Maryland Credit for Taxes Paid

The Howard County Circuit Court recently struck down, as unconstitutional, Maryland’s credit mechanism for personal income taxes paid to other states insofar as that credit does not extend to income taxes paid to Maryland localities. Taxpayers who were denied this credit against Maryland local income taxes may eventually be due refunds. 

The Maryland personal income tax is composed of an amount payable to the state and another portion payable to a locality. Both the state portion and the local portion of the tax are collected by the Maryland Comptroller. As do most states, Maryland allows residents a credit against personal income for taxes paid to other states. However, the Maryland credit for taxes paid to other states is not allowed against the local portion of the income tax.

A Maryland couple challenged this credit scheme, which disallowed a credit against their county income tax, as a violation of the Commerce Clause of the U.S. Constitution. In a lengthy opinion issued on June 29, 2011, Judge Becker of the Howard County Circuit Court agreed. The state is certain to appeal and the final determination of the case is not likely to be known until 2012 or 2013. 

In the meantime, the period for filing refund claims is generally three years from the date a timely Maryland return (including extensions) was filed.  Therefore, refund claims are foreclosed for all tax years before 2007 and for any return that was filed without extension for 2007 (i.e., filed on or before April 15, 2008).  However, taxpayers who extended the 2007 return may still have time to file protective refund claims. Consequently, immediate action is required to file timely amended Maryland returns for such protective claims. 

Aronson LLC can assist in filing these protective claims or with answers to questions concerning the Court’s decision. Please contact Horace Lamb, Jack Koniszewski or Henry Chiwaya at 301.231.6200.

Independent Contractor or Employee?

Language Line Services, of Monterey, California, provides interpretation and translation services in 170 languages to emergency services operators, online retailers, banks and other businesses across the country. One corporate decision the $300 million company made, however, involves the difference between two common English business terms – “employee” and “independent contractor.”

To read full article with additional quotations from Aronson’s Partner, Laurence C. Rubin click here

A Contractor’s Guide to Surviving the Government Shutdown

The political stalemate in Washington seems more and more likely to lead to a Government shutdown. The current continuing resolution expires on March 4, 2011. If our leaders cannot reach a compromise, the Government will be out of money beginning on March 5^th. The total ramifications of a Government shutdown are difficult to predict. What can be predicted is that a shutdown will adversely affect Government contracting. Someone may “win” this game of brinkmanship but regardless of political orientation, most Government contractors, contractor employees, and the important Government programs they support will suffer.

Continue reading »

IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process

In its latest effort to help struggling taxpayers, the Internal Revenue Service yesterday announced a series of new steps to help people get a fresh start with their tax liabilities.

The goal is to help individuals and small businesses meet their tax obligations, without adding unnecessary burden to taxpayers. Specifically, the IRS is announcing new policies and programs to help taxpayers pay back taxes and avoid tax liens.

The announcement centers on the IRS making important changes to its lien filing practices that will lessen the negative impact on taxpayers. The changes include:

• Significantly increasing the dollar threshold when liens are generally issued, resulting in fewer tax liens.
• Making it easier for taxpayers to obtain lien withdrawals after paying a tax bill.
• Withdrawing liens in most cases where a taxpayer enters into a Direct Debit Installment Agreement.
• Creating easier access to Installment Agreements for more struggling small businesses.
• Expanding a streamlined Offer in Compromise program to cover more taxpayers. Continue reading »

How Do The State Economies Compare To The World?

I saw this a couple of weeks ago and still think it’s one of the coolest things I’ve seen recently.  It points to the vital importance of the U.S. economy to the global economy.

Go to: The Economist Online

Repeal of New 1099 Reporting Making Progress

Yesterday, the House Ways and Means Committee approved a bill that would repeal both the expanded Form 1099 reporting requirements sending the measure to the full House sometime after next week’s recess.

Earlier this month the Senate passed the repeal of the expanded 1099 reporting rules that require businesses to report all purchases greater than $600 of goods and services from vendors during a year beginning in 2012, but not the new reporting requirement for owners of rental properties.  The Senate repeal was added to a broader FAA authorization bill.

Although the momentum is building for repeal, the outcome is uncertain.  Current law requires individuals who receive rental income to issue Forms 1099 to service providers for payments of $600 or more during the year, starting with payments in 2011. Repeal of this new reporting requirement may not have as much support as the general business requirement.  Until the repeal ultimately passes you should plan to file your return under the current law.

We will keep you advised of any further developments in this area.

The Wait is Over – IRS Begins Processing Delayed 1040s

The Internal Revenue Service announced today it has started processing individual tax returns affected by legislation enacted in December and reminded taxpayers that they can begin filing electronically immediately.

On Monday, IRS systems began to accept and process both e-file and paper tax returns claiming itemized deductions on Form 1040, Schedule A, as well as deductions for state and local sales tax, higher education tuition and fees and educator expenses. Continue reading »

CPA’s to The Rescue! – Welcome the House’s CPA Caucus

From the Journal of Accountancy Online

Two members of the House of Representatives created the Bipartisan Congressional CPA Caucus with a goal of harnessing their unique professional skills to develop innovative policy approaches to issues that affect CPAs, including tax administration and compliance, and accounting and auditing standards.

Reps. Brad Sherman, D-Calif., and Michael Conaway, R-Texas, the caucus’s inaugural co-chairs, announced the group’s creation on Wednesday. The representatives said another main goal of the caucus is to provide input on issues being debated by Congress on which CPAs have particular expertise, including budgeting and fiscal issues.

Eight CPAs are members of the House in the 112th Congress. Continue reading »

Beware of Conflicting Due Dates

Several tax preparers have asked if Virginia’s due date for calendar year Corporate Income tax and Pass-Through Entity tax returns is going to be moved to April 18 this year because the IRS moved their filing deadline to April 18 in honor of Emancipation Day in Washington, D.C. 

Virginia’s due date for calendar year filers will remain April 15, 2011.  Virginia does not change the due date of returns because of holidays in other cities, states, or countries.  Virginia law extends the due date only when the due date falls on a Saturday, Sunday or legal holiday and Emancipation Day is not among the Virginia legal holidays.

IRS Announces 2nd Voluntary Offshore Disclosure Initiative

The Internal Revenue Service announced today a special voluntary disclosure initiative designed to help people with undisclosed income from hidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be available through Aug. 31, 2011.

The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. The first special voluntary disclosure program closed with 15,000 voluntary disclosures on Oct. 15, 2009. Since that time, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world. These taxpayers will also be eligible to take advantage of the special provisions of the new initiative. Continue reading »