Why the Feds are going broke
August 5, 2009 by Taxcut Editor
Filed under Tax Debt
The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation’s plate and struggling to find money to pay the tab.
The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.
Other figures in an Associated Press analysis underscore the recession’s impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.
The last time the government’s revenues were this bleak, the year was 1932 in the midst of the Depression.
“Our tax system is already inadequate to support the promises our government has made,” said Eugene Steuerle, a former Treasury Department official in the Reagan administration who is now vice president of the Peter G. Peterson Foundation.
“This just adds to the problem.”
While much of Washington is focused on how to pay for new programs such as overhauling health care – at a cost of $1 trillion over the next decade – existing programs are feeling the pinch, too.
Social Security is in danger of running out of money earlier than the government projected just a few month ago. Highway, mass transit and airport projects are at risk because fuel and industry taxes are declining.
The national debt already exceeds $11 trillion. And bills just completed by the House would boost domestic agencies’ spending by 11 percent in 2010 and military spending by 4 percent.
For this report, the AP analyzed annual tax receipts dating back to the inception of the federal income tax in 1913. Tax receipts for the 2009 budget year were available through June. They were compared to the same period last year. The budget year runs from October to September, meaning there will be three more months of receipts this year.
Is there a way out of the financial mess?
A key factor is the economy’s health. The future of current programs – not to mention the new ones Obama is proposing – will depend largely on how fast the economy recovers from the recession, said William Gale, co-director of the Tax Policy Center.
“The numbers for 2009 are striking, head-snapping. But what really matters is what happens next,” said Gale, who previously taught economics at UCLA and was an adviser to President George H. W. Bush’s Council of Economic Advisers.
“If it’s just one year, then it’s a remarkable thing, but it’s totally manageable. If the economy doesn’t recover soon, it doesn’t matter what your social, economic and political agenda is. There’s not going to be any revenue to pay for it.”
A small part of the drop in tax receipts can be attributed to new tax credits for individuals and corporations enacted in February as part of the $787 billion economic stimulus package. The sheer magnitude of the tax decline, however, points to the deep recession that is reducing incomes, wiping out corporate profits and straining government programs.
Social Security tax receipts are down less than a percentage point from last year, but in May the government had been projecting a slight increase. At the time, the government’s best estimate was that Social Security would start to pay out more money than it receives in taxes in 2016, and that the fund would be depleted in 2037 unless changes are enacted.
Some experts think the sour economy has made those numbers outdated.
“You could easily move that number up three or four years, then you’re talking about 2013, and that’s not very far off,” said Kent Smetters, associate professor of insurance and risk management at the University of Pennsylvania.
The government’s projections included best- and worst-case scenarios. Under the worst, Social Security would start to pay out more money than it received in taxes in 2013, and the fund would be depleted in 2029.
The fund’s trustees are still confident the solvency dates are within the range of the worst-case scenario, said Jason Fichtner, the Social Security Administration’s acting deputy commissioner.
“We’re not outside our boundaries yet,” Fichtner said. “As the recovery comes, we’ll see how that plays out.”
The recession’s toll on Social Security makes it even more urgent for Congress to address the fund’s long-term solvency, said Sen. Herb Kohl, D-Wis., chairman of the Senate Aging Committee.
“Over the past year, millions of older Americans have watched their retirement savings crumble, making the guaranteed income of Social Security more important than ever,” Kohl said.
President Barack Obama has said he wants to tackle Social Security next year, after he clears an already crowded agenda that includes overhauling health care, addressing climate change and imposing new regulations on financial companies.
Medicare tax receipts are also down less than a percentage point for the year, pretty close to government projections. Medicare started paying out more money than it received last year.
Meanwhile, the recession is taking a toll on fuel and industry excise taxes that pay for highway, mass transit and airport projects. Fuel taxes that support road construction and mass transit projects are on pace to fall for the second straight year. Receipts from taxes on jet fuel and airline tickets are also dropping, meaning Congress will have to borrow more money to fund airport projects and the Federal Aviation Administration.
Last week, Congress voted to spend $7 billion to replenish the highway fund, which would otherwise run out of money in August. Congress spent $8 billion to replenish the fund last year.
