Will The IRS Interest Rates Stay The Same ?
Just when you thought the interest rate might decrease, it stays the same for the Third Quarter of 2009 ! Out of Washington, the Internal Revenue Service has announced that the interest rate remain the same starting July 1-2009. The rates will be as followed:
*Four percent for overpayment’s and three percent in case of a corporation
*Four percent for underpayments
*Six percent for large corporate underpayments and
*One and a half percent for the portion of a corporate overpayment’s exceeding $10,000
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate during April 2009 to take effect May 1, 2009, based on daily compounding.
If you have an outstanding liability with the IRS or you are unsure and need a compliance evaluation, don’t hesitate to call a tax liability specialists for help today. Don’t let compounding interest grow your tax debt exponentially without getting help today!
The Garrett Nomination and Pseudo-Ethics
Beth Garrett, President Obama’s choice to be Assistant Treasury Secretary for Tax Policy, has withdrawn her name from consideration. Beth didn’t say why, except for the usual boilerplate about her “personal family situation.” However, the Bloomberg story on her announcement quotes a friend, lobbyist Jeff Trinca, as saying she pulled out because she was unwilling to put her family through what has become a “harsh” confirmation process.
I’m really angry about this, as are so many others in the tax policy community. Beth would have been a fabulous assistant secretary, knowledgeable, fair, and hard-working. She is highly respected by both Democrats and Republicans and would have been an asset not only to the grossly-understaffed Treasury, but to the country.
While I have known Beth for many years, we are not close friends and I have no idea why she really withdrew. But if it was because she wanted to avoid the meat-grinder confirmation process, it is past time we rethink the way we choose senior government appointees.
I understand partisan politics, and that Washington has become something like Bosnia—an endless round of revenge killings for past slights, real or imagined. Democrats blocked some GOP nominee in 2002, so Republicans will do the same to Obama today.
But this is beyond partisanship. A highly-skilled tax expert agrees to make a huge financial sacrifice and put her personal life on hold, all to do her part to help improve the tax law. For her trouble, she is required to fill out massively intrusive personal disclosure forms (that the new Administration has made even more intrusive). She allows herself to be investigated by the FBI. Senate Finance Committee investigators flyspeck her tax returns. And if anyone finds so much as a math mistake, it is all paraded before the public. Earlier this year, Obama nominee Nancy Killefer had to withdraw her nomination for a top White House post because of a dispute over a few hundred bucks of District of Columbia unemployment tax.
It isn’t just about those who withdraw such as Garrett and Killefer. I know too many other highly-qualified people who are unwilling even to begin the process.
Oddly, people like Garrett and Killefer may be paying the price for Treasury Secretary Tim Geithner’s much more egregious failure to pay taxes he owed. Geithner was confirmed, but his cosmic punishment appears to be that he must now work without senior staff.
This is madness. There may be no one who can survive a gantlet of congressional investigators without some past sin being discovered. But making a mistake does not make you unfit for government service. The big losers are not the highly qualified lawyers, economists, and scientists who step back from this important work. The losers are the rest of us.
President Obama wants to change Washington. He could start by demanding that we stand-down on our new-found obsession with pseudo-ethics. The next time a nominee withdraws to avoid disclosure of some trivial error or even a bit of poor judgment, Obama should say, “You know what, my nominee made a mistake and I don’t care. It is not important.”
Federal Tax Refund
The Federal Tax system is handled by the Internal Revenue Service or the IRS. The taxes are progressive and they are calculated using a very complicated system that is based on the Internal Revenue Code. The due amount of tax is payable by the 15th of April each year. Any delay or mistakes in filing the returns and paying the taxes can result in serious repercussions, including hefty fines.
To avoid having to pay fines and falling short of their federal tax expectations, many individuals pay tax in installments through out the year. Some also pay in advance in the anticipation of their tax amount. Although this ensures that there’s no overdue fine but do the tiered structure of the tax, it is not easy to predict the exact tax amount until the financial is near its end. This why people pay quite some extra in advance tax payments every so often.
Thus, the situation comes up where an individual had paid more than the final calculated tax amount. When a situation like this arrives, the IRS does not keep the extra amount, nor does it adjust it with the next year’s tax. It refunds the amount to the individual in question. This is what is known as a Federal tax Refund.
