The Internal Revenue Service commissioner is warning Congress that anticipated cuts to the agency’s funding will result in a “noticeable degradation” of services, including audits and efforts to collect unpaid taxes.
In a letter sent to legislators last week, commissioner Douglas Shulman wrote that if Congress moves ahead with its plan to reduce the IRS’s budget by about $500 million next year, the agency would have to reduce the number of workers in its enforcement department. Such cuts, he added, would lead to a 5% to 8% decrease in collection efforts, including audits, which would reduce revenue by about $4 billion.
But what sounds like good news for deadbeats could be bad for regular taxpayers. Shulman warned that the spending cuts would mean that half of the taxpayers trying to contact the agency for help would get busy signals or will “hang up in frustration.” Responses to letters, including those taxpayers trying to resolve account issues, could be delayed up to five months, he wrote, and small businesses could have more trouble reaching the IRS to work out a payment plan.
A bad economy could have some folks looking to Lady Luck for a ladder out. While most gamblers end up empty-handed, a select few win big. And when the amount of money in your pocket grows or shrinks, you know the IRS isn’t far behind. The agency has different rules for amateurs and professionals, as Tax Guy Bill Bischoff previously reported. What’s more, the IRS updated some of its recordkeeping guidelines to make them simpler and more realistic. Check out the Tax Guy’s most recent tips about how to keep your books and stay out of trouble.
Form W-2G Helps Keep Winners Honest
For most types of gambling at a legitimate gaming facility, that facility will issue you a Form W-2G (Certain Gambling Winnings) if you win $600 or more. Of course, the IRS gets a copy too, so you better make sure the gross gambling winnings reported on page 1 of your Form 1040 (or on Schedule C if you are a professional gambler) at least equal the amounts reported on the Forms W-2G.
Technically speaking, an amateur gambler must report the full amount of each and every win on the miscellaneous income line on page 1 of Form 1040. So in a profitable year, you cannot simply subtract losses from winnings and report the net amount of winnings on page 1 of Form 1040. But let’s face it: Even folks who attempt to keep good records will probably only record their daily net winnings and daily net losses. Reporting an amount of gross income equal to the sum total of the net winnings from all days you had net winnings on page 1 of Form 1040 will probably keep you out of trouble with the IRS (assuming the amount reported as income equals or exceeds the sum total of any amounts reported as income on Forms W-2G).
Whether you are an amateur or a professional gambler, you must adequately document the amount of your losses in order to claim your rightful gambling-loss deductions. According to the IRS, taxpayers must compile the following information in a log or similar record.
State and local tax revenues increased in the third quarter–an about face from a year ago. Most of the increase has come from a bump-up in revenue from income and sales taxes, which fell in the recession, leaving many states facing budget gaps.
Combined state and local tax revenues rose 5.2% to $284.3 billion in the third quarter of 2010 over the same quarter in 2009, when tax revenues fell by 5.4% from the year-earlier period, The Wall Street Journal reported.
The Journal reported that personal income tax receipts were up 4.8% in the third quarter and edged up the amount collected in sales taxes by 4%. Property taxes were also up—a whopping 7.8%, despite the continued uptick in foreclosures and falling home values. Where does all this extra cash come from? Your pocket, of course.
A story on SmartMoney.com today pointed out that not all taxes are going to work out in favor of consumers in 2011.
State and local governments are pressed for cash, having run through the Federal stimulus money that came their way this year. Declining home values and more out-of work residents have helped to shrink the tax rolls of states and municipalities. And they have a lot of ground to make up.
To do so, many are raising taxes and fees on the recurring bills for the things consumers use every day–like cell phones and cable service–and on the ever-more-popular downloadable e-book.
Quoted in the story is independent tech analyst Jeff Kagan, who says: “Governments are putting their hands into a variety of pockets, and they’re looking at what’s new and hot.”
The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at email@example.com.