Rep. Richard Neal, D-Mass., chairman of the House subcommittee that oversees fuel taxes, is working on a package to make the fund more self-sufficient. The U.S. Chamber of Commerce, which doesn’t back many tax increases, supports increasing the federal gasoline tax, currently 18.4 cents per gallon.
Neal said he hasn’t endorsed a specific plan. But, he added, “You can’t keep going back to the general fund.
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Is Obama Stimulus Plan Also the Biggest Tax Cut Ever?
May 1, 2009 by Taxcut Editor
Filed under Tax Debt
Are the tax cuts in the stimulus bill the largest is U.S. history?
Yes, sort of.
Steven Waldman, a former U.S. News editor (well before I wandered these halls), makes an interesting case that the coming tax cut will indeed be the biggest ever.
The compromise stimulus plan includes $282 billion in tax cuts over two years.
According to the Wall Street Journal, Bush’s first two years of tax cuts amounted to $174 billion. A second batch in 2004 and 2005 cost $231. And those were thought to be bigger than the tax cuts offered by Reagan, Kennedy, or others.
But wait, you say, wasn’t Bush’s 2001 tax cut, at $1.35 trillion (funny how the GOP didn’t mind draining one trillion dollars from the government coffers then), the largest in history?
Yes, over the full 10 years of its existence. But over the first two years, as Waldman points out above, the price tag was much smaller. So the Obama stimulus tax cut would be the biggest ever for the first two years. Or something like that.
Steve Benen points out over at Political Animal that this means that Republicans will be voting against one of the biggest tax cuts ever. Democrats don’t point this out very much, I suspect, because they are so busy arguing that spending will do more than tax cuts to stimulate the economy.
- Read more by Robert Schlesinger.
- Read more from the Thomas Jefferson Street blog.
- Read more about economic stimulus.
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Tax Preparation Software Reviews
April 25, 2009 by Taxcut Editor
Filed under Tax Debt
2009 Tax Preparation Software Reviews,
Compare – TurboTax, H&R Block TaxCut, CompleteTax, TaxSimple
- Intuit TurboTax has been a top rated and best selling product for tax 
preparation. Consumers continuously return to use Turbo Tax Online every year because of it’s ease of use. The reasons are obvious from the start, Turbo Tax walks you through your return step by step with popup tips and guidance easing you along at your own pace. You can work on your return anytime of day or night, and do it in one sitting, or come back for a few minutes here or there. Regardless of the skill level you have with a computer or taxes, you will find Intuit TurboTax clearly guides and explains the process to you in simple easy terms. By investing a small amount of time with the tax tips, step by step guidance and FREE easy to use tax calculators, you’ll increase your ability to get a bigger tax refund, and widen your knowledge and ability to properly prepare for even bigger refunds on future returns. Check out the Turbo Tax FREE Edition this year
- H&R Block TaxCut a leading top performing and top selling product for tax preparation has built it’s reputation on popularity, dependability and ease of use. HR Block Tax Cut also offers a FREE Edition this year. Millions of people return to use H&R Block TaxCut to prepare their Federal and State income tax returns every year because they trust the professionals. Features Include, Tax Tips, a knowledge center with helpful information on how to maximize your refund. FREE Tax Estimator and Tax Calculators for several purposes help ensure you get easy computing of your tax figures. Online Help from the professionals at H&R Block is at you fingertips any time you need it, and simple forms with step by step guidance ease you through your tax return. H&R Block TaxCut continues to be one of the most popular, well know and well liked products for tax return preparation.
- TaxSimple Tax$imple has consistently served the financial industry with state-of-the-art computer tax software since 1983, Their goal has been to provide world-class tax return software solutions and services to meet all your income tax needs. Each Tax$imple package represents the unique approach of managing tax and financial data with a high level of productivity. TaxSimple performed an extensive marketing analysis to better understand user needs and requirements, which have been implemented into their software programs. In turn the software has become comprehensive, powerful and user-friendly. It includes intuitive navigation for simplicity, along with many more exceptional and time saving features.
