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Bramwell’s Lunch Beat: 529 College Savings Plans Won’t Get Tax Hike After All

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Jan 28th 2015
Staff Writer and Editor AccountingWEB
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IRS waives penalties for late payments linked to Obamacare
The IRS will waive some penalties for taxpayers who owe taxes because of Obamacare, wrote Richard Rubin of Bloomberg. The changes apply only to people who received subsidized health insurance during 2014. On tax returns, they must reconcile eligibility for the credit with their actual income and pay back some of the subsidy if they received too much. That can happen if someone got a higher-paying job or a raise during 2014 and didn’t ask the government to alter the subsidy. The IRS will waive penalties for making that payment late or for failing to pay estimated taxes throughout 2014. Taxpayers must send in a letter for a penalty waiver. They still must pay the taxes within a year and will owe interest after April 15, the due date for individual tax returns.

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Obama drops plan to raise taxes on ‘529’ college savings accounts
The Obama administration said it would drop a controversial plan to raise taxes on so-called 529 college savings accounts, after the proposal sparked widespread criticism over its potential impact on the middle class, wrote John D. McKinnon of the Wall Street Journal. House Speaker John Boehner (R-OH) on Tuesday called publicly on the White House to withdraw its plan. Calls also were coming privately from leaders of the president’s own party, including House Minority Leader Nancy Pelosi (D-CA). A White House official said late Tuesday, “Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision.” The administration will continue to push for expanded tax credits for higher-education costs, as well as other breaks for lower- and middle-income households.

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IRS now paying company that muffed HealthCare.gov work
The Canadian company that played a major role in creating the once glitch-plagued HealthCare.gov website is working on a $4.5 million contract to help the IRS handle its responsibilities under the Affordable Care Act, wrote Josh Hicks of the Washington Post. The IRS hired CGI Federal to help “integrate various work projects” related to the healthcare law, according to an IRS statement last week. The firm is one of more than 30 contractors that helped build the government’s $800 million online insurance exchange, which failed when it first launched in October 2013. The IRS said it has worked with CGI Federal “going back several years” and that the contract was part of a multiyear award that started in 2011 and continued with a five-year agreement completed in August 2013, months before the failed launch of HealthCare.gov.

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Berkshire’s NetJets defeats $500 million IRS tax claim
NetJets Inc., the private jet-sharing company owned by Warren Buffett's Berkshire Hathaway Inc., has defeated an IRS lawsuit attempting to recoup more than $500 million of unpaid taxes, penalties, and interest, wrote Jonathan Stempel of Reuters. US District Judge Edmund Sargus in Columbus, Ohio, said on Monday that the IRS was bound by guidance it gave a NetJets predecessor in 1992 over when to collect federal transportation excise taxes and could not impose more taxes retroactively. The judge's 37-page decision was not a complete victory for NetJets. Sargus rejected a claim by the company that it deserved a $219.5 million refund plus interest on taxes already paid because its services were not “taxable transportation.”

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IRS chief heading back to Capitol Hill
IRS Commissioner John Koskinen is set to testify for the first time in the new Congress next week, wrote Bernie Becker of The Hill. Koskinen will appear before the Senate Finance Committee on Feb. 3, in a hearing examining IRS operations and President Obama's latest budget.

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Conservatives mobilize against gas tax hike
A group of 50 conservative organizations in Washington is mobilizing opposition to an increase in the 18.4 cents-per-gallon federal gas tax to pay for new transportation projects in the United States, wrote Keith Laing of The Hill. Talk of hiking the gas tax for the first time in more than 20 years has spiked in Washington as prices at the pump have fallen to their lowest levels in years. The conservative groups, which include high-profile organizations like Americans for Prosperity (AFP) and the Club For Growth, said on Wednesday that drivers should be allowed to pocket the savings they are now realizing when they fill up their tanks. “Lower-income Americans deserve a break from trying times, not to be slapped with another tax that disproportionately effects them,” AFP Vice President of Government Affairs Brent Gardner said in a statement.

