Taxes

This post is the first in a series of weekly posts containing tax information and filing tips. Check back next week for our next post, or click here to read past posts.

It’s February, which means tax season is in full swing (even if you are in denial). For those who haven’t yet filed their 2012 taxes, I offer an item for your consideration prior to the April 15 deadline. Even those families who have already filed their tax returns for the last tax year (and hopefully claimed tax credits for which they were eligible) shouldn’t stop reading here.

April 15 isn’t just the deadline for filing your 2012 tax return without an extension. It’s the deadline for filing past tax returns! Specifically, it is the deadline for the nearly one million individuals and families who failed to file a 2009 tax return. Practically speaking, this means you can go back in time three years and get a do-over on your taxes. Read more »

What a night, and what a speech!

On Tuesday, President Obama laid out an important economic agenda for women and families in his State of the Union address — expanding early education opportunities, advancing fair tax and budget policies, increasing the federal minimum wage, and passing both the Paycheck Fairness Act and the Violence Against Women Act.

This is a full and impressive agenda for President Obama's second term. But we're up for the challenge and we hope you are, too!

Please join us in thanking President Obama for his commitment to women and their families. Your voice will send a strong signal to the White House that it's on the right track.

What's our take on all of these key issues?

• Expanding Early Education Opportunities — President Obama's early childhood initiative would expand access to critical early learning opportunities for millions of preschool age and young children across the country. This would help many low- and middle-income women and their families who are struggling to afford the early learning opportunities that put their children on a path to success.
• Advancing Fair Tax and Budget Policies — President Obama called on Congress to pass a budget that replaces reckless cuts with smart savings and wise investments in our future. This is especially important to women, because millions of hard-working women are struggling to lift their families out of poverty and cuts in funding for public services have cost women hundreds of thousands of jobs. We also need a tax system that fairly raises the revenue required to make these wise investments and stave off deep cuts to Medicare, Medicaid, Social Security, and other programs women and their families count on.

Kansas governor Sam Brownback wants to eliminate the state income tax. Yes, you read that correctly. The governor wants to join the small list of states that have chosen to eliminate a crucial revenue stream. In 2012, Governor Brownback sharply cut income tax rates to the tune of $850 million dollars in lost revenue for the coming fiscal year. Amid those big tax cuts that primarily benefit high-earners, he found time to eliminate tax provisions that benefit low-income Kansans, including a refund of sales tax paid on food and a state tax credit for child and dependent care expenses.

Consider these numbers: The poorest 20 percent of Kansans will spend, on average, an additional $148 per year on taxes because of the repeal of tax provisions aimed at low-income people. This is a significant blow to women and female-headed families in Kansas,  13.8 percent and 40.9 percent of whom live in poverty. Meanwhile, the richest one percent of Kansans will save an average of $21,087 per year on their state income taxes. As one Kansas state legislator told the New York Times, this tax package is “Robin Hood in reverse.” Read more »

“Will there be a deal to avoid the fiscal cliff?”

That was the question that rang out for months from policy makers, journalists, and concerned onlookers everywhere. And in the first few days of January, the American Taxpayer Relief Act was signed into law, resolving several of the tax and budget issues known as the “fiscal cliff.” Among other things, it requires the very wealthiest to pay a fairer share of taxes, extends tax credits that benefit hardworking families for five years, extends unemployment insurance benefits for a year, and delays across-the-board spending cuts for two months.

However, another series of fiscal showdowns are looming. Read more »

You may have heard that House Speaker John Boehner (R-OH) has introduced a tax bill that is now being referred to as "Plan B" — that is, a backup plan of sorts if the negotiations with President Obama to resolve the "fiscal cliff" break down. The House is scheduled to vote on it tomorrow. But Plan B is a bad deal for women and their families. Here are the top five reasons why:

1. Plan B raises taxes for 25 million low- and moderate-income families. By ending important improvements to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), and eliminating the American Opportunity Tax Credit (AOTC) for college expenses, Plan B takes tax benefits away from the families who need them most. NWLC has calculated that ending the improvements to the EITC and CTC would take $12.6 billion in tax credits from hardworking families — and women would bear two-thirds of those losses.

2. Plan B lets millionaires off easy. By keeping in place all of the Bush-era tax cuts on incomes up to $1 million and repealing tax expenditure limits for even the very highest earners, Plan B ensures that households with incomes over $1 million — the top 0.3 percent — still get tax cuts averaging $50,000 per year (compared with President Obama's proposal to end the Bush-era tax cuts on income above $200,000 for an individual or $250,000 for a couple).

An IRS report released the day before Thanksgiving shows that the very rich had something more to be thankful for. Tax rates fell in 2010 for every income group above $500,000. And the very wealthiest – those whose incomes exceeded $10 million in 2010 – saw the biggest drop in tax rates.

Taxpayers with incomes over $10 million paid an effective federal income tax rate of 20.7 percent in 2010, down from 22.4 percent in 2009. (The “effective” federal income tax rate refers to the percentage of adjusted gross income a taxpayer actually pays in federal income tax, after lower tax rates on certain kinds of income, deductions, exemptions, and credits are taken into account.) Taxpayers with incomes between $5 and $10 million paid an effective tax rate of 24.2 percent in 2010, down from 25.2 percent in 2009.

