Tax

Important Dates In Post-Revolution American Tax History

The Revolutionary War was sparked in part by the British imposing taxes on the American colonists without their permission or consent.

Once the colonists had freed themselves from British rule, it was time to establish a government that could pay the debts it had incurred during the conflict.

Photo by Patrick Fore on Unsplash

Photo by Patrick Fore on Unsplash

1777 – Articles of Confederation

This was the first constitution of the newly formed United State. It favored decentralization of power, which means that Congress was not given the power to tax.

1781  – Report on Public Credit

Robert Morris, Superintendent of finance, wanted the federal government to own the debt it incurred then issue interest-bearing debt certificates while imposing tariffs and internal taxes.

His proposal was shut down by numerous states over the next few years.

1787 – Ratification of the Constitution

The ratification of the Constitution shifted the focus of power to the federal government and away from individual states.

This gave the federal legislature the power to impose tariffs and coin money, along with the flexibility to collect excises and levy taxes directly on individual citizens.

1789 – Tariff of 1789

This tax bill included the original 5% duty on imports, as well as a list of special items that would be taxed at specific amounts.

1790 – Report on Public Credit

This new tax plan worked on two basic principles:

  • Redemption – Congress would redeem at face value all the securities issued by the Confederation government. These old notes would be exchanged for new government securities with interest of about 4%. This plan aimed to intertwine the wealthy Americans who had financed the initial government with the new government.

  • Assumption – The national government would take on outstanding war debts of the states. This would concentrate the nation wealth into the hands of the wealthy merchant class so they would be able to invest in the nation’s economy and other critical innovations.

1791 – Whiskey Excise Tax

This was a tax specifically for spirit distillers and imposed a 7 cents to 18 cent per gallon tax. This was not a popular tax, as spirits were often used as a form of currency out west.

1794 – Uprising Quelled

North Carolina and Western Pennsylvania were in a state of civil unrest after being cited by the federal government for dodging taxes.

The federal government forced the states to send militia to occupy these territories and take down any organized resistance.

President Madison appealed to Congress for a Declaration of War against Britain as the tension between the two countries reached a head.

There was a lot of conflict over fundraising for the war, but Congress eventually settled on doubling the tariff schedule.

 

Important Dates In Colonial American Tax History

In the spirit of summer, we’re creating a series containing some of the important dates in US tax history.

blog dates in history

Credit: Matt Briney on Unsplash

Why is this something we talk about in July? Back on July 4, 1776, Congress adopted the Declaration of Independence, a document that stated the American colonies wouldn’t accept British rule — or taxation.

But that’s just one key date in the history of American taxes. Let’s look at critical years and dates that lead up to the adoption of the Declaration of Independence.

 1733 Molasses Act

This tax was imposed to keep the American colonies buying from the British West Indies and not the lower cost imported options. The imposition of this act was effective the first year then led to corruption.

 1764 Sugar Act

An extension of the Molasses Act, this act increased the tariff per gallon on molasses. It was enforced by prohibiting vessels from shipping directly to the colonies. Ships would have to unload their cargo, pay tariffs, then reload and proceed to the colonies. It also expanded what the Crown could tax.

 1765 Stamp Act

This act said that every official document in the colonies would need a stamp on it. This was done to solely to increase the revenue of the British government, which caused opposition to emerge.

 1766 Declaratory Act

This act repealed the Stamp Act while also declaring that the American colonies are subordinate to the British Government and so the government had the right to tax them. As you can imagine, this didn’t go over well.

 1767 Townshend Acts

This act taxed 72 addition imports including paint, tea, and paper. The revenue raised was to fund the salaries of colonial officers and its administration. The protests from this act eventually caused the Boston Massacre.

 March 5, 1770 – Boston Massacre

What started as a protest of angry American colonists harassing a single British soldier escalated to a bloody conflict where several colonists were shot and killed. This was used to fan the flames of anti-British sentiment.

 1773 Tea Act

This act established that only tea from the East India Trading Company could be sold in the American colonies. The new tea was cheaper, but it hurt independent shop owners, shippers, and smugglers, which is why it caused a backlash.

 December 16, 1773 – Boston Tea Party

Protesters dumped more than 300 chests of tea into the Boston Harbor in protest of the 1773 tea act.

 1774 Coercive Acts

The British pass a series of policies designed to reestablish authority over the American colonies. One of the provisions was Boston Harbor would remain closed until the colonist paid the East India Trading Company for the losses of the tea party.

