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Capital Gains Taxes Are Going Up

July 30, 2012

The top tax rate on long-term capital gains is currently 15%. That’s why Mitt Romney is spending so much time talking about his tax returns.

That revelation has set off a familiar debate about whether that low rate is appropriate. Often overlooked in these discussions, however, is the fact that the days of the 15% tax rate are numbered. As of this posting, it has only 342 left.

On January 1, 2013, capital gains taxes are scheduled to go up sharply:

First, the 2001 and 2003 tax cuts are scheduled to expire. If that happens, the regular top rate on capital gains will rise to 20%. In addition, an obscure provision of the tax code, the limitation on itemized deductions, will return in full force. That provision, known as Pease, increases effective tax rates on high-income taxpayers by reducing the value of their itemized deductions. On net, it will add another 1.2 percentage points to the effective capital gains tax rate for high-income taxpayers.
And that’s not all. The health reform legislation enacted in 2010 imposed a new tax on the net investment income of high-income taxpayers, including capital gains. That adds another 3.8 percentage points to the tax rate.

Put it all together, and the top tax rate on capital gains is scheduled to increase from 15% today to 25% on January 1. That’s a big jump. If taxpayers really believe this will happen, expect a torrent of asset selling in November and December as wealthy taxpayers take final advantage of the lower rate.
Of course, the tax cuts might get extended for all Americans, including high-income taxpayers. That’s what happened in 2010. In that case, the increase in the capital gains rate will be smaller. Because of the health reform tax, the top capital gains tax rate will increase from 15% to 18.8%. That’s still a notable increase, but would likely set off much less tax-oriented selling this year.

Source David Marron

Read more at: Tax Times blog

Treasury Releases Model Intergovernmental Agreement for Implementing the FATCA

July 27, 2012

WASHINGTON – The U.S. Department of the Treasury today published a model intergovernmental agreement (model agreement) to implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts

The agreement was developed in consultation with France, Germany, Italy, Spain and the United Kingdom and is based on a framework announced by those five countries and the United States in February.

Treasury said the agreement would be a basis for close cooperation between the United States, these five countries, the Organization for Economic Cooperation and Development, the European Union, and other partner governments.

The model agreement follows through on the commitment reflected in the joint statement issued with the same countries in February to collaborate on developing an intergovernmental approach to implementing FATCA. The model agreement is accompanied by another joint communique with France, Germany, Italy, Spain, and the United Kingdom, endorsing the agreement and calling for a speedy conclusion of bilateral agreements based on the model.

There are two versions of the model agreement - a reciprocal version and a nonreciprocal version. Both versions establish a framework for reporting by financial institutions of certain financial account information to their respective tax authorities, followed by automatic exchange of such information under existing bilateral tax treaties or tax information exchange agreements. Both versions of the model agreement also address the legal issues that had been raised in connection with FATCA, and simplify its implementation for financial institutions.
If you have any FATCA problems or questions, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).

Read more at: Tax Times blog

Retroactivity of the Fair Sentencing Act of 2010

July 27, 2012

The issue of whether to apply a new sentencing law to crimes committed before the enactment of the law has long confounded judges, both because of the recurring failure of legislatures to be clear about their intentions and because of the inherent questions of fairness that arise from the imposition of disparate sentences for the same crime simply by reference to a date on a calendar. The resolution of such issues often boils down to the weighing of both of those factors and a determination of which one is more significant in the case before the court.

Concerns about fairness prevailed over equivocal evidence of the intent of Congress when a divided U.S. Supreme Court recently ruled that the Fair Sentencing Act of 2010, which dramatically reduced the disparity in length of sentences for offenses involving crack cocaine rather than powder cocaine from a ratio of 100 to 1 to a ratio of 18 to 1, may be applied retroactively to crimes committed before the law became effective.

In Dorsey v. United States, 132 S. Ct. 2321 (2012), Justice Breyer wrote for a five-member majority that allowing vastly different sentences at "the same time, the same place and even [with] the same judge" would result in "a kind of unfairness that modern sentencing statutes typically seek to combat." Id. at 2333. In a dissenting opinion for the four-member minority, Justice Scalia argued that 1 U.S.C. § 109, a law enacted in 1871 and providing that a new criminal statute that "'repeal[s]'" an older criminal statute shall not change the penalties "'incurred'" under that older statute "'unless the repealing Act shall so expressly provide,'" id. at 2339 (Scalia, J., dissenting) (quoting 1 U.S.C. § 109), precluded retroactive application of the Fair Sentencing Act of 2010 because Congress did not explicitly provide for retroactive application. However, Justice Breyer and the majority determined that there were sufficient indications, including the way that Congress had instructed the Federal Sentencing Guidelines to be amended, that Congress had meant to have the new law apply retroactively.

If you have a Criminal Tax Problem, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).

Read more at: Tax Times blog

IRS Business Audit Compliance Initiative Projects

July 27, 2012

The IRS regularly conducts national, regional and local compliance initiative projects (CIPs) to study suspected areas of noncompliance. The IRS uses the data from these projects to develop more comprehensive projects and allocate its audit resources to the areas showing significant noncompliance.

This alert details audit initiatives focusing on business taxpayers.

The projects listed are regional or national and have recently concluded or are scheduled to be completed within the next year.


If you have been contacted by the IRS to schedule an audit, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).

Read more at: Tax Times blog

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