“Conservative” Group Pushes for Sales Tax on Services

The Thomas Jefferson Institute for Public Policy, a supposedly center-right public policy foundation, is pushing for sales taxes to be collected on most services in Virginia.  The law would include services provided to the public but not business-to-business services.  This would include tax preparation, legal services, transportation, shipping services, insurance, private education, auto repair, hair services, dry cleaning, landscaping services, apartments, bowling, and the list goes on and on.  The new law would be “revenue-neutral” (what they always say) and would eliminate the Business and Professional Occupational Tax (Business License), Business Personal Property Tax and Business Inventory Tax.

Although I like the idea of getting rid of Business License fees and Property and Inventory Taxes, I don’t like the idea of charging sales taxes on services.  Charging a sales tax on services is the same as charging sales taxes on labor.  As we all well know, labor is already taxed extensively through the Federal Income Tax, State Income Tax, Social Security Tax, Medicare Tax, State Unemployment Tax and Federal Unemployment Tax.  Now, they want us to collect and remit sales tax to the state for services?

This also creates burdensome accounting.   For example, if you pay someone to mow your lawn as an independent contractor then under this new law they would also be required to collect sales tax from you and remit it to the State.  That seems to me like a paperwork nightmare, especially for small operators.  And, it increases the potential for fraud.  How much of this new tax will never get remitted to the State?

Although this tax is paid by the public, it will eat into the pockets of service providers.  There are certain price points that people will pay, tax included.  Thus, service providers will have to lower their prices to accommodate the new tax.  Also, it will give an unfair advantage to those small operators who skirt the law and don’t collect or report the tax at all.  I say, “Two Thumbs Down” on this idea!

1 Down, 5 To Go

January 31st is finally gone!  The following items were due on January 31st:

W-2′s

1099′s

941′s, plus payments for those less than $2,500 in payroll taxes for the quarter.  You have until Feb. 10th to actually file the 941 if you made your deposits on time.  The payment, however, is due by Jan. 31st.

940′s, plus payments.  You have until Feb. 10th for this as well, if you made the payments on time.  If you owe more than $500, chances are you should have made a deposit during the year.  The payment is due by Jan. 31st.

State Unemployment Taxes

There are six primary days a year that cause stress for tax and accounting professionals.

They are:

January 31st

February 28th

March 15th

April 15th

September 15th

October 15th

There are others as well.  But, those are my six.

Now we can move on to bigger and better things.  Like preparing tax returns!

IRS Direct Deposit Refunds Will Be Getting Faster

Image by 401K via Flickr

The IRS is working toward a real-time filing system.  They announced today that they are hosting a Second Real-Time Tax System Meeting.  This real-time system will allow instant matching on returns which should result in 24 hour refunds.

In my opinion this is long overdue, at least the refund part.  Under the current system you can receive your refund in 5-10 business days.  This is without any type of document matching.  Employers don’t have to file W-3′s  and W-2′s with the IRS and SSA until Feb. 28th so any matching that is done is way after-the-fact.  In fact, the IRS admits that “It is not uncommon for a taxpayer to receive a notice 12 to 18 months after a tax return is filed.  This after-the-fact compliance approach can create problems and frustrations for both taxpayers and the IRS.”  So, my question to the IRS now is, what happens in the 5-10 business days that people currently have to wait?  Why is there even a wait time at all if there is currently no matching done?

When I e-file a client’s return I get an almost immediate response from the IRS that the return has been accepted.  In a matter of minutes their computers have matched up the taxpayer’s name, SS#, spouses name, SS#, all W-2 company names with Tax ID#’s and some other various information.  Of course, they cannot match up any W-2 payroll information because they either haven’t received the information from the employer or they have and it hasn’t been processed (it will be 12-18 months later).  Then, they wait 5-10 business days before they directly deposit the money?  Why?  What happens in that 5-10 days?  It appears, nothing.  There should already be 24 hour refunds.  They don’t need a perfect matching system in order to implement that.

This real-time system should be done in two phases:

1) Start refunding taxpayers money immediately upon them filing.  This would be simple to implement under the current system.  Anything larger than $15,000 should require additional approval (or matching) to prevent extremely large fraudulent refunds.

2) Start improving the matching system.

A real-time system is great, but, the big question for me is, how much “matching” is going to be done up front?  All of it?  And, will it cause even greater delays for many taxpayers in getting their refunds?  Employers aren’t perfect either.  Many times the information that they file with the IRS is inaccurate.  Under the current system taxpayers receive letters 12-18 months later.  Then they have to either agree with the changes to the return or disagree and state the reasons why they disagree.  Sometimes it turns out the the employers filed inaccurate information.

I’m for a real-time system.  But, in what form?  I think it would be great if the IRS would match things up faster so that taxpayers aren’t accruing interest and penalties for 12-18 months before they find out that their return is wrong.  But, the IRS already receives the info by Feb. 28th, 30 days after the taxpayer’s receive their tax documents.  Why does it take so long to match things up?  If they can’t match things up within a few weeks after receiving the info how are they going to operate a “real-time” system?

Why should people buy your product or your service?

Image via Wikipedia

When you are trying to sell your product/service to someone, remember there is really only one reason that people buy something from you.  It is “You can solve a problem for them”.  I’ve broken this down even further into these 3 categories:

Tax Refunds….a Good Thing?

 

We all know how excited some people get when they get an income tax refund.  And, we’ve probably all heard accountants, tax preparers and others with good intentions say something like, “you know, that is your money that you let the government use interest free for the past year”.  Then, they proceed to tell the excited refund recipient that they should adjust their withholding so that their refund won’t be so big the next year.

In theory, this is good advice.  I mean, why should you let the government hold your money for you?  Surely it would be put to better use in your own pocket.  True.  But,