The situation where a person is eligible for a tax refund also arises due to various overlooked deductions and tax credits of which the person may not have been aware of when he was filing the return. This refund is thus a very important part of your tax-filing scenario. There are many ways to ensure a higher refund by checking for every possible deduction and tax credit that applies to you. There are several ways to view, track and maximize your refund.
If you have been paying tax in advance through the year, preparing your return properly can help you ensure maximum tax refund. But preparing your returns properly can be a major hassle, especially with all that paperwork that needs to get done. If your tax situation is a particularly complicated one, you have to spend a lot of time on your return to make sure everything is in order. The IRS has thoughtfully introduced the e-file system. This is a service by which you can file your tax online through the Internet.
The IRS has approved many private organizations for providing this service to the public. There are thus various websites online that offer e-file options through advanced tax software. These software make your return filing process much simpler and effective. And there’s also no paperwork to be done, which makes errors less likely to happen. It is especially helpful for people who have to make very complicated filings, like owners of multiple businesses.
E-file also allows you to pay advance tax with your credit card and also schedule payments in case your forget afterwards. So as you can understand, e-file has made the process of filing tax returns much less complicated.
Ask TaxMama Issue 506 – Texas Taxes Protest
May 29, 2009 by Tax Blog
Filed under Questions & Answers
Dear Family,
Sheesh…running late today because I’m answering all the e-mails coming in this morning about tomorrow’s class. It looks as if I’ve found a meeting system that addresses the learning environment better than the general conference systems. We’ll be trying it out this weekend. And if you’re interested in the results, ask me and I’ll let you know. I’m so excited about all the new features, and all the terrific new students we’re getting to meet this summer, and the earlier students who are coming back to finish of the last Part or so of the exam. What’s especially nice is the return of long-ago students who had to drop out for a variety of personal reasons (most of them heart-wrenching). Whoever said the Internet was impersonal or dangerous, just has no idea of the delightful, reinforcing and positive relationships you can build online – without there being anything illicit in the relationship.
Happy Shavuout. This is the anniversary of Moses bringing the 10 Commandments to the Jews in the Sinai desert. Is that anything like us waiting for new tax commandments from President Obama?
Hey, did you get that e-mail notice from Advanta about your business card? I thought it was spam and tossed it. Then I got Barbara Weltman’s Idea of the Day, and later that morning, a letter from Advanta repeating the information in their e-mail. It seems they are shutting down their business credit card program entirely. They no longer have funding. So the last day to use that card is Sunday. After that, poof! It’s gone. But you will be given the opportunity to pay your balance off over time. (Don’t you pay the balance each month, anyway?) Not a surprise, I suppose. Have you seen their stock price go down from $41 to 63 cents over the last two years?
Speaking of scams, I just heard from an EA and attorney that he started getting claims notices from the Employment Development Department (California’s unemployment office) regarding people who’ve never worked for him – people he’s never even heard of. Be careful. It seems there is a new scam out there with people filing false claims. Open ALL mail from your unemployment office. If you get a fraudulent claim, be sure to object. While it costs you nothing out of pocket – it does raise your rate for next year’s unemployment insurance.
Monday is Tax Protest Deadline Day in Texas. Apparently, it’s the last day to file protests about your property tax valuation. Our good buddy, Brent Clanton, CNN650 morning show host is taking this opportunity to address other tax issues – solutions or disasters – emerging from the very active White House. I’ll bet you have ideas and opinions about health care funding; something that looks suspiciously like a VAT (don’t know what that is? Join us and we’ll explain); estate tax valuation; taxing global income, and more. Join us at 9:05 am CDT. (Of course, you can join Brent earlier! 7:00 – 10:00 am CDT) http://www.cnn650.com/
Remember to drop by and view last week’s Intuit Community webinar and all the other excellent resources on the Intuit Community Site.
You do know that there is a wealth of information that doesn’t cost you a dime, right? Why aren’t you using it? You’ll find that information – and other complimentary and paid educational opportunities from IRS. It’s all in the emailed newsletter subscribers receive. Sign up now.
