3% Withholding Rule From Payments for Goods and Services

A law scheduled to go into effect in 2013 requires federal, state, and local governments to withhold 3 percent from payments for goods and services.  The law would be a constant cycle because funds would br withheld one year, recouped the following year, but then also withheld again. 

Withholding funsa amounts to floating the federal government an interest-free loan.  Businesses would have 3 percent less to spend, affecting day-to-day operations and future growth.  State and local governments would stress their already strained budgets administering this program.

Tax Delinquents May Be Prohibited from Passport Renewals

More than 224,000 people who received passports in 2008 owed a total of over $5.8 billion in federal income taxes, but Congress would need to change the laws to enable the State Department to coordinate with the IRS on denying them passports, according to a new government report.

The report, by the Government Accountability Office, noted that federal law currently prohibits the IRS from divulging taxpayer information, including unpaid federal taxes, to the State Department, unless the taxpayer consents. In contrast, federal law permits certain restrictions on the issuance of passports to individuals, such as individuals owing child support debts over $2,500 or with outstanding felony warrants.

Change in Federal Unemployment Tax Rate

Effective July 1, 2011, the IRS announced that there will be a reduction in the Federal Unemployment Tax Act (FUTA) rate due to the expiration of the 0.2 percent FUTA surtax. This will decrease the overall rate from 6.2% to 6.0% on FUTA taxable wages paid after June 30, 2011. The annual FUTA taxable wage base of the first $7,000 paid to each employee remains unchanged.

Beware of emails claiming to be from the IRS

Bogus email scams are resurfacing, including one involving payments allegedly rejected by the Electronic Federal Tax Payment System.  The email has a link that may download malicious software.

PLEASE REMEMBER THAT THE INTERNAL REVENUE SERVICE NEVER SENDS AN EMAIL TO A TAXPAYER FOR ANY REASON AND CONSEQUENTLY WILL NEVER ASK FOR FINANCIAL INFORMATION VIA EMAIL, FAX, OR TELEPHONE.  NEVER!  IF YOU RECEIVE SUCH A REQUEST, IT IS BOGUS AND SHOULD BE DISREGARDED IMMEDIATELY.

New Mileage Rates Beginning July 1, 2011

The Internal Revenue Service announced an increase in the optional standard mileage rate for the last six months of calendar year 2011.  The new rate will be 55.5 cents per mile, an increase from 51 cents per mile for the first six months of 2011.

In addition, the medical and moving rate will be 23.5 cents per mile, an increase from 19 cents per mile for the first six months of 2011.

The charitable mileage remains at 14 cents per mile.

Proposed Vehicle Mileage Tax

As an alternative to raising fuel taxes, one possibility would be imposing taxes on vehicle miles traveled. In order to impose so-called VMT taxes, however, metering devices would have to be installed in vehicles to keep track of the number of miles traveled. They might work similarly to transponder systems such as EZPass, which allow drivers to prepay tolls in 14 states.

IRS Will Audit More Landlords

The Internal Revenue Service announced their intention to audit more income tax returns containing rental properties, especially those reporting minimal income or losses.  The IRS believes that a significant number of landlords are either under-reporting rental income or over-reporting rental expenses - or both.  Targeted will be returns that continuously report losses and/or extraordinary expenses.

Landlords are cautioned to maintain accurate records and receipts, and to know the tax laws dealing with rental property.