Moody’s: Obama Tax Package Hurts US Credit Rating

Credit ratings agency Moody’s recently warned that President Barack Obama’s planned tax package could result in a negative outlook for the US’ AAA long-term credit rating.

The fiscal proposals aim to extend all of the previous administration’s income tax cuts by two years, retain unemployment insurance for 13 months, and introduce a 2% cut in the payroll tax this year. According to Moody’s, such fiscal policies might worsen the national fiscal deficit and level of public debt.

The agency does foresee prospects for additional tax revenues as the US economy recovers in the next two years following the likely passage of the policy. However, it sees such benefits being outweighed  by the reduced tax collected, and higher benefits paid out by the government.

Unless accompanied by other counterbalancing measures, such as reductions to government spending, Moody’s therefore predicts a downgrading of the country’s credit outlook in the next two years.

What you Need to Know About Income Tax Programs

Nowadays, almost every household in America has at least one computer and Internet access. This has changed the lifestyle and methods of doing different things. Education, shopping, paying bills and communicating have become cheaper and more convenient. Another means that the Interne access has made a lot easier is the filing of taxes. In 1998, Congress required that by the year 2007, 80 percent of all tax returns be filed electronically. A lot of people prefer it that way, because it is much easier. Now, there are available income tax programs that give taxpayers an alternative to traditional tax preparation services and their fees.

The electronic filing of taxes was introduced by the Internal Revenue Service in 1986 through authorized agents. In 1993, the IRS finally approved income tax programs in which taxpayers would fill out tax forms, print and mail them to the IRS electronically.

Preparing and filing using an income tax program is quick and easy. In addition, most programs available offer assistance against an IRS audit. The software is guaranteed to be up-to-date on the latest tax changes. According to users, it offers help and support in every aspect necessary.

How long does it take to file and receive refunds?

The available income tax programs allow taxpayers to prepare and file tax returns in a much faster and more convenient way. Also, tax refunds can arrive as early as 8 days after filing the forms electronically through an income tax program. This is a week earlier than receiving the refunds in a paper check.

What benefits does the program offer?

The software programs help the taxpayers to minimize, if not eliminate, errors. They also help users to make the necessary adjustments by suggesting errors that might not otherwise be found, and review returns for errors that might have lead to an audit.

What other options are available when filing online?

The IRS has partnered with different programs that can prepare the tax returns for free and file them electronically. The IRS website offers these services through their website. However, there is an adjusted gross income limit of $56,000.

What else do I need to know before using the program?

before purchasing or downloading an income tax program, you should verify if it’s compatible with your computer’s operating system first. Also, check for any available program updates after installation to ensure the product’s accuracy. Once in a while, check whether there are changes and updates in the software.

How to Reduce Tax on a Decedent’s Gross Estate

A rich decedent’s estate taxes can be a considerable amount and can take a big part of the assets left to the beneficiaries. The exempted amount of an estate that can be transferred tax-free differs every year.

For instance, back in 2009, the exemption amounted to $3.5 million; however in 2010, estate taxes will have been erased until 2011, when it reaches the brink of $1 million. It is still debatable where the exemption will lead to, but any individual with a gross estate valued more than the current exemption needs to evaluate their tax reduction options.

Spousal Exemption

The whole amount of the estate is passed to the surviving spouse, with no tax whatsoever. However, if there are children who are to become heirs to the estate upon the spouse’s death, ┬áthen the taxes will just be postponed. This is usually the case for those people who don’t have much assets. For people with bigger estates, spousal transfer is not encouraged when looking at it in the long-term point of view.

Lifetime Gifts

A single individual may give gifts amounting to $12,000 annually ($24,000 per married couple filing jointly) without having to pay for gift tax. This gives the gift giver the chance to see how their gifts were received while they’re still living; and it also decreases their estate’s value. A married couple with a number of children can gradually give away part of their money to decrease the size of their estate until it reaches the point where the value is less than the exemption, which would result to the elimination of virtually all taxes on the estate.

Irrevocable Life Insurance Trusts

Another way to decrease the size of an estate and reduce its tax is through life insurance. In this case, one would have to make regular payments to it, the same way they would do in an insurance premium. This then grows separate from the estate. Not only does life insurance trusts decrease the size of the estate, they are also not as expensive and will eventually lead to life insurance proceeds that are free from tax.

 

Calculating Property Tax Valuation

Have you ever wondered how your city comes up with your property tax value? If you are worried that your real estate taxes might be unfairly high, then you might want to understand the basics of computing your property tax valuation.

First and foremost, even if your property tax statement is seemingly crowded with complicated terms such as millage rates, ration, etc., you must know that property tax simply comes down to only a few factors: the market value of your property, your cities assessment ratio and the tax rate.

Market Value

To put it simply, market value is what your property sales for under a normal sale, disregarding any “undue influences” like being in a state of foreclosure, structural issues with the property, short sales time frame, among other.

Assessment Ratio

The assessment ratio is oftentimes is what is generally referred to as your “property tax value.” What is done here is that cities multiply your market value, by the assessment ratio, the resulting number is the assessed value. However, bear in mind that assessment ratios is different from one state to another. In fact, don’t be surprised if your assessment rate is totaling different than your neighboring town.

For instance, if your if your properties market value is $500,000 and your cities assessment ratio is 80% your property tax value would be: $500,000 x.80= $400,000 assessed value.

Tax Rate

The tax rate, also known as a millage rate, is the actual rate that property owners pay in their given town. Similar to assessment ratio, tax rate varies from town to town, not to mention building types. Case in point: a bungalow home will be taxed at a different rate than a commercial building.

To determine your annual taxes, you multiple the tax rate by the assessed value. For example take the assessed value of $400,000 x.020 (tax rate/millage rate) = $8,000 in annual property taxes.

Tax Appeal

In the event of a real estate tax appeal, remember that you can only argue about the fair market value of your property. You can never question the tax rate or the assessment ration, unless they made an error and recorded your property in the wrong category.