Monday, September 27, 2010

Lame Duck Vote on "Bush Tax Cut" Extension Coming

Senator Dick Durbin (D-IL) and other key Democrats appeared ready to defer votes on legislation extending the tax cuts scheduled to expire at the end of this year until after the November 2 election. Positions taken by party leaders were completely predictable: Democratic leaders want to limit cuts to taxpayers making less than $250K if MFJ or $200,000 otherwise (called "middle class tax cuts") while Republicans called for all cuts to be extended for at least one more year in view of the suspect economic recovery (technically NOT a recession).

It is disappointing, if hardly surprising, that tax preparers are left guessing at major facets of the tax code until less than two months from tax season. While Republicans probably are not totally blameless, the majority party has to take the largest share of the blame here--they simply did not have the courage to risk either voter reaction to a vote on the limited extension or reaction of key supporting blocks if they fully extended the cuts.

Wednesday, September 22, 2010

Paging Everett Dirkson: What's a Billion Among Friends?

NOTE: My apologies for the long period between posts.

A report by the Treasury's Inspector General indicating that the Internal Revenue Service turned down the TIGTA's recommendation to freeze refunds on taxpayers with potentially invalid Earned Income Credits brings to mind the quip from former Senate Minority Leader Dirkson (R-IL) during the 1960s--"a billion here, a billion there and soon you are talking real money." TIGTA claimed that the EIC is vulnerable to fraud and that the IRS needs to take better advantage of third-party data and to improve procedures for checking EIC claims.

While understanding that the IRS has numerous expectations placed on it by the Washington powers-that-be, treating potential fraud with the EIC as a minor problem is not a satisfactory solution. Put another way, the IRS response here, if seen on a tax return audited by a revenue agent, would be at risk of a negligence and possibly even constructive fraud penalty.

Thursday, September 09, 2010

Obama: Let's Increase the Easy R & D credit to 17%

President Obama has proposed increasing the "simple" form of the research and development credit from 14% to 17%. Obama called for a permanent extension of the credit, stating that the credit could help in developing more high-paying jobs. Obama also continued to press for extending the Bush-era tax cuts only to middle-income Americans, claiming that extension of the cuts was too important to let disagreements about whether tax cuts should continue for wealthy taxpayers to delay the extension.

Is this the right route to go? I am not sure--while encouraging research is a good thing, does this simplify the tax code or not? On the other issue, I am inclined to favor Minority Leader Boehner's (R-OH) call for a two-year universal extension of the "Bush" tax cuts.

Carnival of Taxes #74

Kay Bell was kind enough to include last week's "Drilling Down" post in Monday's Labor Day Carnival of Taxes.

Friday, September 03, 2010

XBRL Compatibility Suite: Preparing for the Second Level of XBRL

XBRL US just released the XBRL Compatibility Suite, designed to help users do a better error-check, improve peer documentation, more complete tagging of footnote documentation and compare documents developed for the 2009 XBRL taxonomy release with new requirements in the 2011 taxonomy pre-release. A powerful endorsement comes from Louis Matherne who claims that FASB uses the suite as part of their taxonomy maintenance procedures.

While smaller businesses are unlikely to need XBRL, mid-size publicly-traded busineses and larger business (even privately-held) would be advised to at consider the Compatibiilty Suite. The comparison feature between the 2009 taxonomy and the proposed 2011 taxonomy sounds like a particularly valuable part of the new suite.

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