Taxation Basics
Every taxpayer in the United States faces the possibility of being audited by the Internal Revenue Service. The IRS has the right to conduct an audit within three years of a return's due date or filing date, whichever is later. The IRS can also audit a taxpayer beyond the three year period when no return was filed, there are allegations of fraud, or if the IRS charges the taxpayer with substantially omitting or concealing income.
Earned Income Tax Credit
The federal Earned Income Tax Credit (EITC) is a refundable tax credit for low income working families. For those who qualify, EITC reduces their income tax bill and provides a refund for those who did not pay income taxes. Enacted in 1975, it has been expanded and modified numerous times since then. Affecting millions of American families, EITC is both an important anti-poverty program and a source of controversy because of concerns about the payment of unjustified claims for the credit. This article will outline the structure of the EITC and describe current issues with its application. A number of states have their own Earned Income Tax credits; this article focuses on the federal EITC.
Conversion of Roth IRAs
Roth Individual Retirement Accounts (IRAs) are already one of most popular savings vehicles in the United States, and new rules adopted by Congress in May 2006 may make them even more popular. A traditional IRA allows people to set aside a certain amount of money each year that is exempt from the current year's taxes and also is not taxed as it appreciates in value; the taxpayer pays tax only when the money is withdrawn, usually in retirement. With the Roth IRA, introduced in 1998, people must pay the current year's income taxes on their Roth contributions, but they don't have to pay taxes on the earnings when they are withdrawn from the account. Beginning in 2010, people making more than $100,000 per year will be allowed to convert a traditional IRA into a Roth IRA, which may increase the popularity of the Roth IRA.
Retailers' Rights and Duties Under the Streamlined Sales Tax Project (SSTP)
All around the country, state legislatures and businesses are faced with the question of whether to participate in the Streamlined Sales Tax Project (SSTP). SSTP is intended to simplify sales and use taxes in the age of Internet commerce and provide a structure for states to efficiently collect taxes on remote sales. Even in the small minority of states that do not have a state sales tax, SSTP is an issue because retailers in those states can voluntarily agree to participate in SSTP.
