12 Ways to Cut Your Taxes

Wonderful article on CNN Money today. Titled 12 Ways to Cut Your Taxes, the column jumps into some areas that we really like to hit on here at Mass Tax-ed. For instance:

2. You've Got a Kid in College

Nice discussion on the home credit. Dependents who follow of this blog, take note -- if you can alert your parents and save a couple hundred bucks through the Hope Credit, they might be willing to send a few back to you!

10. You Picked Up a Second Job

How many college students or recent grads do you know who started a second job for the stream of income? This particularly applies to folks working as independent contractors. A few hundred bucks in a credit is available here if you do your work primarily from home.

11. You Moved For Work

More graduates are taking jobs that require them to change locations. If this happens to someone you know, encourage them to take this credit listed in this bullet point on their federal return.

Notice the "AMT Helper" logo in red on certain bullets too -- well done CNN Money!

http://money.cnn.com/galleries/2010/moneymag/1003/gallery.tax_breaks.moneymag/11.html

Exploring the First-Time Homebuyer Tax

There is a great post on the Red, White and Blue Press today authored by Isaac Lewis. This blog is a nice morning pit stop and their examination of how the First-Time Homebuyer Tax Credit is helping the housing market is worth glance.

http://www.rwbpress.com/2010/03/04/is-the-first-time-homebuyer-tax-credit-helping-the-housing-market/

As you may not know, qualified first-time homebuyers are able to apply up to an $8,000 credit on their 2009 tax return. Credits are different than deductions -- they are applied after the individual tax is calculated and drive down the total tax bill that you owe. This generally results in a comparatively less tax owed and thus higher refund of withheld payments, although the credits are only limited to bring you down to zero tax and not past it (you cannot "cash in" the credit). Leftover credits are generally carried forward onto future returns.

Think of taxable credits like free points on an exam from the professor after a grade has been set. Let's say the class gets 10 free points on the exam. If you originally earned an 82/100, your new grade will be 92/100. However, if you originally earned a 92/100, your new grade would be 100/100 and the leftover 2 points would be applied to the next exam.

But back to the First-Time Homebuyer Tax Credit. This credit is a byproduct of President Obama's Stimulus plan and beneficially provides enticement for folks of our generation to make their first home purchase (as long, of course, if you can secure the loan). Be smart, but this is a credit of which to certainly take advantage. Purchase a house with a mortgage that you can afford, build some equity in it, and watch your investment grow.

Our generation should be aware of opportunities such as the First-Time Homebuyer Tax Credit. And that is why Mass Tax-ed is here. We sort through the babble and provide a clear explanation for important tax-related policies to our younger generation. Do you like what you see? Stay tuned for more.

Check It Out

Sometimes you stumble upon something so simple that you wonder how you possibly could have missed it in the first place! (Let's hope this isn't a phenomena that occurs when filing your respective individual tax return though). Check out AMTblog.com, which contains great information and some opinion pieces on the future of the AMT in the US.

http://www.amtblog.com/

The mid-February post concerning a generalized "What You Need To Know" about the AMT is a good read. It gets into a little more than just the basics of the AMT without overwhelming the reader. Particularly, it discusses certain deductions that are more impactful in the AMT. As you know, the AMT is a hot-button issue here at Mass Tax-ed, so this blog is one that we'll keep an eye on.

Funny reads on the Tax Lawyers Blog

One of the blogs that we keep up with here at Mass Tax-ed is the Tax Lawyer's Blog. Great publication if, for lack of any better reason, the masthead on the blog itself. The content is entertaining too. Check it out:

http://blog.pappastax.com/

At Mass Tax-ed, we don't mind injecting some humor into our work from time to time. For instance, here's an article from the Tax Lawyer's Blog concerning "strange taxes":

http://www.billshrink.com/blog/7738/13-weird-taxes-and-tax-breaks-from-around-the-world/

Among the entries:

- Tax on illegal drugs (in Tennessee)

- Tax on odd baby names (in Sweden)

- Tax on playing cards (in Alabama)

- Witchcraft (in the Netherlands)

Unfortunately, no tax on mass text messages were discovered. Maybe some day in the future...

