toyota and Lexus Vehicles:
l 2007 Camry Hybrid --$1,300
l2006, 2007 Highlander 2WD or 4WD Hybrid --$1,300
l2005, 2006, 2007 Prius --$1,575
l2007 Lexus GS 450h --$775
l2006, 2007 Lexus RX400h 2WD or 4WD --$1,100
Credit amounts for April 1, 2007 - September 30, 2007 purchases of Toyota and Lexus Vehicles:
l2007 Lexus GS 450h --$387.50
l2008 Lexus LS 600h L Hybrid --$450
l2006, 2007, 2008 Lexus RX400h 2WD or 4WD --$550
l 2007, 2008 Camry Hybrid --$650
l2006, 2007 Highlander 2WD or 4WD Hybrid --$650
l2008 Highlander 4WD Hybrid --$650
l2005, 2006, 2007, 2008 Prius --$787.50
No credit is available for purchases of Toyota and Lexus hybrid vehicles after September 30, 2007 (IRS News Release IR-2006-172, November 6, 2006; Notice 2006-78, 2006-41 I.R.B. 675; IRS News Release IR-2007-28, February 8, 2007; IRS News Release IR-2007-186, November 8, 2007).
**Credit Amounts for Honda Vehicles Under The Phaseout Rule
Credit amounts for January 1, 2008 - June, 30, 2008 purchases of Honda vehicles:
l2005 Accord Hybrid AT and Navi AT --$325
l2005 Civic Hybrid CVT and MT --$850
l2005, 2006 Insight CVT --$725
l2006 Accord Hybrid AT and Navi AT with updated calibration --$650
l2006 Accord Hybrid AT and Navi AT without updated calibration --$325
l2006, 2007, 2008 Civic Hybrid CVT --$1,050
l2007 Accord Hybrid AT and Navi AT --$650
Credit amounts for July 1, 2008 - December 31, 2008 purchases of Honda vehicles:
l2005 Accord Hybrid AT and Navi AT --$162.50
l2005 Civic Hybrid CVT and MT --$425
l2005, 2006 Insight CVT --$362.50
l2006 Accord Hybrid AT and Navi AT with updated calibration --$325
l2006 Accord Hybrid AT and Navi AT without updated calibration --$162.50
l2006, 2007, 2008 Civic Hybrid CVT --$525
l2007 Accord Hybrid AT and Navi AT --$325
No credit is available for purchases of Honda hybrid vehicles on or after January 1, 2009 (Notice 2007-98, 2007-50 I.R.B. 1160).
The IRS has announced that rebates or cash incentives offered by employers to employees to encourage the purchase of hybrid cars are taxable compensation. Employers must include the cash incentive amounts on the employees' year-end Form W-2. The amounts are also subject to income tax withholding and employment tax. For the exclusion for employee discounts to apply, the employer must produce the property and other requirements must be met (IRS News Release IR-2006-112, July 13, 2006).
The IRS has issued a list of qualified alternative fuel motor vehicles (QAFMV) and qualified heavy hybrid vehicles. QAFMVs, which are vehicles powered by alternative fuels (compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen and any liquid at least 85 percent of the volume of which consists of methanol) or a combination of an alternative fuel and a petroleum based fuel, can have an allowable credit of up to $32,000. QAFMVs can be either new, original equipment installation vehicles or prior use vehicles that have been repowered to use an alternative fuel by an aftermarket installer. Qualified heavy hybrid vehicles, which are hybrid vehicles with a gross vehicle weight rating of over 8,500 pounds, can have an allowable credit of up to $12,000. The lists for both QAFMVs and qualified heavy hybrid vehicles are posted on the IRS website at http://www.irs.gov/newsroom/article/0,,id=157557,00.html (IRS News Release IR-2007-196, December 5, 2007).
The IRS has provided interim guidance, until regulations are issued, relating to the qualified heavy-duty hybrid motor vehicle creditunder Code Sec. 30B(a)(3) and (d) and procedures for manufacturers, or domestic distributors of foreign manufacturers, to follow to certify that a heavy-duty hybrid vehicle qualifies for the qualified heavy-duty hybrid motor vehicle credit. Guidance is also provided to taxpayers who purchase vehicles regarding the conditions under which they may rely on the vehicle manufacturer's or a foreign vehicle manufacturer's domestic distributor's certification in determining whether a heavy-duty hybrid motor vehicle credit is allowable and the amount of the credit (Notice 2007-46, 2007-23 I.R.B. 1342).
Following through on his campaign promise of raising taxes on the "wealthy", the Obama Administration will be rolling out their $318 BILLION tax hike including expiration of the Bush tax cuts and an increase in personal tax rates from 33% to 35% over the next few years. In addition, a scale-back of home mortgage interest and contribution deductions are also anticipated under President Obama's proposal. Not-for-Profit entities are suffering from the economy just like taxable businesses; therefore, this is an odd time to reduce the tax benefit for home mortgage deductions and reducing the incentive to support charitable organizations, which are typically very efficient in their operations.
Another $316 BILLION of spending cuts tied to: i) reductions in government payments to private health-care providers supplying Medicare services and ii) other healthcare reductions are also planned.
These combined tax increases and spending cuts of $634 BILLION are designed to pay for President Obama's planned Single-Pay Medical Plan.
