Income Tax News

The 95th Academy Awards, also known as the Oscars, will be held on Sunday, March 12, at the Dolby Theatre in Los Angeles. 

This year’s top acting and directing nominees will be gifted swag bags filled with goodies that are valued at nearly $126,000. But online searches show that many people are wondering if these gift bags are taxable. 

THE QUESTION 

Are Oscar gift bags taxable? 

THE SOURCES 

THE ANSWER 

Yes, Oscar gift bags are taxable. 

WHAT WE FOUND

Oscar nominees who accept gift bags have to claim them on their federal income taxes. That’s because the IRS treats these swag bags as income, and says they don’t meet the definition of gifts. 

“These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gift bags do not do so solely out of affection, respect or similar impulses for the recipients of the gift bags,” the IRS says on its website. 

In the early 1970s, the Academy of Motion Picture Arts and Sciences established its gift basket program as a way to say thank you to presenters and performers at the Oscars. The gift baskets often included luxurious trips, expensive jewelry and other fancy gadgets. However, in April 2006, the Academy said it would no longer give out gift baskets after facing backlash from the IRS because the agency said that movie stars hadn’t been paying taxes on the gifts they received. 

By Aug. 17, 2006, the IRS and the Academy reached an agreement to resolve the tax issues in relation to the gift baskets that were given away at the Oscars through 2005. The agreement let any person who received an Oscar gift basket prior to 2006 off the hook for paying taxes on the gifts. 

“There’s no special red-carpet tax loophole for the stars. Whether you’re popping the popcorn, sitting in the audience or starring on the big screen, you need to respect the law and pay your taxes,” former IRS Commissioner Mark Everson said in a statement.

According to the IRS, any person who accepts a gift bag at an awards show “has received taxable income equal to the fair market value of the bag and its contents and must report that amount on his or her federal income tax return.” If a person redeems a non-transferable gift certificate, a voucher for a trip or a personal service that was found in the gift bag, they must also report it on their taxes. 

Gift bag recipients are allowed to donate the gifts to charity, and may be able to receive a tax deduction. But the IRS says they still have to claim the gifts as income on their tax return. 

Distinctive Assets, a Los Angeles-based entertainment marketing company that is not affiliated with the Academy, has been distributing gift bags to the top acting and directing nominees at the Oscars for over 20 years. Their 2023 “Everyone Wins” nominee gift bag is valued at nearly $126,000. It includes skincare products, fragrances, trip vouchers, and even cosmetic surgery procedures.  

In an email, Distinctive Assets founder Lash Fary told VERIFY the gift bags his company gives out are considered business gifts by the IRS.  

“All business gifts are taxable. The IRS bases any applicable tax on the fair market value of a business gift,” Fary said. “However, the vast majority of our gift bag’s value is comprised of gift vouchers or invitations to partake in services. That means that unless a nominee uses a particular gift certificate the fair market value of that gift is zero (with no tax consequence whatsoever).” 

The Associated Press contributed to this report.

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Originally Appeared Here

Mental Health America of West Central Indiana Inc. faces a $1 million funding gap on a $14.7 million project to construct a community-based justice diversion center and build a low-income housing project named Mullen Flats.

The gap is a result of higher construction prices, higher loan interest costs and higher environmental remediation costs said Myra Wilkey, chief executive officer.

The non-profit is seeking $750,000 from the Vigo County Council to help plug that gap. That includes $500,000 for the diversion center, proposed to be funded from the county’s local income tax public safety fund, and $250,000 for the housing project to come from the county’s American Rescue Plan Act (ARPA) funds.

“We have a $1 million gap. If we were to build the diversion center outside of building it with Mullen Flats, the cost of that six months ago was $1 million,” Wilkey said after the council’s Tuesday non-voting information meeting.

“The general contractor and the sub [contractors] said if we can roll [the two projects together] you could have a potential savings of $500,000,” Wilkey said. In addition to higher construction costs, environmental remediation cost $300,000 for the Mullen Flats project.

“Costs have significantly increased since we started the project in 2020,” Wilkey said. “We got delayed because of the [COVID-19] pandemic and then the cost has skyrocketed. We thought if we waited [to move forward] it would be better. It is not because the interest rates are going up,” Wilkey said, adding interest rates on loans to start the project have created an unanticipated $350,000 funding gap.

Mullen Flats, to be built on land at 2750 Elm St., west of Mental Health America’s Liberty Village, is a 44,000-square-foot, three-story project with a 5,500-square-foot justice diversion center on the ground floor. The project includes 42 one-bedroom, low-income permanent supportive housing units on the top two floors.

Mental Health America has been awarded $13.9 million for the project, with $1.5 million from the Indiana Housing Trust Fund and $12.4 million in Low Income Housing Tax Credits from Indiana Housing and Community Development Authority.