- CompleteTax is a quick and easy way to do your taxes online. Developed for the do-it-yourself taxpayer, it is a Internet-based program that prepares both your federal and resident state income tax returns, along with FREE e-filing. Included is a free online tax guide that helps you with virtually any tax issues you may have. One of the great product tools is the Tax Projector, which is a easy-to-use calculator that predicts your tax situation for the upcoming year. Other products include a collection of FREE easy-to-use online investment calculators designed to help you plan for, and solve common financial issues that arise while doing your taxes. They include a lease calculator, retirement calculator and finance calculators that will help you make smarter, better informed financial decisions.
Michael Bownelli is a specialist in tax Return Refunds, helping clients increase their tax refund through tax knowledge and deduction awareness for their tax returns. [http://taxreturnrefunds.com]TaxReturnRefunds.com Turbo Tax FREE Edition + Basic, Deluxe, Premier, Home & Business Tax Software Products. [http://taxreturnrelief.com]TaxReturnRelief.com TaxCut FREE Edition + Basic, Premium, Home & Business, Online Tax Software Products.
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How to Choose a Tax Consultant
April 22, 2009 by Taxcut Editor
Filed under Tax Debt
Anyone can claim they are a tax consultant-and many do, even those 
without solid credentials. When choosing someone to help you with tax problems, look carefully at experience and credentials:
How long have they been in business?
There are tax consultants who practice without the support of an experienced staff. The Incline Group has a staff of professionals that have been solving tax problems since 1985.
Who will be doing the work?
Far too often, the so-called “consultant” you talk with on the phone is just a salesperson. Ask to speak with and discuss your case with someone who has experience and expertise to actually handle your case.
Do they have easy access to accountants, lawyers and other professionals to whom they can collaborate on your tax problems?
A solid network of reliable professionals is essential to some tax resolution cases. The Incline Group has long established relationships such as these in money professional areas.
Do they have access to funds if this is necessary to help you?
Sometimes funds are needed to resolve a problem or to fund an offer. The Incline Group has resources available to help you.
Will they handle the entire case on your behalf?
A consultant who will not handle the case on your behalf is not providing a complete solution. Do-it-yourself approaches are mostly unsuccessful, and other solutions often don’t keep your best interests in mind. Incline full handles your case on your behalf to find the best solution for your unique situation.
Do they handle both Federal and State tax problems?
Before hiring a tax consultant, make sure they can handle your specific tax problems, including both Federal and State. The Incline Group successfully handles both.
Is resolving tax problems their primary profession?
Some consultants handle tax resolution as a side business, in addition to doing tax returns, audits and other activities. Incline clients benefit from our exclusive focus on tax problem resolution and financial solutions. All The Incline Group does is tax resolution.
Are they looking to resolve the cause and not just the problem?
Finally, consider whether the tax consultant is looking at your case for the long haul. Tax problems are often symptoms of other issues, the biggest payoff will come from a professional who has their eye not only on solving the immediate problem, but helping to ensure financial success far into the future.
What will The Incline Group do for you?
We will counsel you on ways to resolve delinquent income and employment tax problems, including (but not limited to) Offer In Compromises, penalty abatements, long-term payment plans, asset transfers via Certificate of Discharge, and others.
We will represent you through a Power of Attorney so you don’t have to spend your time dealing with the IRS.
We will work with you to resolve problems with the IRS and State Collection Divisions. This includes Collection Notices, Levy on Wages, Seizures, Delinquent returns, Bankruptcy, 100% Penalties (IRS 6672 Cases), and lien problems.
We will guide you to prevent future problems with the IRS or State Collection Divisions.
We will provide you with the absolute best representation at an affordable and reasonable fee.
We will get you the solution that is best for you. There are in most cases only a few viable options to negotiating an acceptable tax resolution.
We will negotiate and get the lowest monthly installment payment allowed by law.
We will prepare your Offer In Compromise so that the IRS will consider it processible and the amount to be offered will be at the lowest possible amount allowed by law. Processible means that the offer has been properly filed and ready for consideration. Remember, that with offers, if your financial status improves during the review period, the IRS will likely increase the amount needed to be paid with your offer.
We will resolve your tax problems and be here for you in the future.
Remember . . . . at The Incline Group, your financial future is our life’s work.
Better Business Award GOLD Star to New Century Tax Consultants, our team of Expert Attorneys, CPA's, and Tax Practitioners.
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