 July 4, 1776

The Declaration of Independence is adopted after days of the discussions and 12 of 13 colonies agreeing to succeed. The actual signing of the Declaration didn’t occur until August 2.

 

Taxation is a large portion of why the American colonies felt it necessary to break away from England. Taxation continues to be a large part of America’s history, especially in the years immediately following the Revolution.

 

We’ll cover that time period next.

 

6 Tax Deductions That Went Extinct in 2018

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The Tax Cuts and Jobs Act of 2017 was called one of the largest tax overhauls in 30 years. It went into effect at the beginning of 2018, which means taxpayers are starting to feel the impact now. Some households will benefit from it, others will not. Here are some deductions that have been eliminated or reduced.

Moving Expenses
Unless you or a spouse is in the military and is currently on active duty, you won’t be able to take any deductions for moving. In the past, those who moved for a job and paid the moving cost could deduct most of their expenses.

Personal Deductions
Deductions for personal exemptions, which can be worth $4,050 for each exemption, were eliminated and replaced with a larger standard deduction and an expanded child tax credit.

Paying Alimony
If you’re paying alimony on a divorce finalized before December 31, 2019, then you can deduct those payments one last time.

Unreimbursed Job Expenses
This fell into the category of miscellaneous itemized deductions, an area that has been greatly reduced by the latest tax laws. It means that anything an employee pays for while on the job and doesn’t get reimbursed for, is not deductible.

State and Local Taxes
You used to be able to fully deduct any amount of state or local taxes. Now that cap is set at $10,000 meaning those with high state income and property taxes will get much less back.

Tax Preparation Fees
Tax preparation fee deductions were eliminated as part of the miscellaneous fees. This is will occur from 2018-2025. That means you cannot deduct payments to accountant, tax prep firms, or tax preparation software.

Tax Scams: Don’t be fooled

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Tax Advocate

Scam Awareness

Don’t be fooled by scammers pretending to be the IRS. Scammers target taxpayers and tax professionals each year in growing numbers. Oftentimes a scammer will contact you by telephone and alter the caller identification to make it look like the IRS or another official agency is calling. The IRS will not call you if you owe taxes without first sending you a notice in the mail.

Scammers may also use a scheme called “Phishing” to falsely lure you into telling them your personal information such as your social security number, bank information, credit card accounts, and more. Scammers will “Phish” for your information by asking you to verify specific details.

Don’t fall for these scams. The IRS provides tips and resources to help taxpayers and tax professionals learn how to spot a scam and what to do if you are a victim of a scam. Learn more about tax scams and how to recognize the signs of phishing and tax scams. It could save you from becoming a victim.

You should report all unsolicited email claiming to be from the IRS or an IRS-related function to phishing@irs.gov.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Do you have everything you need before you file a federal tax return this year?

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

tax-season-2017

By Taxpayer Advocate Service 

There are several changes that might require some up-front actions by you, so that you are ready to file your federal tax return this coming year. The IRS has provided a listing titled Get Ready on IRS.gov.

Reviewing this list now can help you avoid return processing delays or last minute scrambles for information you will need to prepare your return.

Number one on that list is Individual Taxpayer Identification Number (ITIN) renewal – for anyone who has not used it on a federal tax return at least once in the last three years. Additionally, all ITINs issued before 2013 will begin expiring January 1, 2017, starting with those with middle digits of 78 and 79 (Example: (9XX-78-XXXX). All expired ITINs must be renewed before being used on a U.S. tax return. This year, there are also new documentation requirements when applying for or renewing an ITIN for certain dependents – so be sure to read those before applying. This process can take seven weeks if you qualify for an ITIN and your application is complete. If your information is not complete, it can take longer, so start the process now of applying for or renewing an ITIN.

Others changes are that some taxpayers:

Life events can also make a big difference in taxes and healthcare, so remember to account for all life events that could affect your tax liability.

Any of these events during 2016 may affect the taxes you owe:

  • Birth of a child or a child turning age 17,
  • Marriage, divorce or separation,
  • Career or job changes, unemployment or furlough,
  • Planning for retirement,
  • Withdrawal from the Thrift Savings Plan or a 401(k),
  • Natural disasters,
  • Moving or home ownership, and
  • Foreclosure, debt forgiveness or bankruptcy.

