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2012 Year-end Tax Planning - before it is too late
IRS reminds taxpayers with filing extensions not to overlook possible tax benefits [IR 2011-101]: IRS is urging taxpayers whose tax-filing extensions run out on Oct. 31 or later to be sure they take advantage of expanded individual and business tax benefits. The agency reminder was directed to members of the military and others serving in Iraq, Afghanistan, or other combat zone localities. Typically, taxpayers have until at least 180 days after they leave the combat zone to file their returns and pay any taxes due, according to IRS. The reminder also applies to people affected by Hurricane Irene and other recent natural disasters. As described by IRS, currently, parts of nine states and Puerto Rico are covered by federal disaster declarations, and affected individuals and businesses in these areas have until Oct. 31 to file. IRS stressed that eligible small businesses should “check out often-overlooked tax benefits” such as the small business health care tax credit. The agency noted that small businesses that operated at a loss in 2010, including farmers and self-employed individuals, may be eligible for an immediate tax benefit by carrying unused losses back to prior tax years. Taxpayers should also check various tax breaks extended or expanded by the recovery law and other recent tax legislation. These include the Making Work Pay Credit, the American opportunity credit and other higher education tax benefits, residential energy credits, the Earned Income Tax Credit, and the child tax credit and additional child tax credit. IRS also reminded U.S. citizens and resident aliens that federal law requires them to report income from all sources, both foreign and domestic, including income from foreign trusts and foreign bank and securities accounts.
U.S. tax collections may
decline by $4 billion annually if the U.S. Congress cuts the budget
of the tax-collecting Internal Revenue Service, according to a
letter from the IRS commissioner on Monday Oct 17. In a letter to
congressional tax-writing committees, IRS Commissioner Douglas
Shulman said steep IRS budget cuts would sap revenue collections and
hamper the agency's ability to pursue identity theft, offshore tax
evasion and other fraud. The proposed spending cuts "will result in
a direct increase to the nation's deficit," Shulman said.
Enforcement budget
pruning as proposed by Congress would mean "that front-line IRS
staffing levels must be substantially reduced, leading to a
measurable decrease of approximately $4 billion in revenue annually,
or seven times the reduction in IRS budget," he said. Last month, a
Senate subcommittee voted to cut IRS funding for fiscal 2012 by
$458.8 million. A House bill would fund the IRS at $600 million
below the fiscal 2011 level. President Barack Obama's deficit
reduction recommendations called for more IRS funding estimated to
bring in $3.2 billion in additional tax revenues over 10 years.
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