Oh yes, did you see the Scripps National Spelling Bee Finals last night? We watched the first hour – and it was utterly charming – and fun. Let me tell you, without having memorized the official dictionary, there’s no way these young folks could have spelled most of the words presented to them. Though, there were one or two surprisingly common words mixed in.
Spelling Bee Finals
For my 12th birthday, my bat-mitzvah, my two brothers bought me a Merriam-Webster Collegiate Dictionary – because they needed one in the house. To their chagrin, not only did I keep the dictionary in my room, inaccessible to them; but I read it! A little thin on plot, but great on subjects, even history, etiquette and stories you wouldn’t believe!
In IRS News this week, we learn about the newly-expanded work opportunity tax credit (WOTC) for eligible unemployed veterans and unskilled younger workers. With summer coming up, and summer hires, perhaps you can help someone in need – and get rewarded with a generous tax credit.
http://taxquips.com/index.php?cat=IRSNews
Today’s Money Funny is all about Men’s perspective on life and marriage.
http://taxquips.com/index.php?cat=MoneyFunnies
In TaxQuips this week, we learn about body builder expenses, and get into a discussion about taxes for a former UK resident who has moved to the US and is selling his UK home.
http://taxquips.com/index.php?cat=TaxQuips
As always, we love your feedback, opinions and ideas.
You are what makes all this fun – and interesting!
Please use the Comments link online.
http://taxquips.com/index.php?id=1238
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06.15.2009 Employers Make monthly Payroll tax deposit
06.15.2009 Personal Tax Returns Due for US Taxpayers overseas Form 1040
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- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- Money Funnies & Inspiration :: The Mens' perspective on Marriage and Life
- IRS News :: Work Opportunity Credits for hiring veterans, youth and …
- Prepare your own tax return :: $19.95 includes IRS, State, e-filing and tech support
- The 100% Home-Based Business Tax Solution :: The evolving e-book and Tax MiniMiser
- Pass the IRS Special Enrollment Examination :: Becoming an EA is more than a job, it's a recession-proof career.
Tax Credits for Hiring Unemployed Veterans and Certain Youth
May 29, 2009 by Tax Blog
Filed under Questions & Answers
IR-2009-55, May 28, 2009
WASHINGTON — Businesses planning to claim the newly-expanded work opportunity tax credit (WOTC) for eligible unemployed veterans and unskilled younger workers hired during the first part of 2009 have until Aug. 17 to request the certification required for these workers, according to the Internal Revenue Service.
Newly-revised Form 8850, now available on IRS.gov, is used by employers to request certification from their state workforce agency. The American Recovery and Reinvestment Act, enacted in February, added unemployed veterans returning to civilian life and “disconnected youth” to the list of groups covered by the credit. Though eligible unemployed veterans and disconnected youth who begin work anytime during 2009 or 2010 may qualify a business for the credit, certification by the state workforce agency is required.
In general, an unemployed veteran is a person discharged or released from the military during the five years preceding the hiring date who received unemployment benefits for at least four weeks during the one-year period ending on the hiring date. A “disconnected youth” is a person age 16 to 24 on the hiring date who has not been regularly employed or attending school and who meets other requirements.
The WOTC offers tax savings to businesses that hire workers belonging to any of 12 targeted groups, including unemployed veterans and disconnected youth. The other 10 include people ages 18 to 39 living in designated communities in 43 states and the District of Columbia, Hurricane Katrina employees, recipients of various types of public assistance, and certain veterans, summer youth workers and ex-felons. The instructions for Form 8850 detail the requirements for each of these groups.
The certification requirement applies to all groups of workers except employees who were Hurricane Katrina victims. Normally, a business must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But under a special rule, businesses have until Aug. 17, 2009, to file this form for unemployed veterans and disconnected youth who begin work on or after Jan. 1, 2009 and before July 17, 2009. Notice 2009-28, posted today on IRS.gov, and the instructions for Form 8850 provide details on this special rule.
[TaxMama Note: With summer coming up, and summer hires, perhaps you can help someone in need – and get rewarded with a generous tax credit. Remember to check with your state. They may have a corresponding credit, too. ]
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Form 8850 :: Pre-Screening Notice and Certification Request for the Work Opportunity Credit
- Instruction to IRS Form 8850 :: The form is newly revised – READ THE INSTRUCTIONS!