Toasting Tax Reform

Nice little commentary from CQ Politics (I pulled this off of the Yahoo! feed) regarding tax reform. Highly encourage a read of this:

http://news.yahoo.com/s/cq/20100228/pl_cq_politics/politics3300874;_ylt=ArUuOiaK75kksnrTg6BZqMoJZrcF;_ylu=X3oDMTJtZHJ0NDBvBGFzc2V0A2NxLzIwMTAwMjI4L3BvbGl0aWNzMzMwMDg3NARwb3MDMTMEc2VjA3luX3BhZ2luYXRlX3N1bW1hcnlfbGlzdARzbGsDcG9saXRpY2FsZWNv

The business of reform (and I call it a business because for many firms in the accounting world, reform is a huge source of business) is on the tip of folks' tongues when talking about the tax world. Simplification of the code? Let's do it, they say. Eliminate or adjust for inflation the AMT? A favorite discussion topic of Mass Tax-ed. Institute a flat tax? Not going to happen, but worth a theoretical conversation nevertheless.

At any rate, this is a nice, supporting bit of commentary to get your brain working on this Monday and start to the work week.

Great Opinion Column in the WSJ

Loyal Readers:

There was a great staff editorial posted in the Wall Street Journal today. The column discussed the 2.9% Medicare tax (called a Medicare payroll levy in this column) being applied to passive income -- which includes incomes such as interest, dividends, rents, etc.

As you may or may not know, each taxpayer that receives a W-2 has 1.45% of their gross income set aside for Medicare. The employer which furnished a W-2 to its employees likewise pay 1.45% of the gross income to Medicare. Both of these amounts combine for the 2.9% that is sent to the IRS.

The 2.9% is only taken from total wages, not other types of income. This proposal would change that... and since passive income is typically not automatically withheld by employers, would cause additional strain on young individuals filling out their tax returns.

Here's the link to the editorial:

http://online.wsj.com/article/SB10001424052748704188104575083520811873704.html

I agree with most elements of the staff editorial. I think that several key contradictions that exist in the Health Care Reform bills are accurately pointed out, such as as the hike on capital gains tax through the 2.9% Medicare payroll levy on passive income. The article does not quite mention the burden on young taxpayers filing returns, but I identify this consequence as another negative by-product of this type of legislation.

It serves as another good reason why young people need to have a unified voice when it comes to defining the legislation that will impact our generation for many years to come.

Once again, look at this issue as a reason why Mass Tax-ed is here -- the voice of a younger generation when it comes to individual tax matters.

Attacks -OR- "A Tax" ?

You likely have read about the bitter software engineer who flew a plane in a Texas IRS building. It is indeed a sad sorry, however, an article that I found online looks at the incident through the lenses of disgruntled taxpayers.

http://news.yahoo.com/s/ap/us_plane_crash_tax_protesters

The pilot, Joseph Stack, had two registered companies suspended by the IRS. Stack left a 6-page manifesto which chronicled his clashes with the collection agency. He was one of thousands of individual contestants of tax rulings made by the IRS.

The IRS also has a "Frivolous Tax Arguments" dossier that is both referred by the web-site and found here:

http://www.irs.gov/taxpros/article/0,,id=159853,00.html

Prayers to the families impacted by this tragic accident.

More Mass Tax-ed to come later this week.

Follow-up on State of the Union

After about a week digesting the Obama State of the Union address, I'm ready to share two more links with our loyal readership.

First, it was clear from the start that tax cuts were a big discussion item for President Obama. It was a terrific mechanism for him to inculcate the two important aspects of his speech: creation of jobs and health care.

The first article that I share provides a perfect explanation for this:

http://online.wsj.com/article/BT-CO-20100128-723583.html?mod=WSJ_latestheadlines

What's most intriguing here is the immediate tie to jobs for new workers. For college-age students, this would seem to be great news -- particularly for those just now entering the job market. The small business spin may further be alleviating news to those who are not seeking the cookie-cutter entry-level corporate gigs.

Notice the mention that the ceiling for the proposal is the $106,800 income cap for social security. I would really like to explore social security in the near future, as I think this is another tax-related concern for our generation. Expect a post on that topic soon.

The second article that I want to share is a post on stltoday, the self-proclaimed "#1 St. Louis web-site. The post draws information from CNN Money that appears to be credible, so I will accept its validity in this instance.

http://www.stltoday.com/forums/viewtopic.php?p=8193347

The article begins with discussion surrounding the expiration of Bush's 2001 and 2003 tax cuts, however, it moves into other hot topics such as capital gains tax (discussed early in the State of the Union speech by Obama, too), the AMT (a hot topic in its own right on Mass Tax-ed), and the Earned Income Tax Credit (for low-income taxpayers, such as -- perhaps -- recent college students).