However, the project is now facing declines due to housing tax credits, with a land purchase agreement with the city slated to expire April 7. Mental Health intends to close on financing for the property prior to that, on April 3. Construction is slated to take 16 months, with the project slated for completion in August 2024, then another six months to lease out the apartments. 

Wilkey told the Vigo County Council that Terre Haute City Council is slated to vote on a resolution to commit an additional $250,000 from ARPA funds for the diversion center. That money will complete the $1 million funding gap.

Councilman Aaron Loudermilk questioned why the county is paying a larger portion of the funding gap and why it is not equally divided with the city.

Commissioner Chris Switzer said commissioners were contacted about the issue three months ago.

“We did have a meeting with the mayor [of Terre Haute] who made it clear we [the county] did receive the biggest substantial chunk of public safety [income tax money] and we should pay for the diversion aspect as the city is providing the property, cleanup and matching $250,000,” Switzer said.

Loudermilk said that while he supports the project, “you could have countered and said the city received more in ARPA funds than the county.” Switzer said “he did that.”

The timing and sudden need of the funds annoyed Council President R. Todd Thacker.

“If this conversation all happened three months ago and we just now hear it and it is crunch time, then you come to us,” Thacker said, “I don’t like that.”

“I understand,” Wilkey said. “I don’t like it either,” she said adding some commitments were not met.

“We all need to work together so we can get there,” Wilkey said.

“That’s what we always hear,” Thacker said. “We all need to work together but you [County Council] just happened to be the last one invited.”

Councilwoman Marie Theisz said the county “has got to do something to get people to not end up in our jail. Our jail numbers are high. I am with you, I don’t like the [cost] split [with the city], but at the same time, I feel like we have to do something,” Theisz said. “Having a variety of options for the judges, for law enforcement, for the citizens of Terre Haute and Vigo County, I think is going down the right path. I want to continue moving forward on that.”

Thacker said the council “has a decision to make next week… I don’t necessarily like the split [of costs] but I don’t know that it will hang me up on it individually,” Thacker said of the funding request.

The County Council will vote on the funding request at its 5 p.m. March 14 meeting at the Vigo County Government Center.

Originally Appeared Here

The IRS recently announced that the deadline for residents of 51 of California’s 58 counties, including the entire Bay Area, would be extended until Oct. 16 because of this winter’s storm disaster declarations.

The decision by the Internal Revenue Service to delay the income tax filing deadline until October for 97% of California’s population is ridiculous policy that has serious negative consequences for the already-troubled state budget.

The IRS recently announced that it was exercising its discretion to extend the filing deadline for residents and businesses of 51 of California’s 58 counties, including the entire Bay Area, until Oct. 16 because of this winter’s storm-disaster declarations.

It’s using a chain saw when a paring knife would have been more appropriate. There is no question that some people suffered tremendous loss from the onslaught of landslides, flooding and surging ocean waves. But for the vast majority of state residents, that crisis has come and gone.

It would make sense to offer tax-filing delays for just those who suffered damage. But the IRS does not distinguish within disaster areas between people and businesses that endured harm and the rest of us. If it decides to offer tax-filing delays, it automatically does so for every resident and business within the counties designated by the Federal Emergency Management Agency as disaster areas.

The decision by the federal taxing agency backed California’s Franchise Tax Board, which collects state income taxes, into a corner. When the IRS announcement was issued Feb. 24, the state was left no realistic choice but to follow suit, which it did Thursday.

There was no practical or political way for California to stick with its original deadline of April 18, nor the first extension the IRS and state had previously announced of May 15. Most tax filers must start with preparing their federal returns and then make adjustments to that to calculate the state amount. If the state had failed to follow the lead of the IRS, it would have created chaos.

But the delay to Oct. 16 means a cash-flow slowdown for the federal and state governments. It’s unclear what the effect of that will be for the feds. But for state government, the consequences are real.

While the delay will not affect employer payments from payroll withholding, it will affect estimated quarterly tax payments and funds that come in with tax returns, according to an expert with the state Legislative Analyst’s Office.

The state Department of Finance estimates that $35 billion out of about $168 billion of personal and corporate income tax revenue originally expected in the current fiscal year, which ends June 30, will now be deferred to next fiscal year.

The state is expected to be able to internally borrow to cover that shortfall. But it will mean less money to invest and hence less return on that investment. Our back-of-the-envelope calculation puts that loss at about $500 million; the state Treasurer’s Office did not respond to our inquiry to confirm.

The biggest effect will be the uncertainty during upcoming budget negotiations. Gov. Newsom must prepare by mid-May his revised proposal for next year, and the Legislature is required to approve a spending plan by mid-June.