The Individual Shared Responsibility Provision of the Affordable Care Act requires you, your spouse and your dependents to report qualifying health insurance for the entire year. If not, you need to be able to claim a health coverage exemption or report an individual shared responsibility payment when you file. In addition, you may be eligible for the premium tax credit if you purchased health coverage through the Health Insurance Marketplace.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

IRS Issues Guidance For Energy Tax Credit Claimants

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

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By Tax News 

The US Internal Revenue Service, in its Notice 2017-04, has updated and clarified the guidance provided in its prior notices regarding the extension, at the end of last year, of the dates by which facilities must begin construction to claim the renewable electricity production tax credit (PTC) and investment tax credit (ITC).

Under the Protecting Americans from Tax Hikes Act, taxpayers can now claim the PTC for certain renewable energy facilities if construction begins before January 1, 2017. The Act also renewed the PTC for wind facilities if construction begins before January 1, 2020 (with the credit being phased out over that period), and extended the ITC for solar energy facilities, if construction begins before January 1, 2022.

A taxpayer may establish that construction of a qualified facility has begun by starting physical work of a significant nature (“Physical Work Test”) or incurring at least five percent of the costs of the planned project (“Safe Harbor Provision”). Notice 2017-04 clarifies the costs that may be included in the Safe Harbor Provision for retrofitted renewable energy facilities.

A taxpayer is also required to make continuous progress towards completion, determined by the relevant facts and circumstances, once construction has begun. Previously, the IRS would agree that a project had satisfied the continuous construction test if the facility was placed in service and generated power within four calendar years after the calendar year during which construction of the facility began, or by December 31, 2016, whichever is later (“Continuity Safe Harbor”).

Under the new Notice, December 31, 2016, is now replaced by December 31, 2018. For example, if construction began on a facility on January 15, 2013, and the facility is placed in service by December 31, 2018, the facility will be considered to satisfy the Continuity Safe Harbor, as will a facility where construction began on January 15, 2016, and is placed in service by December 31, 2020.

The guidance confirms that taxpayers are prohibited from combining methods to satisfy the beginning of construction requirement. For example, a taxpayer may not rely upon the Physical Work Test and the Safe Harbor Provision in alternating calendar years to satisfy the beginning of construction requirement or the continuity requirement. The Notice confirms that this rule applies to facilities for which construction began after June 6, 2016.

The PTC and ITC are aimed at leveling the playing field between US-produced wind, solar, and geothermal energy and cheaper non-renewable alternatives, such as natural gas.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

IRS Announces 2017 Filing Season Date

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

2016 Year-End Tax Planning

 

Download our 2016 year-end tax planning guide for free! 

By Tax News

The Internal Revenue Service (IRS) has announced that the next US tax season will begin on January 23, 2017, and reminded individual taxpayers claiming certain tax credits to expect a longer wait for their refunds.

More than 153m individual tax returns are expected to be filed in 2017, and the agency expects more than four out of five will be prepared electronically using tax return preparation software.

Many software companies and tax professionals will be accepting tax returns before January 23 and then will submit the returns when IRS systems open. While the IRS will begin processing paper tax returns at the same time, it was stressed that there is no advantage to filing tax returns on paper in early January instead of waiting for the IRS to begin accepting e-filed returns.

The IRS said it anticipates issuing more than nine out of ten refunds in fewer than 21 days, but reminded taxpayers that it is now required to hold refunds claiming the earned income tax credit and the additional child tax credit until February 15.

In addition, the IRS said it will take several days for these refunds to be released and processed through financial institutions. Factoring in weekends and the President’s Day holiday, the agency cautioned that many affected taxpayers may not have actual access to their refunds until the week of February 27.

“For this tax season, it’s more important than ever for taxpayers to plan ahead,” IRS Commissioner John Koskinen said. “People should make sure they have their year-end tax statements in hand, and we encourage people to file as they normally would, including those claiming the credits affected by the refund delay.”

The filing deadline to submit 2016 tax returns will be April 18, 2017, rather than the traditional April 15 date due to a weekend and a holiday.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Trump Confirms US Withdrawal From Trans Pacific Partnership

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Tax News

globe

 

President-elect Donald Trump has confirmed that, during his first day in office, he will withdraw the United States from the Trans-Pacific Partnership (TPP) trade treaty.

In a short video on YouTube, he said that he would immediately “issue a notification of intent to withdraw from the TPP – a potential disaster for our country. Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores.” The decision was expected, but perhaps not as one of the first executive actions “he would take on day one.”

Covering some 40 percent of the global economy, TPP was signed in February this year by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Approximately 86 percent of tariffs on industrial goods will be eliminated if the agreement enters into force.

With TPP in doubt, China has been pushing for a completion of negotiations for the Regional Comprehensive Economic Partnership (RCEP), as part of its longer term objective to oversee the formation of a wider Free Trade Area of the Asia Pacific.