- IRS notice 2009-28 :: Work Opportunity Tax Credit Guidance
- Links to State Tax Forms ::
The Man Rules
May 29, 2009 by Tax Blog
Filed under Questions & Answers
At last a guy has taken the time to write this all down
Finally,the guys’ side of the story.
(must admit, it’s pretty good.)
We always hear”the rules” from the female side.
Now here are the rules from the male side.
These are our rules!
Please note.. these are all numbered “1 ”
ON PURPOSE!
1. Men are NOT mind readers.
1. Learn to work the toilet seat. You’re a big girl. If it’s up, put it down. We need it up, you need it down. You don’t hear us complaining about you leaving it down.
1. Sunday sports It’s like the full moon or the changing of the tides. Let it be.
1. Crying is blackmail.
1. Ask for what you want.
Let us be clear on this one:
Subtle hints do not work!
Strong hints do not work!
Obvious hints do not work!
Just say it!
1. Yes and No are perfectly acceptable answers to almost every question.
1. Come to us with a problem only if you want help solving it. That’s what we do. Sympathy is what your girlfriends are for.
1. Anything we said 6 months ago is inadmissible in an argument. In fact, all comments become null and void after 7 days.
1. If you think you’re fat, you probably are.
Don’t ask us.
1. If something we said can be interpreted two ways and one of the ways makes you sad or angry, we meant the other one
1. You can either ask us to do something Or tell us how you want it done. Not both. If you already know best how to do it, just do it yourself .
1. Whenever possible, Please say whatever you have to say during commercials.
1. Christopher Columbus did NOT need directions and neither do we.
1. ALL men see in only 16 colors, like Windows default settings.
Peach, for example, is a fruit, not A color. Pumpkin is also a fruit. We have no idea what mauve is.
1. If it itches, it will be scratched.
We do that.
1. If we ask what is wrong and you say “nothing,” We will act like nothing’s wrong. We know you are lying, but it is just not worth the hassle.
1. If you ask a question you don’t want an answer to, expect an answer you don’t want to hear.
1. When we have to go somewhere, absolutely anything you wear is fine. Really.
1. Don’t ask us what we’re thinking about unless you are prepared to discuss such topics as baseball or motor sports.
1. You have enough clothes.
1. You have too many shoes.
1. I am in shape. Round IS a shape!
1. Thank you for reading this.
Yes, I know, I have to sleep on the couch tonight.
But did you know men really don’t mind that? It’s like camping.
Pass this to as many men as you can to give them a laugh.
Pass this to as many women as you can – to give them a bigger laugh.
Courtesy of D J Jackson in Northridge, CA
Please remember to send us your humor. Clean jokes preferred.
Read more Money Funnies here:
http://taxquips.com/index.php?cat=MoneyFunnies
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- Money Funnies & Inspiration :: More Money Funnies at TaxMama.com
What a Choice: Raise Taxes for the Poor or Bust the Budget
As promised, TPC has crunched some numbers for the health reform plan introduced by congressional Republicans last week. They are pretty ugly, and an indication of just how hard it is to confront the taxation of medical care.
The Patient’s Choice Act, sponsored by Representative Paul Ryan (R-WI), Senator Tom Coburn (R-OK) and others, takes some remarkable steps toward bipartisanship by embracing regional purchasing pools. It also includes some very Republican ideas, such as giving low-income families $5,000 to buy their way out of Medicaid.
But most interestingly, it proposes a generous tax credit of $2,300 for singles and $5,700 for families to help buy private insurance. And it would pay for this new subsidy by repealing the tax exclusion for employer-sponsored insurance. The authors have left out some key details, such as whether the credit would be refundable, how it would be indexed for inflation, and whether employer-paid premiums would be subject to Social Security and Medicare payroll taxes.
So, TPC’s health modeler Surachai Khitatrakun ran several options. And he found the GOP is faced with a painful choice: It can design a credit-for-exclusion swap that won’t bust the budget. But to do so, the plan would end up raising taxes on people making less than $50,000. That’s both a bad idea and a political non-starter.