Normally, the estimates of state tax return revenues would be known by mid-May. This year, however, state lawmakers will have to work without complete information as they navigate budget negotiations that are already likely to be contentious, with shortfalls for the next fiscal year already projected at $22 billion-$25 billion.

The revenue delays, investment return losses and budget uncertainty were avoidable. The tax extension should have only been offered to those few who truly needed it.

Rather than granting eligibility to everyone in 51 counties, surely the IRS, which has a form for everything else, could devise one in which needy filers declare that they are legitimately impacted by a disaster. They deserve an extension; the rest of us do not.

Originally Appeared Here

On Tuesday, the Supreme Court handed down a decision with an unprecedented 5–4 split. Bittner v. U.S. featured a faceoff between Justice Neil Gorsuch, writing for the majority, and Justice Amy Coney Barrett in dissent—with Justice Ketanji Brown Jackson breaking with the liberals to give Gorsuch his decisive fifth vote. But it gets even stranger: Jackson was the only justice to join a key section of Gorsuch’s opinion endorsing special solicitude for federal defendants’ due process rights.

What does it all mean? On the surface, not a lot: Bittner is a minor case about civil penalties for people who fail to disclose their foreign accounts to the IRS. Dig deeper, though, and the decision suggests a certain libertarianism in Jackson’s jurisprudence that may distinguish her from the two other progressive justices. That trait does not map neatly onto the left–right divide that emerges in so many cases, as Tuesday’s ruling demonstrated. Instead, it points toward a skepticism of government power that should cheer civil libertarians across the political spectrum.

Bittner revolved around a provision of the Bank Secrecy Act, or BSA. The statute requires American citizens and residents to file an annual report with the IRS identifying all of their foreign accounts if the money they hold, in aggregate, exceeds $10,000. A person who inadvertently fails to file these reports—a “nonwillful” infraction, as lawyers call it—incurs a penalty of up to $10,000 per “violation.” Attempted enforcement of the BSA has raised a thorny question: What counts as a “violation” under the law? The government says individuals incur a $10,000 fine for each foreign account they fail to report. Those facing BSA penalties say they incur $10,000 for each annual report they fail to file.

The difference is important for Alexandru Bittner, the defendant in this case, who holds 272 foreign accounts that he failed to report over five years. (No one claims he’s using them illegitimately—Bittner is a dual American-Romanian citizen with a thriving business career in Romania.) If he’s fined per report, he owes $50,000. If he’s fined per account, he owes $2.72 million.

SCOTUS sided with Bittner on Tuesday, albeit barely. Gorsuch’s majority opinion was joined by Jackson along with John Roberts, Samuel Alito, and Brett Kavanaugh. Barrett’s dissent was joined by Clarence Thomas, Sonia Sotomayor, and Elena Kagan.

The majority and dissenting opinions dueled over the statutory text, but Gorsuch went a step further, highlighting two other reasons to interpret the BSA narrowly. First, he pointed out that the IRS has taken inconsistent positions on this question: Until 2019, it suggested in guidance documents that the penalty applied to each missed report, not to each unreported account. Then the agency changed its mind. That’s particularly troubling given that many Americans have no idea about their obligations under the BSA, and the government hasn’t done much to educate them. U.S. embassies and consulates stopped providing tax consulting for American expatriates a decade ago. The relevant form (which does not create tax liability) isn’t even an IRS document; it’s published by the Treasury Department, and the submission process is totally different from the process for other tax documents. In short, it is very easy for well-intentioned people to run afoul of the BSA.

Which leads to a second reason to reject a broad reading of the law: the rule of lenity. This principle requires federal courts to interpret laws against the government and in favor of defendants when they are unclear or ambiguous. It’s typically invoked in the criminal context, but applies to civil fines, too. And, Gorsuch wrote, it’s especially appropriate here. The rule “exists in part to protect the Due Process Clause’s promise” that laws must provide “a fair warning” that “the common world will understand,” he asserted. Here, “the government’s own public guidance documents” supported a more lenient interpretation before taking an about-face. Many qualified accountants shared that view of the law until the IRS decided it was incorrect. “If many experienced accountants were unable to anticipate the government’s current theory,” Gorsuch concluded, “we do not see how ‘the common world’ had fair notice of it.”

Notably, only Jackson joined this portion of the opinion. Roberts, Alito, and Kavanaugh refused to sign on, though they joined the rest of Gorsuch’s decision. Why? It’s not hard to guess. Gorsuch is the court’s most consistent proponent of the rule of lenity, sometimes to the conservatives’ dismay. In 2019’s U.S. v. Davis, for instance, Gorsuch wrote the majority opinion striking down a federal law imposing harsh mandatory minimum sentences on certain offenders. Resisting a different interpretation that would spare the law—and preserve the defendant’s lengthy sentence—he invoked the rule of lenity, declaring that “ambiguities about the breadth of a criminal statute should be resolved in the defendant’s favor.” This approach infuriated Kavanaugh, who wrote an acerbic dissent accusing Gorsuch of misapplying the principle. Thomas, Roberts, and Alito joined Kavanaugh in full.

