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Archive for the ‘tax’ Category

Steven Kroll, managing director at Monness Crespi Hardt & Co., talks about the U.S. deficit and economy. Kroll also speaks about the tax-cut agreement President Obama reached with Republicans, the performance of U.S. stock and bond markets, and his investment strategy. He talks with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” Dan Deming of Stutland Equities LLC also speaks. (Source: Bloomberg)

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By Gene Schulist, School-Pak

Governor Pat Quinn (Illinois) recently called for dropping the state sales tax on back-to-school supplies for a 10-day period in August as a means of helping state residents during the current recessionary period.

Items would include school supplies like pencils (Of course companies would never think of buying these during the tax freeze.), binders (ditto), dry erase markers, (How will executives graph sales at their companies? Wait, they can buy these during the freeze.), and clothing purchases of $100 or more.

Of course, that means the state of Illinois will lose about $50 million dollars in sales tax revenue.

Since the state is facing a $12 billion dollar deficit this upcoming year, the new budge could be short an additional $50 million.

Now, if you’re a resident, what’s the smart thing to do? Would you go shopping for school supplies or clothes now? Or would you wait for the freeze? How crowded would the stores be during the tax freeze?

It was unclear whether the $100 in clothing costs was per item or if it was for a collective sale. Or whether there were limitations on the products, like purchasing socks and underwear.

The merchants, on the other hand, would end up with excess stock until that 10-day window opens up. Then they would be faced with overflow crowds and would have to provide more retail help. Since most states charge companies unemployment tax based on the number of workers, the store costs will go up.

And remember, with no one purchasing supplies or clothes outside that 10-day window, there would be little sales tax collected then either. So the 10-day window would lower store sales, increase employee costs and eliminate sales tax receipts.

The Illinois state legislature has until May 31 to approve the measure, and gratefully, cooler heads have prevailed and Quinn has backed off his proposal.

Maybe a place to start reducing the budget is to re-examine government employee benefits. When these start approaching 50-70 percent of the budget, states like Illinois will be facing bankruptcy.

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Buried within the 2,409-page health care bill is a provision that could cause a flood of new tax paperwork for U.S. small businesses. Beginning in 2012, Section 9006 of the bill mandates that all companies must issue a 1099 tax form not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year, according to a CNN Money article.

Under the new rule, the article states that, “If a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.”

This change could cause businesses to issue millions of new tax documents each year.

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It’s tax season and according to an article by MSNBC.com, small business owners could see some relief regarding their 2009 taxes. MSNBC.com spoke with Jean Baxley, a tax attorney in Washington, DC, about the latest tax breaks implemented by the Obama Administration under The American Recovery and Reinvestment Act of 2009 (ARRA).

Here are some of the breaks that the article mentions:

First year expensing:
Under the amended Sec. 179 deduction, small businesses can now expense up to $250,000 of the cost of their property and equipment that was put into use during 2009, all at once instead of using depreciation to find the cost of equipment and machinery purchases.

First-year bonus depreciation
The ARRA made “bonus” depreciation available on top of regular depreciation, so small businesses that were not profitable can now immediately depreciate 50 percent of the cost of any office-related property that they used in 2009.

General business credit
If small businesses are operating at a loss, then bonus depreciation is not going to be beneficial, so the Recovery act now allows businesses to claim a higher limit on their refundable credits instead if they want.

Read the article, “10 Tax Breaks You Need to Know About” to find out the other seven tax breaks and let NSSEA know your thoughts!

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The Teacher Tax Deduction is a provision in the tax code that allows elementary and secondary school teachers (including counselors, principals, and aides) the opportunity to take a tax deduction of up to $250 annually on their federal income tax, if they have spent their own out-of-pocket funds to purchase school supplies and/or equipment for their classrooms.

This federal tax law provision will expire on December 31, 2009 unless Congress extends, expands, modifies, strengthens or continues the Educator Expense Deduction for another year or longer.

Some top NSSEA priorities in advocating a Teacher Tax Deduction bill are to:

1. Create a “permanent” Teacher Tax Deduction that would not expire each year and would not have to be renewed annually.

2. Increase the dollar value of the Educator Expense Deduction from $250 to a larger amount. Most bills that propose this change would double the deduction from $250 to $500 per eligible educator, per year.

3. Expand the definition of an “eligible educator,” one who is eligible for the Teacher Tax Deduction, to include Head Start teachers and early childhood educators.

Each of these proposed types of changes will add to the cost of the current Educator Expense Deduction meaning that Congress will have to determine what these additional costs would be, and to calculate how they would be paid for. These are difficult choices, given the rising national debt and federal deficit of the nation. Congress would have to consider which changes are the most important to make, if any, and how affordable it would be to make them.

In recent years, Congress has chosen to pass a large package of federal tax bills set to expire, by bundling them together into a single piece of legislation, known as a “tax extenders” bill, and passing the package before the expiration date, at the end of the calendar year. However, in other years, Congress has not acted until after the group of tax provisions officially has expired. Then Congress included legislative language to make continuation of the federal tax provisions retroactive to the first of the relevant calendar year, so the Teacher Tax Deduction remains available for eligible teachers to use.

To contact your legislator, visit: http://www.usa.gov/Contact/Elected.shtml and show your support for the Teacher Tax Deduction Bill. Let NSSEA know your thoughts!

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