Amazon announced last week that they are terminating relationships with affiliates in the state of Illinois because of a new tax law signed by Governor Pat Quinn. The law requires online retailers to collect sales tax in Illinois if they have a physical presence in the state. Under this new law, “physical presence” goes beyond an office, warehouse or distribution center – affiliates of an online retailers are now considered “physical presences” – thus tax nexuses in Illinois.

This action is becoming more common as more U.S. states in search of revenue are finding creative ways to expand the definition of a local nexus. Read the rest of this entry »

The owner of a small transportation company on Long Island is arguing that it is not only unfair he has to pay a payroll tax that benefits a competitor of his — the Metropolitan Transportation Authority — but that its adoption was unconstitutional.

William Schoolman, president of Hampton Luxury Liner and Classic Coach, a luxury coach bus service that operates between Manhattan and various locations in Suffolk County, filed a lawsuit Dec. 14 in state Supreme Court in Suffolk County after having to pay $2,500 in payroll taxes in 2009 for the MTA fund.

Gov. David A. Paterson in May signed into law legislation that requires employers in the MTA's service area to pay the payroll taxes. Lawmakers said the tax was needed to help bring MTA out of a $1.8 billion deficit.

"New York state is very unfriendly to businesses. It really is outrageous what the Legislature did," said Schoolman. "They passed an illegal law."

The Metropolitan Commuter Transportation Mobility Tax affects employers, including schools, hospitals and people who are self-employed, in the New York City boroughs and Rockland, Putnam, Nassau, Suffolk, Orange, Dutchess and Westchester counties. The tax amounts to 0.34 percent of every 1 percent of their payroll.

The 12 counties make up the Metropolitan Commuter Transportation District.

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Ever make a personal call on your company cell phone? Did you record the value of that call as taxable income, as required by law?

Join the club, but don't worry. President Barack Obama will propose repealing the widely ignored requirement as part of his 2011 budget plan, a Treasury Department official said Saturday.

The administration made a similar proposal in June, and it was well received in Congress. Lawmakers, however, became preoccupied by the health care debate for much of the year and a lot of their work on tax law was delayed.

Obama is scheduled to release his proposed tax and spending plan on Monday. If the cell phone tax is repealed this year, taxpayers would be off the hook for all of 2010, said the official, who spoke on condition of anonymity because the budget had not yet been released.

A 1989 law says that personal use of a company cell phone should be taxed like other fringe benefits, such as a company car. The law, however, was passed when cell phones were referred to as car phones and were considered a luxury. Today, workers increasingly use company-issued mobile devices for texting, e-mailing and browsing the Internet — sometimes for work, sometimes for personal use.

Last summer, the Internal Revenue Service issued a request for comments on ways to improve compliance with the tax, and there was such a backlash that the administration proposed repealing it.

At the time, IRS Commissioner Doug Shulman said the tax was "poorly understood by taxpayers" and acknowledged it was difficult to enforce consistently.

Some employers have faced big tax bills after failing to comply with the law.

In 2008, the IRS audited two University of California branches, in Los Angeles and San Diego. As part of a settlement, UCLA paid a tax assessment of $238,474 and San Diego paid $186,471.

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People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service.

Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card.

"Americans have opened their hearts to help those affected by the Haiti earthquake," said IRS Commissioner Doug Shulman." This new law provides an immediate tax benefit for the many taxpayers who have made generous donations."

Taxpayers can benefit from their donations, almost immediately, by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.

The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.

To get a tax benefit, taxpayers must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.

Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.

The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities.

Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.

This year’s special Haiti relief provision is modeled on a 2005 law that, in the wake of the Dec. 26, 2004, Indian Ocean tsunami, allowed taxpayers to deduct donations they made during January 2005 as if they made the donations in 2004.

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Several new tax laws could mean more money in your pocket this year.

"We spend the entire off season studying the new tax law updates and all the things that are coming down the pole," said Jackson Hewitt Tax Service franchise owner, David Elkins. "It's really been extended to include more people, to benefit more people than it has been in the past."

More people can tap into the $1,000 education credit, including those who are currently in school and have taken out a loan.