While it is unlikely to have the same level of market access benefits as TPP, RCEP aims to bring together the existing free trade agreements of China, Japan, South Korea, India, Australia, and New Zealand with the Association of Southeast Asian Nations (ASEAN) into a single enhanced comprehensive agreement. ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Don’t fall for phone or email tax scams

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By: Bankrate

phone or email tax scams

IRS Scam Video / Bankrate Video

Tax crooks continue to come up with new ways to try to get their hands on your money.

The latest scam is a play on a common tax notice that’s sent to taxpayers. The fake emails purport to be about an Internal Revenue Service bill related to the Affordable Care Act.

How to tell it’s a phony email

The melding of the CP2000, a commonly snail-mailed communication from the IRS, and an email request for money represents just the latest evolution in tax scams.

The crooks apparently are trying to latch on to the IRS’ frequent reminders that it sends notices to taxpayers before asking for money.

But where the IRS sends its real notices via the U.S. Postal Service, in this scam the fake notice is delivered as an email attachment.

The fraudulent CP2000 notice, notes the IRS in a statement about this new scheme, includes a payment request that taxpayers write a check to IRS, instead of to the U.S. Treasury (the real payment entity), and send the check to a processing center at a Post Office box address.

But don’t do it.

The scam notices use a tax matter that many filers still find confusing, the Affordable Care Act, commonly referred to as Obamacare, and its possible tax if you have insufficient health coverage. In this case, the fake CP2000 seeks information about taxpayers’ 2014 health care coverage.

There also is a payment link within the email itself.

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How the IRS will, and won’t, contact you

The one good thing that comes from this latest attempted tax crime is that it gives the IRS — and Bankrate — the chance to offer a reminder about how and when you’ll hear from the tax agency.

The CP2000 is a real notice that the IRS commonly mails out, using the U.S. Postal Service, regarding questions about a taxpayer’s filings.

But the IRS will never send a CP2000 in an email to taxpayers.

The agency does not initiate contact with taxpayers by email or through social media platforms.

If you receive the scam email, the IRS says forward it to phishing@irs.gov. Then delete it.

If receive any communication that appears to be from the IRS and makes you worry about your tax situation, call the agency directly at 1-800-829-1040 to discuss your concerns.

Keep an eye on your finances

And if you fear that your tax or other personal financial data has been compromised, monitor your credit reports. You can do so for free by using mybankrate.com.

Keep up with IRS and tax news, as well as find filing tips, calculators and more at Bankrate’s Tax Center.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

3 Reasons to Start a Small Business in Palm Beach, Florida

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Not all states are created equal, and in addition to plentiful sunshine, Florida offers quite a few tax advantages for businesses. As of 2016, the incentives fall into three areas: corporate income, insurance premiums, and sales and use. Not only that, starting a small business is relatively easy.

Small Business Regulations Are Minimal

Founding a small business in an area such as Palm Beach, Florida is a breeze, particularly since the county website is so friendly and provides a step-by-step guide of the process. Basically, you need to name your business and check with county officials about zoning, any licenses and any state sales tax issues. Working out of your home is most likely fine, but it is always good to confirm. That’s it! The process for other areas of the state, besides Palm Beach, is relatively similar.

There Is No State Income Tax Unless You Are a C-Corporation

The only Florida businesses that pay taxes are C-corporations, but even then, the taxes are low compared to what C-corporations have to pay in other parts of the country. This means that sole proprietorships and partnerships get huge savings. As for limited liability corporations, they also do not have to pay state tax unless they are one of the infrequent LLCs that has opted for incorporation.

Many Florida small businesses take the form of an S-corporation; it offers the dual benefits of no business tax and quite a few similar legal protections available to C-corporations. However, S-corporation owners do need to pay federal taxes on their S-corporation income.

Tax Incentives Are Varied

Florida provides many tax incentives, such as a research and development tax credit, and a sales tax exemption for industrial machinery and equipment purchases for eligible manufacturing businesses. No matter what type of business you want to go into, there may be a Florida tax incentive for you. Enlist the help of an accountant to learn more, or click on applicable links from the Florida Department of Revenue.

How Herman & Company CPA’s, P.C. Can Help

Herman & Company CPA’s, P.C. offers many solutions for businesses to maximize profit in Palm Beach, Florida. Whether you need assistance with accounting and bookkeeping needs and/or tax planning, Herman & Company CPA’s, P.C. will do a free consultation. Get in touch to see how we can be of service!

 

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.