More recently, in 2022’s Wooden v. U.S., Gorsuch wrote a mini treatise endorsing the rule’s expansion. Some decisions suggest that it applies only to “grievous ambiguities,” he noted, but “this ‘grievous’ business does not derive from any well-considered theory about lenity or the mainstream of this court’s opinions.” Defendants should not have to prove that a law is severely or hopelessly ambiguous; rather, any “reasonable doubt” about its scope “should be resolved in favor of liberty.”

Just as this theory can repel conservatives when applied to violent crime, it can turn off liberals when applied to white-collar offenses and regulatory mandates. Sotomayor joined most of Gorsuch’s full-throated support for the rule of lenity in Wooden. Yet when the court released Bittner on Tuesday, Sotomayor was in dissent, along with Kagan. Both justices telegraphed their votes during oral arguments when they suggested that only wealthy tax-dodgers attempting to deceive the IRS could get caught up under the law. Jackson viewed things differently. “Realistically,” she said, the reporting requirement applies to “anybody who’s living overseas.” Unlike Sotomayor and Kagan, Jackson understood that it isn’t just rich business magnates who face punishment under this law, but also working-class expats. And she alone signed onto Gorsuch’s application of lenity.

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Bittner thus shows how the rule cuts across ideological lines. So does another case lurching toward SCOTUS: Cargill v. Garland, a challenge to the ban on “bump stocks,” devices that transform semi-automatic rifles to mimic automatic weapons. The government issued a regulation outlawing bump stocks after one was used to kill 60 people in 2017. In January, however, the 5th U.S. Circuit Court of Appeals invalidated the ban, citing (among other reasons) the rule of lenity. In the coming years, more conservative courts will use lenity in striking down more regulations favored by progressives. Perhaps Sotomayor and Kagan refused to apply the rule here in part because they are wary of its creeping expansion into the administrative state and firearm restrictions.

If that’s true, it seems Jackson does not share their fears, just as she does not share their concerns that Bittner will let loaded tax-cheats off the hook. Those few data points we have on the newest justice all point toward a suspicion of government overreach, though it’s too soon to say how consistently she’ll apply these views. The one indubitable conclusion so far is that Jackson is not just a liberal but a civil libertarian, and whenever the government seeks to punish a citizen, it should never take her vote for granted.

Originally Appeared Here

Christopher De Los Santos

For the third year in a row La Vega High School senior Ruben Alarcon is helping community members with their federal tax returns.

“When I first did this as a sophomore, I was scared,” Ruben said. “There were all these juniors and seniors helping people and I didn’t know if I could do it.”

Many career and technical education students at La Vega High School have earned the Volunteer Income Tax Assistance certification through the IRS, helping out members of the public at free workshops.

Now Ruben is one of the most confident among the many career and technical education students who have earned the Volunteer Income Tax Assistance certification. He said he stayed until 8 p.m. one evening a few weeks ago to make sure all the people got helped.

The school’s tax preparation workshops are free to the public.

“I would come back next year and keep helping people with their taxes if I could,” Ruben said.

Ruben will graduate in a few months and join the U.S. Navy under the delayed entry program to go to nuclear propulsion training. At tax season next year, he likely will be learning about the reactors that power U.S. Navy submarines and aircraft carriers.

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La Vega High School volunteer Alexa Rangel, right, helps 2017 graduate Yuridia Navarro with her tax return Thursday.

Rod Aydelotte, Tribune-Herald

2017 La Vega graduate Yuridia Navarro brought her federal taxes to the high school cafeteria Thursday afternoon, and high school junior Alexa Rangel assisted her.

“My mom used to help me do my taxes,” Navarro said. “For my first experience with my own taxes, this was pretty good.”

Navarro said Alexa was friendly, gave good customer service and made the process smooth and easy.

“I would recommend this to my friends,” Navarro said.

Alexa enrolled in the accounting and business class that Renee Contreras teaches. She said Contreras talked to her class about helping the community with their taxes through the Volunteer Income Tax Assistance program she oversees.

“It sounded interesting and I wanted to try it,” Alexa said.

This is her first year helping people do their taxes.

“Last Thursday, I had a client with so many forms,” Alexa said. “I had to ask for help.”

Renee Contreras, faculty sponsor for the Volunteer Income Tax Assistance program at La Vega High School, performs a quality assurance check on a tax return.

Rod Aydelotte, Tribune-Herald

Contreras said her students are trained to help people with basic federal tax returns and they also know how to process some business income as well. Student tax preparers are all certified through the IRS Volunteer Income Tax Assistance program and have their skill credentialed through LinkedIn Learning, Contreras said.