As a Wall Street Journal blog explains: “The reason for the drop in average tax rates [among the very wealthy] is no secret. It’s the special 15 percent top rates for capital gains and dividends that President George W. Bush pushed through.” Read more »

Whether served as a side dish or not, politics always seems to wiggle its way onto the Thanksgiving table. And because your family may not agree on everything (or anything), we want you to be as prepared for them as you are for the big meal.

And now that the election is over, the public debate is all about the so-called "fiscal cliff," which refers to the combination of tax cuts and numerous other provisions set to expire at the end of December plus a series of automatic spending cuts scheduled to begin in January.

Contrary to what some commentators might suggest, however, the economy won’t immediately fall into a recession if Congress doesn’t reach agreement on all of these issues by midnight on December 31. Indeed, real and lasting damage WILL be done if Members of Congress allow misguided fears to pressure them into a bad deal that cuts programs vital to women and families and fails to make the wealthiest among us pay their fair share in taxes.

To explain what this means for you – and for Aunt Edith – below are a few key myths and facts.

MYTH: If we raise taxes on the richest 2%, it will kill jobs.

FACT: We’ve seen that trickle-down economics doesn’t work. We had much stronger job growth after President Clinton raised taxes on the wealthiest Americans than after President Bush cut them. And, allowing the Bush-era tax cuts for the richest two percent to expire would generate nearly $1 trillion in savings. This much-needed revenue would allow us to call off the looming – and draconian – automatic cuts to programs that are also scheduled to take place. Plus, it would let us invest in human capital as well as physical infrastructure. When so many Americans can't find work, it's important to support programs that create good jobs and long-term economic growth. Read more »

As the year-end expiration date for the Bush-era income tax cuts draws nearer, taxes seem to be an increasingly hot topic. So far, however, some expiring tax provisions have largely escaped media attention. These include improvements to refundable tax credits, like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), that were enacted in 2009 as part of the American Recovery & Reinvestment Act (ARRA). These credits help low- and moderate-income families, millions of whom will lose benefits if the ARRA improvements are allowed to expire – as the tax plan proposed by Republican leaders in Congress would do, even as it maintains tax cuts for the richest two percent of Americans.

The $160,000 tax break that millionaires will receive if the Bush-era tax cuts are extended next year does not include the effect of another tax cut that also has remained mostly under the radar: the 2010 estate tax cut. If this tax cut is allowed to expire on schedule at the end of the year, and the federal estate tax reverts to its 2009 level as President Obama has proposed, 99.7 percent of estates will still be exempt from the tax. Read more »

The latest effort by the House Republican leadership is called “Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012” (H.R. 6169). That’s a misnomer.

This bill would provide for expedited consideration of tax reform legislation – but only on the condition that it include additional massive tax cuts for high-income households and corporations and leave behind millions of women and their families.

Under H.R. 6169, the current six-bracket personal income tax system would be replaced with just two rates, 10 percent and 25 percent (or less). But reducing the number of brackets won’t make it any simpler to file your taxes. The IRS – with or without your favorite tax prep software – already tells you how much tax you owe after you fill in the Form 1040 – you don’t have to muddle through the brackets yourself. There’s probably an app for that, anyway. But fewer brackets mean that our tax system is less progressive, because then taxpayers with extremely high earnings pay taxes at the same rate as those with lower earnings. “Simple” doesn’t necessarily mean “fair”. 

Like the 2013 Ryan budget, H.R. 6169 calls for large tax cuts for the very wealthy. In 2015, those making $1 million or more would enjoy an average tax cut of $265,000 (on top of what they would get from extending the Bush-era tax cuts). In contrast, those making between $20,000 and $30,000 would get an average tax cut of $129 from the tax cuts proposed in the Ryan budget and H.R. 6169, and half of the people in that lower income bracket would get no tax cut at all. Read more »

I’m at that time in life when lots of my friends are having kids. I’m thrilled for my friends - their kids are awesome and adorable. But one thing they’re not is cheap. And if Republicans have their way, kids are about to get even more expensive.

New analysis by the Tax Policy Center shows that the tax bill (H.R. 8) introduced by Rep. Dave Camp (R-MI) (a bill virtually identical to S. 3414 which was introduced by Senate Republican leaders and rejected by a majority of the Senate last week) ends tax cuts for millions of hard-working families. In fact, more than one-third of all families with children and nearly three-quarters of low-income families with children (who make an average of $17,400 a year) would lose valuable tax benefits under Rep. Camp’s bill. The loss would be particularly hard for women who are the majority of low-income parents.

Wonder why so many families will lose out under Rep. Camp’s tax bill? It, like the bill introduced by Senate Republican leaders, would end tax cuts for low- and moderate-income families that were put into place by the American Reinvestment and Recovery Act of 2009. The National Economic Council estimates that by letting these tax cuts expire:

• 12 million families would lose an average of $800 from the elimination of the Child Tax Credit expansion.
• 11 million families would lose an average of $1,100 from the repeal of the American Opportunity Tax Credit for college expenses.
• 6 million families would lose an average of $500 from the elimination of improvements to the Earned Income Tax Credit.