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US state lawmakers slam attempt at online sales tax law
US states for years have asked Congress for federal legislation easing the way for them to collect sales taxes on Internet purchases, but now that a bill has been drafted, state lawmakers are resisting, wrote Lisa Lambert of Reuters. The National Conference of State Legislatures on Tuesday released a letter it sent to House Speaker John Boehner (R-OH) on Monday that depicted a proposed online sales tax bill as an unconstitutional attack on states' rights. A draft of the bill by House Judiciary Committee Chairman Bob Goodlatte (R-VA) “not only imposes new taxes on consumers in non-sales tax states, it raises taxes on consumers who purchase products from higher sales tax states,” wrote the group, which represents state lawmakers from across the country.

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Yahoo to spin off Alibaba stake tax-free as public company
Yahoo! Inc. announced a tax-free spinoff of its stake in Alibaba Group Holding Ltd., seeking to maximize the return of cash to shareholders and triggering a 10 percent jump in the Web portal’s shares, wrote Brian Womack of Bloomberg. The deal will put Yahoo’s holding in the Chinese e-commerce company into a newly registered firm called SpinCo, which will own all of Yahoo’s 384 million Alibaba shares valued at $40 billion, the Sunnyvale, California-based company said in a statement on Tuesday. Shares in SpinCo will be distributed to existing Yahoo shareholders as a separate public company. Yahoo CEO Marissa Mayer is taking the steps after Starboard Value LP and other investors pushed her to return cash to shareholders, find ways to cut taxes, and avoid major acquisitions.

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India says it won’t appeal Vodafone tax ruling
In a move to show it wants to welcome more foreign investment, India said on Wednesday it will not appeal a court order that ruled in favor of Vodafone Group PLC in one of its long-running, multimillion-dollar tax disputes, wrote Saurabh Chaturvedi and Eric Bellman of the Wall Street Journal. Vodafone and Indian tax authorities have been locked in two huge tax cases for years. A court in Mumbai ruled in favor of Vodafone in one of its cases late last year. In the case that was rejected, tax authorities claimed that Vodafone priced the shares of its stakes in its Indian companies sold to other arms of Vodafone in a way to avoid taxes. Authorities had been seeking more than $500 million in taxes. Vodafone is still fighting another case in which tax authorities say it owes more than $2 billion in taxes left over from its acquisition of a phone company in India. Vodafone has maintained that it doesn’t owe taxes in either of the cases.

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Report: Sales tax unaffected for US consumers and businesses in Q4 of 2014
The US sales tax rate was unaffected in the fourth quarter, while the number of indirect tax changes increased from the previous quarter, according to the latest ONESOURCE Indirect Tax report from Thomson Reuters. The report, which summarizes changes in sales, use, and value-added tax, shows that statewide retail sales tax remained unchanged across the nation, allowing the average rate to remain steady at 5.457 percent. Tax code amendments rose 14 percent to 201, making the fourth quarter the second busiest of the year. The average county taxes changed marginally by 0.08 percent to 1.252 percent, while the average city rates changed 0.011 percent to 1.764 percent, up from 1.762 percent in the third quarter. Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee tied for the highest rates at 7 percent. Colorado had the lowest rate at 2.9 percent among the non-zero states.

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Reznick Capital Markets Securities becomes affiliated company of CohnReznick
Reznick Capital Markets Securities, a broker-dealer registered with the US Securities and Exchange Commission, announced on Wednesday that it has changed its name to CohnReznick Capital Markets Securities and is now an affiliated company of top-10 US accounting firm CohnReznick LLP. Along with the name change, the firm announced an expansion of its investment banking advisory services, along with a broader diversification of its client base. Since its inception in 2008, CohnReznick Cap Markets has conducted more than $3 billion in corporate and asset financings, primarily in the renewable energy sector. The current investment banking team is comprised of 19 individuals located in six different offices across the United States.

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