Let's back-track a moment here too. Again, I will constantly seek to ask "Why?" when bringing these issues into the foreground. As stated in my preface to this blog, "Many of these Americans are entering the workforce (re: EITC), expanding their future income potential (re: AMT), or beginning to save for their retirement (re: Capital Gains Tax)."

I believe this connection re-affirms my belief why awareness of key individual tax issues is important for college students in my generation. These are areas that impact our lives or our futures -- even if they aren't the most glorious or most prevalent on our agendas. I still fastidiously believe that there should be a voice to bring awareness to these matters -- and that, my friends, is truly why Mass Tax-ed is here today.

As we move onto week 2 of post-Obama State of the Union 2010, stay tuned for future developments here on The Voice of Masses.

Two Great Reads: AMT and...

Two great articles that I would like to share with my loyal readership:

1. http://online.wsj.com/article/SB126429047014334331.html

This Q & A tackles Congresses' 2010 position on the AMT tax. The AMT is an important agenda item for this blog, as I believe that it is an issue that deserves much more attention on Capitol Hill. This tax is not indexed for inflation, thus more and more taxpayers find themselves caught in an AMT bear-trap each year. Of course, the additional generated revenue in the back pockets of DC bigwigs likely means the AMT will never go away -- however, when considering its purpose, I believe that some sort of indexing should be lobbied.

2. http://www.usatoday.com/money/perfi/taxes/2010-01-26-irs-corporate-tax-breaks_N.htm

Though this article pertains mostly to corporate deductions, I find it interesting enough to share in this space. It appears the corporations and the IRS are headed toward a standoff as to disclosure of "gray-area" deductions. As we have found through the fallout of the near collapse of the Wall Street investment banking industry (re: Bear Sterns, AIG), the newest trend in regulation is full disclosure of such hot topics as executive bonuses. Loading up on deductions could be a tool utilized by big corporations to keep their bottom-line healthy -- and if increased disclosure is being demanded here, I'm sure a similar push-back will follow.

As for how these two articles relate to our target audience (recent college graduates ages 18-30) ...

1. Although the AMT may not come in to play for several years, it is important to become familiar with it now. If it remains not indexed for inflation, many young Americans may find themselves in this trap sooner than they may think!

2. Increased regulation is back on the front-burner in terms of corporate governance. But much like a fox always finds a new way to get into the chicken house, corporations are seeking new ways to meet and exceed market expectations. Being familiar with this new development is a healthy way to learn about future issues we may face as potential young investors in these publicly-held corporations.

Thanks for reading Mass Tax-ed, and expect another post soon with follow-up and analysis of President Obama's State of the Union.

So, What is Mass Tax-ed?

So, why are we here?

As Congress approaches the 2010 mid-term elections (and beyond), proposed changes to the Internal Revenue Service tax code will likely impact thousands of United States taxpayers.

This blog will examine these proposals by sharing comments and links to key developments. My stance is that proposed changes to the IRS tax code deserves more attention by our representatives in Washington DC and by the news pundits who cover it. Issues such as Health Care Reform and Bank Regulation constantly grab headlines -- however, the changes to the code similarly impacts the pocketbooks of thousands of Americans, but at only a fraction of the public's interest.

In earnest, we will focus our content on the impact to young Americans between ages 18 - 30. Many of these Americans are entering the workforce, expanding their future income potential, or beginning to save for their retirement. Trying to understand the code and its complicated proposals is difficult and thus easy to neglect by the masses. By reading Mass Tax-ed, we will sort through the news to find what's important and help explain why.

Welcome to Mass Tax-ed.

Are you stuck on a friend's mass texting list? You know, a friend who shamelessly sends messages so generic and open-ended that you nearly curse it in the same breath as spam e-mail. This particular social habit can be frustrating, confusing, and quite disheartening.

Just like trying to understand the United States Tax Code.

Follow Mass Tax-ed as we sort through the spam and share tax policy news that impacts you. We focus on future political implications found within proposals to the code in order to connect Capitol Hill and your pocketbook without getting lost in the grocery store's cured meats section.

Can we stop your old college roommate from texting you every Saturday night to find out "where's the party at, bro?" Not likely.

But we will bring awareness to tax code proposals that will mean something to you.