“These kids feel a real sense of civic responsibility,” Contreras said. “They work hard and they’re dedicated. They enjoy helping people.”

Before starting as a career and technical education teacher this school year, Contreras had been a math teacher for 25 years. She worked 10 years before that as an accountant.

La Vega High School Principal James Villa said Contreras reviews the student tax preparers tirelessly. The students have all performed many simulated tax returns before the help an actual client.

The program lets students apply what they learn in the classroom in the real world, Villa said.

“We have an emphasis on service learning with industry certification this year,” Villa said. “The VITA (Volunteer Income Tax Assistance) program goes right along with that. Many people in the community, especially elderly people, rely on our students to prepare their taxes.”

Community member Daniel Salinas brought his ID, his tax documents and an official document with his Social Security number for students to help him prepare his income tax return.

“Last year I went to the tax service at Walmart and they charged me almost $250,” Salinas said. “My grandson is a student here and he told me about this opportunity to get my taxes done for free.”

La Vega’s certified student tax preparers will continue to help community members from 4:30 to 6:30 p.m. Tuesdays and Thursdays through April 15. On Tuesdays they will be at the Waco-McLennan County Central Library, 1717 Austin Ave. On Thursdays they will be at the La Vega High cafeteria, 555 N. Loop 340.

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Originally Appeared Here

This year, taxes are due on Tuesday, April 18.

Regardless of whether a person files early or waits for the last minute, doing taxes can be a whole day of work.

The Internal Revenue Service estimates it takes the average non-business filer nine hours to prepare their tax return, with an average non-business tax prep costing $160.

The IRS usually has all of the information you file; it knows how much you owe, but it doesn’t tell you. The current tax filing system puts it on you to match its numbers.

It’s part of a cycle driven mostly by the lobbying of large tax preparing services.

ProPublica’s reporting revealed tax preparing companies have spent millions lobbying Congress to avoid simplifying the tax code and tax filing so that everyday people filing their taxes will throw their hands up in frustration and pay for their services.

At the same time, anti-tax advocates — primarily conservative groups who want to fuel opposition to taxation — have pushed hard to defund the government, specifically the IRS, and elect lawmakers who will do that and keep people angry at the tax system.

An underfunded IRS struggles to fulfill its duties, especially when the tax code keeps getting more complicated.

So for the time being, America is stuck in the clutches of a system that drives a lot of people to pay for tax prep services.

So what does an easy and free solution look like?

The IRS has a system called Free File available on its website and open to any person or family who earns $73,000 or less. The agency estimates Free File is available to about 70% of tax filers, but the actual usage rate is pretty low.

In 2020, IRS data showed more than 148 million individual income tax returns were filed online. Of that 148 million, just over 4 million, or less than 3%, actually used Free File.

While the IRS can let you submit for free, getting outside help to understand the bevy of forms you need can be pricier. That’s built into software like TurboTax, but the IRS can’t offer similar services because of the agreement it struck with tax preppers when it created Free File in the early 2000s.

SEE MORE: How likely are you to be audited this tax season?

The IRS has a list of providers that offer free tax prep help if you meet certain qualifications, but the system is full of obstacles. Plus, each site has its own specific set of requirements.

Providers may try to funnel you into paid programs or force you into one if you get certain tax credits. If you try to find help yourself using a search engine, you might find services that are similar to the Free File program but actually are not, and that can even stump the experts.

Beverly Moran is a professor emerita of tax law at Vanderbilt University. She has written six books and dozens of articles on the tax system. She puts her expertise to work, helping people file their taxes in order to find issues with the process. Even she found herself dealing with an impostor.

“I went on one of these sites that was not through the IRS website but appeared to be through the IRS website,” Moran said. “I went all the way through, filled out the return and then was told that I owed $29. Well, that’s ridiculous. So I called the company and they said, ‘Oh, well, the person that you were doing this return for is eligible for the earned income credit.’ And any time there’s a credit, this program requires a payment. And it seems to me that virtually anyone who is eligible for that software, for that free software, was going to be eligible for the earned income tax credit, so they all would have had to pay.”

The earned income tax credit is a government benefit for lower income people that is delivered through the tax code. Estimates show 1 in 5 workers eligible for it don’t even file for it. This was last year for a 2021 tax return, which meant there was another big benefit the first provider had overlooked.

“When I finally got to the IRS website and I found another provider within the IRS website, I realized that the original provider that had wanted to charge had dropped a $1,400 credit,” Moran said.

Another potential solution to the problem is return-free filing. The government would calculate your taxes using all of your W-2s and tax forms; then you could either accept the result or provide proof that you should pay less or get back more.