"So whether you pay for it out of pocket, cash, check or credit card or get a loan for it, it qualifies the same for the education credit." said Elkins. "Also new this year any additional expenses, such as buying a computer that's required for school, such as books – books haven't been deductible in the past. Books are now [eligible], and any supplies – those are all new deductibles."

The earned income tax credit has been extended to include more children. Internal Revenue Service

"In the past, the people with bigger families didn't get a benefit from the earned income credit," said Elkins. "If you had two children or four children, your credit was the same. That's been extended this year to three children."

The most recent change includes new guidelines to the first-time homebuyer tax credit.

"It gives people who have kind of been left out of the first time homebuyers credit situation, who have actually already owned a home, it allows them to sell their home buy a new home and also participate in the credit," said Elkins.

People who sell a home that they've lived in for at least five out of eight years can cash in on up to $6,500 credit. You must sign your contract by May 1 and close by June 1.

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Few places have felt the twin challenges presented by Oregon’s broken state budget and its knotted tax system the way this old farm town has.

acing $3 million in state cuts and no way to raise money, the school district here cut back to a four-day week last fall. Teachers cram in curriculum. Parents juggle child care. Students sleep in on Mondays.

“The three-day weekends are nice,” said Joe DeFranco, who teaches at Mae Richardson Elementary School here, “but academically, we’re strapped.”

Still more cuts will come unless revenues rise. On Tuesday, voters here and across Oregon will have the chance to make that happen when they decide the fate of two ballot measures that would raise taxes on higher-income residents and on businesses to help pay for public education and other services. Known as Measures 66 and 67, the votes are referendums on $727 million in tax and fee increases that were approved last year by the Democratic-controlled Legislature.

Yet if the measures pass, it will probably not be because of support here in largely conservative southwest Oregon. Too many times the state has proposed too many taxes, many residents here say, and this is no exception, never mind the school troubles.

Instead, experts say, if the measures pass it will be because Oregon lawmakers found a way to narrowly focus a tax increase that more liberal parts of the state could tolerate, even at a time when a tax increase could not be harder to digest.

What happens here may be closely watched elsewhere. While tax increases are probably coming in plenty of other states, most by executive or legislative action, Oregon will be the first this year to ask voters to raise taxes on themselves — or at least on some of themselves.

“What’s the saying? ‘Don’t tax me. Don’t tax thee. Tax the man behind the tree?’ ” said Tim Hibbitts, a longtime independent pollster in Oregon. “The measures were designed and have been sold with the idea that somebody else is going to pay, people who are high-income earners and businesses.”

Mr. Hibbitts added, “They were crafted pretty cleverly politically.”

Supporters, led by teachers and public employees’ unions, point out that the income tax increase affects less than 3 percent of the population: individuals who earn more than $125,000 a year. They say the state’s wealthier residents should pay more to help those with less. They also say that state businesses enjoy a relatively low tax burden and that most small businesses will pay only $140 more in fees.

Opponents say the proposals are the wrong fix at the wrong time. State income taxes for wealthier Oregon residents are already among the highest of any state. But the most notable opposition may have come from powerful business groups and prominent executives like Phil Knight of Nike, which is based near Portland.

Oregon unemployment is at 11 percent and new taxes will make it even harder to hire, opponents say. They say that supporters are underestimating how many people would be affected, and that while some of the increases are scheduled to fade out, some are not.

Complicating matters further, the Legislature has essentially already spent the $727 million in projected revenue by incorporating the anticipated tax increases into the current budget. If the measures fail, lawmakers will have to make new cuts or find another way to raise revenue.

What many people on each side agree on is that, recession or not, Oregon’s tax system is flawed and that passing Measures 66 and 67 is not a long-term solution.

Oregon is one of only five states with no state sales tax, and voters have repeatedly rejected ballot initiatives to create one. In addition, a statewide cap on property taxes limits how much local governments can raise rates each year.

Here in heavily forested Jackson County and in several others, there is another wrinkle. Property taxes were historically low here in part because the counties received payments from the federal government for timber production on federal lands. Yet timber production has declined substantially, and subsequent federal subsidies have not compensated for the decline. That aid, too, is set to phase out.