If the exclusion is made non-refundable, and if workers have to pay payroll taxes on their health insurance, the trade-off would actually boost revenues by about $200 billion over 10 years. Income taxes would fall by $1.1 trillion, but payroll taxes would rise by even more–$1.3 trillion. Unfortunately, most of that extra tax burden would end up on the backs of those making $50,000 or less. Those making between $20,000 and $30,000 annually would see their taxes rise by about $260 and their after-tax income fall by more than 1 percent
Every other option TPC looked at risks becoming a major revenue sink. For instance, if the credit is made refundable, as it probably should be, and employer insurance is subject to payroll tax, total federal revenues would fall by nearly $600 billion over the decade. If the credit is refundable and the value of insurance remains exempt from payroll taxes, the swap would cost a staggering $1.7 trillion over a decade. Not much chance Congress will buy a plan that costly when it already faces such huge deficits.
If the credit is refundable, the swap becomes pretty progressive. Those making an average of $15,000 would get a tax cut of roughly $700 and see their incomes rise by about 5 percent. Taxpayers with an average income of $70,000 would see their after-tax incomes rise as well, but only by about 2.3 percent. The top 10 percent of earners would end up paying roughly the same tax as they do now.
By the way, for all of these models, TPC assumed the credit would be indexed to an average of the growth in the consumer price index and medical costs. If it is tied just to CPI, the credit would quickly become far less generous, though, of course, Treasury would also lose less revenue.
So, it seems policymakers are left with three choices: They can make the exclusion-for-credit swap progressive and expensive, they can make it regressive and cheap, or they can propose a much more modest credit. No one ever said this was going to be easy.
Federal Income Tax Return
The federal government of the United States levies the federal income tax and it is levied on every taxable earner of the United States. This includes the resident aliens and every earning individual who Adjusted Gross Income is above a stipulated level. The Internal Revenue Service (IRS) handles the federal income tax levy and administration.
The taxable income of the person is determined by a two-tiered system. First the person’s actual income is determined and this is considered as the base of the calculation. Upon this net income, certain deductions are made to obtain the gross total income. Then the gross total income is adjusted with the itemized deductions list or the standard deductions list, whichever is deemed applicable to the individual in question. The deductions are what finally give the adjusted gross income or AGI. Any income tax applicable is then calculated on the basis of a person’s AGI.
The IRS follows the internal revenue code to determine taxable amounts and each year the taxable amount is changed and adjusted based on the inflation. There is a minimum AGI amount, below which a person will not have to pay tax. However, every earning member is expected to file a tax return.
As per the Internal Revenue Code, the returns can actually be divided in to tax returns and information returns. But the usual term used for both is ‘tax returns’ and it is often used to talk about both types of returns. Every person is expected to declare the tax liable assets that the person holds. The tax will thus be based on that. However, there are provisions under which a person can gain tax credits during filing tax returns. These credits are actually better than the deductions because tax credits are calculated after the tax is charged and not before. Hence, a deduction would mean a saving equivalent to the taxable percentage of the amount. Whereas, a tax credit means that the entire amount of the tax credit is saved. So at 17% tax, a $100 deduction saves you $17 but a $100 credit saves you the full $100.
Filing returns however can be very complicated and arduous. This can soon turn in to an uphill process if you are not sure which policies apply to you. Plus you will have to go through a lot of paper work to submit your federal income tax returns correctly. So the IRS has provided you with E-files. E-files is an electronic system of filing your tax return, which is also available from a few trustworthy IRS registered service providers.
With e-files there is absolutely no paper work to be done and you will be guided through the filing process. These combines eliminate any errors that you might have made during the filing process. It is also free for those with an AGI below $56,000 annually. This is a very safe and secure method of payment, which also alerts you of policies that may apply to you, there by reducing your tax returns.
The Benefits of Opacity
A basic tenet of public finance holds that people tend to do less of something when it is taxed. Raise income tax rates and some people will work less. Boost the gas tax and people will drive less. Hike the cigarette tax and people will smoke less.
That inexorable law of demand poses two problems for the taxman. First, taxes distort behavior as people move from taxed activities to those that are taxed less or not at all. Sometimes, as in the case of cigarette taxes, we want to discourage the taxed activity. In other cases, the tax only makes the economy less efficient. Second, tax avoidance may reduce the revenue gained from a tax increase—or even negate it entirely. For example, if gasoline sales plummet when gas taxes rise, we get less revenue to build and maintain roads.
