Relevant and even prescient commentary on news, politics and the economy.

Tax Relief for Victims of Sandy

by Linda Beale

Tax Relief for Victims of Sandy

The IRS released several bulletins this week providing relief for victims of Hurricane Sandy.
IR-2012-83 extends the return filing and tax payment deadline to Feb. 1, 2013 for hurricane  victims in Connecticut (Fairfield, Middlesex, New Haven, and New London Counties; the Mashantucket Pequot Tribal Nation and the Mohegan Tribal Nationa within New London County), New Jersey (Atlantic, Bergen, Cape May, Essex, Hudson, MIddlesex, Monmouth, Ocean, Somerset, and Union) and New York (Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk and Westchester).  The New Jersey relief starts with the Oct. 26 onset of the storm, while the Connecticut and New York relief start Oct. 27.  The release notes that the relief may be extended to taxpayers in other locations “based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred starting in late October. As a result, affected individuals and businesses will have until Feb. 1, 2013 to file these returns and pay any taxes due. This includes the fourth quarter individual estimated tax payment, normally due Jan. 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on Oct. 31, 2012 and Jan. 31, 2013 respectively. It also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period.

Penalties and interest that would otherwise apply will not apply, and taxpayers don’t have to apply for this basic filing extension.  Failure-to-deposit penalties for deposites due when Sandy struck or later are waived if the deposits are made by Nov. 26, 2012. Details on this are available at disaster relief.  

The IRS also noted that it will work with taxpayers who don’t live in the designated areas “but whose books, records or tax professional are located in the areas affected by Hurricane Sandy.”  Those taxpayers do need to contact the IRS to claim the relief.  The number to call is 866-562-5227.

IR-2012-84 alerts employers and others that qualified disaster relief payments made by an employer or other person in respect of damage from Hurricane Sandy (which has been designated a “qualified disaster”) can be excludible from taxable income and that “employer-sp9onsored private foundations may provide disaster relief to employee-victims in areas affected by the hurricane without affecting their tax-exempt status.
Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance.
IR-2012-86  expands availability of housing for victims of Hurricane Sandy by temporarily waiving the low-income housing tax credit rules that prohibit owners of low-income housing from providing housing to Sandy victims who do not qualify as low-income.

Other assistance through FEMA may be available:
Assistance can include grants for temporary housing and home repairs, low-cost loans to cover uninsured property losses, and other programs to help individuals and business owners recover from the effects of the disaster. FEMA has also approved Transitional Sheltering Assistance (TSA) in New York and New Jersey for eligible disaster survivors who have a continuing need for shelter because they are unable to return to their homes for an extended period of time. Individuals and business owners who sustained losses can apply for assistance from FEMA by calling 1-800-621-FEMA (3362) via mobile device at m.fema.gov, or online at http://apps.irs.gov/app/scripts/exit.jsp?dest=http://www.disasterassistance.gov/

More information about the low-income housing credit waiver is available in Notice 2012-68.  General information (with links to these and other releases) is available at “Help for Victims of Hurricane Sandy.”

cross posted with ataxingmatter

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passes

(Dan here: I am traveling right now and am posting things late or maybe not as tidy as I would like. But posts are coming.)

by Linda Beale
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passes
crossposted with Ataxingmatter

No big surprise here.  The House on December 16 passed the Senate-approved TRA by a vote of 277-148, clearing it for the President’s signature.  The bill extends the Bush tax cuts for two years and reduces the number of estates subject to the estate tax, and the rate of tax when they are taxed, even below the number subject to the tax in 2009.  It includes the usual “patch” for the AMT for two years, and various tax breaks for businesses–especially expensing provisions that will likely merely result in more pay to managers and more payouts to mostly wealthy shareholders.

Those most vulnerable get the relief from the lower rates (not many dollars for them, of course), the 2% cut in the payroll taxes, and the extension of unemployment compensation.

Those at the top of the wealth and income heap who have garnered almost all the benefits of productivity gains in the economy over the last few decades get most of the benefit of the bill–tens of thousands of dollars of tax relief for the top 20% of the income distribution, substantial estate tax reductions, and none of the burden-sharing that progressives had advocated (such as the carried interest treatment as ordinary income).  The bill even provides what amounts to an interest-free loan to the wealthy who convert regular IRAs to Roth IRAs–the “deal of the century” according to one CPA who services the wealthy.  See Leondis, Tax Measure Gives Deal to Wealthy Roth IRA Converters, Bloomberg.com, Dec. 17, 2010.  And of course, the bill also lets the wealthy transfer up to $100,000 from regular IRAs to charities without paying the income tax they should have to pay on the appreciation.

All in all, the wealthy made out like bandits in the tax bill.  And in many ways, that is the appropriate way to view them–they have stolen the sustainable livelihood of the middle and lower classes for two decades and are rapidly moving into position to become a ruling oligarchy.  The bill was a big win for corporatism and the wealthy on the right.

Knzn gives new definition to "infrastructure"

For those who don’t want to try to read about John McCain’s 2 – 1 = 7 calculations, a couple of interesting links.

It’s missing the appropriate equations, so I suspect a few of the simplifying assumptions are skewed, and he doesn’t mention that the industry in question has always been at the forefront of new-technology which enabled it to reap this benefit, but the Substitution Effect discussed here is almost as interesting as the heroin/Kalishnikov exchange rate.

What Fiscal Stimulus needs to look like

Fiscal stimulus? All sorts of numbers being tossed around, not sure where they are coming up with them from. But, if we are looking to drive a consumption based economy, it seems to me we have to get money into the hands of the most consumers on a regular basis.

Here is what has to be made up using year 2000 dollars. Keeping the same ratio of income for the top 1% as in 1962 (just seemed like a nice year to pick), the share per person for the bottom 99% (of total population) in 2005 goes from $24,515 which is just under 120% of poverty, 4 people ( 2007 tables) to $28,274 or just around 140%. It’s a $3759 increase. That’s the number to fix the problem as I see it. Or, one wage earner at $113,096/yr. Close to the top 1% number for 1962 of $114,711.

The $3759 times 4 (four people in a family) is $15,036. That’s health insurance of the non-high deductible type plus an extra $3000 for a retirement plan for this family of 4. If they are a young family, they could probably split that $3000 putting half in retirement and blowing the rest. Imagine 99% of the population in 2005 blowing $1500 just because they had it to spend. Real, in the hands, cash money.

Or look at it this way, we shifted the “risk” of health coverage and pension from the company to the employee, but not the $3759 per person that would need to go with it. You know, that old increased reward for increased risk meme of the free market capitalist system. Instead it went to the top 1% such that they have $681,370/yr/person. That’s $2,725,480/yr (family of 4 you know). And that is more than double the threshold for the top 0.1% excluding capital gains (Saez data). BTW, there were 2,969,720 people in the top 1%.