The Internal Revenue Service announced Wednesday that under "certain circumstances," homeowners will be able to pre-pay their 2018 state and local property taxes and deduct them on their 2017 returns.
The new tax reform bill signed into law last week caps the amount of state and local taxes that can be deducted from income at $10,000, and while the bill is clear that income taxes can't be paid early, it's vague when it comes to property taxes, The Hill reports. The IRS announcement said that homeowners can prepay their 2018 property taxes if state laws allow them to be assessed before Dec. 31, 2017. The $10,000 cap goes into effect in 2018. Catherine Garcia
On Wednesday, President Trump will announce his plan to overhaul the tax code, including a proposal to cut the corporate tax rate to 15 percent from 35 percent, White House officials told The Washington Post on Monday.
Independent analysts have estimated a cut this severe could cost the federal government $2.4 trillion over 10 years, and it's a deeper cut than one House Republicans have proposed. Treasury Secretary Steven Mnuchin said Monday that such a tax plan "will pay for itself with economic growth," but Edward Kleinbard, the former chief of staff for Congress' Joint Committee on Taxation, told the Post that if Trump's administration is "going to rely on the principle that tax cuts can pay for themselves, history has demonstrated that tax policies move the growth needle a bit but no more than that."
Most companies do not pay the 35 percent rate because of deductions, and these changes will have to be backed by Congress with bipartisan support in order to pass. During his speech, Trump is expected to discuss changes to personal income tax as well. Catherine Garcia
Philadelphia's City Council is expected to approve a 1.5 cent-per-ounce tax on sugary and diet drinks Thursday, becoming the first major U.S. city to do so.
Two previous efforts to enact a soda tax in the city failed, but this time, Mayor Jim Kenney told the council the estimated $90 million in new tax revenues would pay for pre-K, community schools, and recreation centers, The Associated Press reports. The beverage industry has spent millions of dollars on a campaign to block the tax, and is expected to sue if it is approved. The only other city in the U.S. to have such a tax is Berkeley, California. Catherine Garcia
As Tax Day looms, the Government Accountability Office (GAO) released a new report Monday that paints a damning picture of IRS protections of taxpayer data.
The tax agency "has not effectively implemented elements of its information security program," the government watchdog found, and until significant changes are made, "financial and taxpayer data will remain unnecessarily vulnerable to inappropriate and undetected use, modification, or disclosure." Current security lapses include issues like improper password settings, lack of adequate encryption, outdated software, and more.
The Tax Policy Center, a nonpartisan research center, says the tax plan unveiled by Republican presidential candidate Ted Cruz in November would cut federal revenues by $8.6 trillion over 10 years, adding significantly to the debt.
Cruz's plan calls for a flat 10 percent individual income tax; repealing the corporate income tax, payroll taxes for Social Security and Medicare, and estate and gift taxes; increasing the standard deduction and getting rid of most other deductions with the exception of charity and mortgage interest; and introducing a 16 percent value-added consumption tax, Reuters reports.
The Tax Policy Center says the value-added tax would only replace 70 percent of the costs of the tax cuts, and the plan in general would "cut taxes at most income levels, although the highest-income households would benefit the most and the poor the least." The center's analysis finds that taxpayers with incomes over $3.7 million would see an average cut of almost 29 percent, while "households in the middle of the income distribution would receive an average tax cut of $1,800, or 3.2 percent of after-tax income, while taxpayers in the lowest quintile would receive an average tax cut of $46, or 0.4 percent of after-tax income." Catherine Garcia
Operating with a smaller budget, the Internal Revenue Service audited 0.86 percent of all individual tax returns last year, down from 0.96 percent in 2013 and the lowest number since 2004.
In 2011, the agency audited 1 in 90 individuals and 1 in 8 people who earned more than $1 million, and in 2014, those rates decreased to 1 in 116 individuals and 1 in 13 millionaires. The decline is "deeply disturbing," IRS Commissioner John Koskinen said in speech Tuesday to the New York State Bar Association. "This continues a long-term trend that carries serious implications for our tax system, and the nation. The math is pretty simple. There are fewer audits because we have fewer auditors."
In 2014, there were 11,629 revenue agents, down 16 percent from a peak in 2010, Bloomberg reports. The agency's budget was cut by 3 percent for the fiscal year ending Sept. 30, and is under a hiring freeze. Koskinen has called for more funding, and the IRS might close for a few days later this year in order to save money. Catherine Garcia
Due to worries about possible fraudulent activity, the Minnesota Department of Revenue will no longer accept tax returns from TurboTax.
The department said on Thursday that it did "not take this step lightly," CBS Minnesota reports. Two residents reported that they logged into TurboTax and saw that a return had already been filed in their name, and when the department looked at other returns filed using TurboTax, they found what they say was "potentially fraudulent activity."
"Our priority is maintaining the security of private taxpayer data and preventing fraudulent activity within our system," the department said in a statement. "We have sophisticated technology in place to safeguard private tax information." They also said that TurboTax is "one of the largest vendors that they see for individual income tax filing," and they are checking all of the 2,000 returns that have already been filed using the program. Catherine Garcia
On Monday, Rep. Chris Van Hollen (D-Md.) will present an ambitious "action plan" put together by senior Democrats that would give tax breaks to the middle class while adding fees to financial transactions on Wall Street.
As The Washington Post reports, the plan proposes to give a "paycheck bonus" worth $1,000 to individuals and $2,000 to couples; increase the tax credit for child care from $3,000 per person to $8,000 per person; create a bonus of $250 for workers who put away $500 a year in retirement funds or other savings accounts; and reduce marriage penalties for dual-income couples.
Van Hollen also proposes limiting tax breaks for the top 1 percent of earners, and to impose a 0.1 percent fee on stock trades. Van Hollen says that the fee could bring in as much as $800 billion over the next 10 years, with most coming from high-volume traders. Catherine Garcia