John W. Tapogna, a former economist with the Congressional Budget Office who now leads an economics consulting firm in the Pacific Northwest, said the situation facing counties in this part of Oregon could soon become a crisis that might help force the state to look more broadly at its tax structure.

Continued

Residents facing hardships during the recession could find a little financial relief through a number of tax law changes this year, according to local accountants.

A number of new credits and expanded deductions could translate into tax savings for families, students, homeowners and vehicle buyers.

Read the rest of this entry »

More than a dozen new state laws are on the books for the New Year. Nine of the 13 new laws deal with changes to the tax code.

State representatives say because of the recession, revenue and taxation is a major focus for 2010.

The Speaker of the House says the new laws will help Oklahomans, still suffering through the recession. One law, for example, speeds up the payment of Tax Commission rebate checks to local cities.

"In Oklahoma, we see that we should show respect for taxpayers, and provide relief when we can," said Chris Benge, Speaker of the House (R-Tulsa).

Another law helps families who lose a loved one in battle. It states any payment to a soldier killed in action will be exempt from state income taxes.

Still another new law extends a 50% tax credit for clean-burning cars and trucks.

"We think it will help deliver us from our dependence on foreign oil, and also, the other benefit for Oklahoma is that it will be good for Oklahoma because it will create more jobs," Benge said.

Oklahoma will soon have a statewide Chief Information Officer to coordinate information-technology efforts between all state agencies.

"Try to imagine it being like a big corporation, and you have all these different departments doing their own IT. Well that's a terribly inefficient way to deliver that service," Benge said.

The CIO will earn at least $130,000 dollars a year, and his staff of managers and specialists will take home more than a million dollars. But Benge says a dedicated IT czar will ultimately save the state millions.

The 74-year-old estate tax has been repealed. It forced living relatives to pay an special tax on the property of the deceased.

"For many years we felt it was one of the most, if not the most, unfair tax that has been assessed on our citizens," said Chris Benge, Oklahoma Speaker of the House.

The so-called death tax didn't live to see the beginning of the new decade.

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An outside audit released Monday found numerous problems in a tax incentive program designed to encourage filmmakers to come to Iowa, but the extent of the violations is hard to tell because the bookkeeping was so sloppy.

The audit by West Des Moines accounting firm Clifton Gunderson LLP noted it found invoices and receipts for only two of the 22 projects that received tax credits.

Gov. Chet Culver called for the audit last month after learning of problems in the Iowa Film Office. Since those first reports, the director of the Economic Development Department and two other officials have lost their jobs, the internal audit was began and a separate investigation by the attorney general, state auditor and revenue department was launched.

Culver also suspended the tax credit program.

New Connecticut tax laws set to go in effect tomorrow bring new fees and tax increases in Connecticut. Changes include:

• Cigarette tax jumps from $2 to $3 a pack
• Most bottles of water will cost a nickel more because of an expanded bottle and can redemption law
• Hundreds of state licenses and fees, ranging from a pet shop license to the cost of filing small claims cases in superior court, will be higher.
• Fee that allows people to feed garbage to pigs is increasing from $5 to $15 a year
• The license to manufacture cheese in Connecticut jumps from $50 to $100
• Liquor permits for a bowling alley are increasing from $2,000 to $2,250
• A youth camp license climbs from $650 to $815 a year.

The increases were included in the two-year, $37.6 billion budget approved by the Democratic controlled General Assembly following a lengthy impasse with Republican Gov. M. Jodi Rell.

It’s the first major expansion of the water bottle tax in Connecticut in nearly 30 years. According to the Department of Environmental Protection, approximately 500 million containers are sold each year in the state. Based on the number of uncollected beer and soda cans and bottles, the state expects it will collect about $17 million in unclaimed water bottle deposits. Other new laws include:

• Pet owners will be allowed to create legal trusts that ensure after their death that their pets are taken care of financially.
• New law broadens the definition of identity theft, increasing the penalties for criminal impersonation and creating the crime of unlawful possession of personal access devices, such as PIN numbers.
• Drivers will be required to slow down when approaching a stopped emergency vehicle and, if possible, move over one lane to provide space between the motorist and the emergency vehicle.
• Any 16- or 17-year-old seeking a driver’s license must pass the Department of Motor Vehicle’s 25-question “final exam” before receiving a license.