California piloted its own version of this approach to favorable reviews from tax filers. Joe Bankman, a Stanford Law professor, helped create the system.

SEE MORE: Inflation could impact your tax return this year

“They know what your wages are because your employer already reported it to them,” Bankman said. “So in California, we took that information and we sent a pilot group a completed return, and we also made it available online. And we said, ‘Based on what we know and on what you reported last year about your household status, how many kids you have and so on — here’s what we think your return will look like. If this is right, hit correct, submit.'”

But it didn’t last long. California Republicans alleged, among other criticisms, the software could cost taxpayers money if it didn’t always maximize deductions. Plus, Intuit – the maker of TurboTax, which is based in California – spent over a million dollars lobbying lawmakers as Ready Return was getting off the ground.

Bankman fought back, pouring in $35,000 of his own money to counter-lobby state legislators to promote the return-free system. He’s also advocated for it to members of Congress.

“When I went to California to try to fight into it I thought, ‘Well, there’s only 120 legislators. I’ll talk to them all one-on-one.’ And I found that in order to do it, I had to hire a lobbyist because I just couldn’t handle the details or get the meetings,” Bankman said. “In Congress when I went there, now there’s 500-plus. And what I found everywhere I went is that Intuit had already preceded me. They’d already met every representative I was going to meet.”

So the current system lives on, but this year, a new stream of funding is making it easier for people to get help from the IRS.

The IRS received money in the Inflation Reduction Act that Congress passed last year to bolster its phone support service. It allowed the agency to purchase new technology and hire 5,000 more employees to answer the calls of confusion.

A 2022 report found only about 10% of calls to the IRS made it to an actual IRS employee, a trend that had been consistent the past couple of years. But this year, a Treasury Department source told the Washington Post the response rate through Feb. 4 had soared to 88.6%.

SEE MORE: Tax season has begun. Here’s how to prepare, avoid a refund delay

Originally Appeared Here

As tax season gets underway, it’s not just federal taxes that are a big topic of conversation. There’s also state taxes, too, and a new report shows just how well some states are graded on their tax policies, with five receiving an “A” and four getting a failing “F.”

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For the study by finance site MoneyGeek, states were graded on their “tax burden” for the average resident — the lower the burden, the higher grade the state received. To gather the findings, MoneyGeek ascertained what an average family would pay in state taxes in 2023 using data collected from the Bureau of Labor Statistics’ Consumer Expenditure Survey along with incomes reported by the U.S. Census Bureau and housing information from Zillow.

MoneyGeek stated they then created a “hypothetical family” including one dependent, an adjusted gross income (AGI) of $87,432 representing the median national income and a property value of $374,665, also reflecting the national new home median price. While most states fell in the middle, averaging a “B” or “C” grade, there were nine states that stood out for their high marks or low standards.

Among the states with the lowest tax burden, the five earning an “A” included:

1. Wyoming (3.9% of income)
2. Nevada (4.6% of income)
3. Tennessee (5.5% of income)
4. Alaska (5.5% of income)
5. Florida  (5.6% of income)

Conversely, among the states with the highest tax burden, these four earned an “F” grade:

1. Illinois (16.9% of income)
2. Connecticut (15.3% of income)
3. New Jersey (14.8% of income)
4. New Hampshire (14.3% of income)

Not far behind were New York, Iowa, Vermont, Wisconsin, Nebraska and Michigan, which all earned D grades.

The starkness of the highs and lows stands out as well, as MoneyGeek noted, “For a typical middle-class family, the tax burden difference between living in the highest-tax state (Illinois) and the lowest-tax state (Wyoming) is $11,340 per year.”

An analysis from The Hill noted that there are eight states that have no income taxes — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — which made them score favorably even though there are generally higher sales taxes in these states that hurt their grade. For example, Tennessee has a sales tax rate of 9.55%. While there are some states with high income tax rates — like California, due to many tax credits, deductions and strategic tax brackets — residents don’t end up paying as much as other states with lower income tax rates.

The news comes as the Tax Foundation reported that many families migrated last year, largely choosing states with friendlier tax policies and leaving behind those with higher tax rates. As the organization reports in one example, Illinois lost 0.8% of its population in 2022.

Tax Filing: IRS Recommends This April Deadline to Pay Taxes (Even With Extension)
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GOBankingRates also recently reported that 27 states (nearly half of the nation) are now eyeing personal income tax cuts, or nixing them altogether as many states are amassing budget surpluses. In two cases, Mississippi and Arkansas, leaders believe having no state taxes would be a boon to attract businesses as well as new households.