But recent research suggests that taxes don’t always have to depress demand. People may not react to tax changes they don’t perceive. If the price change isn’t obvious, homo economicus goes on merrily consuming the same as before.
MIT economist Amy Finkelstein examined the behavior of motorists using toll roads with and without electronic toll payments. Because drivers don’t fork over cash to pay tolls when they use electronic transponders, they are less aware of the cost and their demand is less responsive. Toll revenues, Finkelstein found, are 20 to 40 percent higher with electronic toll payments than under the old cash-only system.
Raj Chetty, Adam Looney, and Kory Kroft compared consumer behavior when sales taxes were included and excluded from marked prices and found an 8 percent drop in demand when people saw the tax-inclusive price on the shelf instead of having the tax added at the cash register. The salience of taxes clearly matters: people don’t react to taxes they don’t see.
Tax complexity might also reduce tax awareness. For example, many taxpayers have no idea whether they will owe the alternative minimum tax (AMT) until their accountant or TurboTax tells them. If they don’t know it’s there, they won’t change behavior and the government doesn’t lose needed revenue. It is the same with the phase-outs of the personal exemption (PEP) and itemized deductions (Pease). They are effectively rate increases that few notice.
Of course, complexity can work the other way too. The energy conservation tax credits in this year’s stimulus bill subsidize the purchase of various “green” products that save energy, ranging from low-e windows to high-efficiency air conditioners. But, as Rosanne Altshuler has pointed out, it’s not easy to figure out whether a specific item qualifies. Sellers will no doubt advertise their qualifying products but more consumers might take the bait if the tax rules were simpler. Similarly, lots of evidence suggests that people don’t take full advantage of tax-deferred savings accounts because of confusing rules and the wide variety of choices available.
Furthermore, taxpayers may be so confused by the rules that they respond in perverse ways. Some people think that the phaseout of itemized deductions actually reduces the value of additional charitable contributions and mortgage interest deductions. It doesn’t. AMT taxpayers may be confused about what is deductible and what isn’t.
I’m not arguing in favor of complexity. Taxpayers don’t trust a tax system they don’t understand. Complexity may reduce compliance, either because people have trouble following the rules or because they think others must benefit from obscure provisions and they should somehow pay less tax too. And we often do want tax provisions to affect people’s behavior.
Nonetheless, complexity may sometimes mask taxes and thus help to raise revenues in a relatively efficient way.
Selling UK Home
May 28, 2009 by Tax Blog
Filed under Questions & Answers
Today TaxMama hears from Colin in Maryland, who tells us, “I wish to sell my house in the UK as I live in the USA permanently now. What tax implications are there? It is my sole residence, with a value approx 240.000 pounds.”
Dear Colin,
From everything that I see, the tax code does not appear to distinguish between a personal residence here in the US or outside the country. Location of the home is not part of the definition of the personal residence.
You can read more about the rules here.
http://www.irs.gov/publications/p523/index.html
http://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html
So, since the tax code provides you with an exclusion of $250,000 for any gain you might have (or $500,000 if you’re married), if you originally paid more than 83,500 pounds for the house, it’s quite likely that you will pay no US taxes on the sale of this home. Of course, if you’re married filing jointly, the $500,000 exclusion may wipe out all the taxes.
You can use one of these currency converters to help you. http://www.oanda.com/convert/classic
http://coinmill.com/GBP_USD.html
However, you may face taxes in the UK. You’ll need to research that or consult with a Chartered Accountant there.
Incidentally, if you do pay taxes in the UK, it’s quite likely that you won’t be able to deduct those taxes on your US tax return. Why? Because you won’t be paying any US taxes on those profits.
A strategy you could try is to determine how much the UK taxes will be – and if you are better off reporting the sale of the house here and paying the low long-term capital gains rates on your US tax return. Then, reduce your taxes by the foreign taxes you pay in the UK.
If you want someone to help you with the US side of this planning, hire Roger B. Adams, EA to help you.
And remember, you can find answers to all kinds of questions about international taxes and other tax issues, free. Where? Where else? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Publication 523 :: Selling Your Home
- IRS FAQs :: Sale of Residence – Real Estate Tax Tips
- OANDA.com :: Currency Converter
- CoinMill.com :: Another Currency Converter