More From GOBankingRates

This article originally appeared on
GOBankingRates.com:
Is Your State Tax-Friendly? Only 5 Were Given an A-Grade (and 4 Failed)

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Most of us would hardly consider ourselves to be tax experts. Nevertheless, every year we’re required to wade through confusing paperwork and ever-changing rules in order to file our taxes. If you don’t have a paid tax professional helping you with your return, the Internal Revenue Service (IRS) has employees on board to provide free help to taxpayers in person and over the phone. But getting that help could end up costing you something else: your time and patience. Taxpayers have long complained about how hard it is to reach any of the agency’s telephone assistors. And now, the IRS is warning against even trying. Read on to find out why the agency is advising taxpayers to avoid calling right now.

READ THIS NEXT: 3 IRS Deductions You Can’t Take This Year, Experts Warn.

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The 2023 tax season is expected to be a confusing one for taxpayers, as many pandemic-related changes are being phased out after three years. As a result, the IRS said it “has taken additional steps” to help improve service this year.

One of these major adjustments was an increase to the agency’s workforce. The passage of the Inflation Reduction Act in Aug. 2022 allowed the IRS to hire more than 5,000 new telephone assistors over the last few months. These new customer service representatives have received weeks worth of training to “help improve the taxpayer experience” by answering phone questions, according to the agency.

“The IRS is fully committed to providing the best service possible, and we are moving quickly to use new funding to help taxpayers during the busy tax season,” former IRS Commissioner Chuck Rettig said in an Oct. 2022 statement. “Our phone lines have been simply overwhelmed during the pandemic, and we have been unable to provide the help that IRS employees want to give and that the nation’s taxpayers deserve … As the newly hired employees are trained and move online in 2023, we will have more assistors on the phone than any time in recent history.”

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Despite this recent addition to the agency’s workforce, the IRS is still calling for caution when it comes to over-the-phone assistance. “Even though we have new hires in the pipeline, our phone lines remain extremely busy,” Rettig warned in October.ae0fcc31ae342fd3a1346ebb1f342fcb

Doug O’Donnell, the acting IRS Commissioner who recently took over from Rettig, gave a similar warning in January, right before the 2023 tax season started. “We’ve trained thousands of new employees to answer phones and help people [but] our phone volumes remain at very high levels,” he confirmed.

Over the past few years, these historically high levels have led to many people’s phone calls going unanswered. During the 2022 tax season, the IRS received about 73 million telephone calls from taxpayers looking for help, according to The Washington Post. But Erin Collins, the national taxpayer advocate, reported that only about 10 percent of these calls actually reached an IRS employee.

“If a private company failed to answer nine out of 10 customer calls, customers would go elsewhere. That, of course, is not an option for U.S. taxpayers,” Collins wrote in her report.

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It’s now more important than ever for you to heed this advice. In a new alert posted Feb. 16, the IRS warned taxpayers that the “peak period” for filing taxes is quickly approaching. According to the agency, many people prepare and submit their tax returns during Presidents Day weekend every year. As a result, this creates a peak period for calls to the IRS.

“The IRS continues to see improvements this tax season compared to previous years, including better phone service,” O’Donnell said in a statement. “But we always see a significant surge in phone traffic around Presidents Day. With the calendar advancing, millions of people turn their attention to taxes during this period.”

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In light of this anticipated phone line surge, you might be better off trying different options before resorting to calling. “During the two week February period following Presidents Day, the IRS recommends turning first to the self-help tools available online,” the agency said in its new alert.

The IRS website is full of tools designed to provide quick answers to taxpayers at any time. “There’s no wait time or appointment needed—online tools and resources are available 24 hours a day,” the agency explains. For help answering common tax questions, the IRS suggests searching the Interactive Tax Assistant (ITA), Tax Topics, and Frequently Asked Questions (FAQ) sections of its online website. You can also set up your own Online Account to help get personal tax information quickly.

“To avoid potential delays, we encourage people to check IRS.gov first, which can provide much of the same information instantly to taxpayers,” O’Donnell said in his statement.

Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you’re spending, saving, or investing, always consult your financial advisor directly.

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COLUMBUS, Ohio (AP) — A battle for political control of the Ohio House has laid bare the risks the Republican Party faces as factions of its legislative supermajority square off more over tactics and the willingness to thwart long held institutional norms than policy.

Six weeks ago, Republican Jason Stephens, a second-term representative from rural southern Ohio, scored a surprise bipartisan win for speaker over Rep. Derek Merrin. Since then, Stephens’ detractors have grabbed headline after headline for their maneuvers — even as a single piece of legislation is yet to be introduced. That includes the crucial and time-sensitive state budget.

And the clashes appear far from over. With Stephens preparing finally to unveil Republicans’ session priorities Wednesday, a group of GOP lawmakers lined up against him — calling themselves “the Republican Majority Caucus” — have not ruled out suing him for control of the caucus campaign fund.

The faction wants a judge to clarify whether the House speaker and the head of the caucus need necessarily be the same person. While Ohio law does not seem to require it, Stephens has asserted he is both.

“I’m the speaker of the House, the head of the Republican caucus, and I’m excited for us to get ready and move forward,” Stephens told reporters after successfully passing House rules Jan. 24 during a typically boring procedural session-turned-raucous.

“We now have our House in order,” he declared, even as Merrin backers stood nearby alleging constitutional and rules violations. Those included that Stephens had failed to let them speak on the floor — a time-honored tool of speakers everywhere — and begun the session at 2:05 p.m. rather than 2 p.m.

It’s all part of a growing line of attacks against Stephens and the Republican representatives who supported him that is roiling lawmaking in a state where the GOP rules every branch of state government and twice chose Republican Donald Trump for president by wide margins.

The fight has included a declared takeover of the GOP caucus by Merrin’s camp, a call for Stephens’ resignation, censure of Stephens and his GOP supporters by the Ohio Republican Party’s central committee and attack ads by one of several same-party PACs that are starting now to fight their reelections.

“There’s a lot of people right now who don’t feel like they have a voice, because the Democrats elected the speaker of the House,” Merrin told reporters the day he declared himself in charge of the caucus and its fundraising operation, despite Stephens’ election. The Associated Press has not yet received records on that closed-door vote in response to its requests.

Fracturing is a known risk of supermajority rule.

Aristotle Hutras, who served as executive secretary to the late Democratic Ohio House Speaker Vernal Riffe, who led the chamber from 1975 to 1995, recalled the legendary Ohio politician worrying aloud after his party won 62 of 99 seats in 1982: “It might be too many, boys.” Republicans this year have 67.

“Even Vern Riffe, historically the longest serving speaker in Ohio history, knew it could be difficult governing with too much of a majority,” said Hutras, who was a young caucus staffer in 1982. “When there are too many in a caucus, every man is a king.”

Hutras said Riffe resolved conflict quickly by getting straight to work.

Merrin’s group believes math is on their side. Forty-three of 67 House Republicans supported him for speaker, a clear majority of the caucus. But 22 broke off and supported Stephens, defying results of an informal speaker vote in November and teaming with all 32 House Democrats.

Clearly perplexed, angry and stung, the Merrin camp went on the attack. Though Merrin is term-limited in two years, many of his allies are new lawmakers whose ability to make their marks could depend on caucus financial support.

They asked the state party’s central committee to condemn Stephens and those who voted for him, including withholding future party endorsements and campaign cash. The panel didn’t go quite that far, but they did vote to censure the 22 lawmakers — as they had after then-U.S. Rep. Anthony Gonzalez voted in favor of Trump’s impeachment.

Their resolution cast Democrats as the enemy, with a “dangerous and perverse” agenda that Stephens and the others had now prevented Republicans from blocking.

Targeted lawmakers pushed back. State Rep. Bill Seitz, a long-serving Cincinnati Republican, said his record as a conservative was clear. State Rep. Sara Carruthers chided Merrin in a Dayton Daily News interview, calling him a crybaby who couldn’t stand being outmaneuvered.

State Rep. Jon Cross quipped to the USA Today Network’s Ohio bureau, “What you’re telling me is I’m a Republican that voted for a Republican speaker and the state Republican party is censuring me? Sounds like the dipsh–s are running the insane asylum.”

The Ironton Tribune, located in the seat of the county where Stephens is a former commissioner and auditor, called the censure “juvenile” and “politics at its worst.”

“(T)here seems to be no interest in turning down the outlandish rhetoric and acting like the adults in the room,” they wrote.

The paper called on Republican Gov. Mike DeWine to speak out and urge the party to “move toward actually getting things done in Columbus.”

DeWine, an establishment Republican whose support for Trump has been tepid, has faced his own share of run-ins with the state central committee — where opponents of his aggressive early response to the coronavirus have grown in their numbers. He said he was staying out of it.

His budget bill, a $57.5 billion blueprint for state spending over the two years beginning July 1, is among House bills that are yet to materialize — though some committee activity has begun on the proposal.

Stephens’ and Merrin’s differences appear largely to surround stylistic decisions, including how quickly a measure to the ballot that would make it harder to amend Ohio’s constitution should be pushed and whether to fully eliminate Ohio’s income tax, for example.

A key exception is with regard to unions. Stephens questions a so-called “backpack bill” that would extend Ohio’s vouchers to every schoolchild, including those attending private schools, and appears to have rejected bringing an anti-union “right to work” bill this session, which had been a Merrin priority.

Groups touting parents’ rights, a burgeoning Republican priority nationally, have used union donations to try to link Stephens and his leadership team to former Ohio House Speaker Larry Householder, who’s on trial for corruption in Cincinnati. They cast the group as in the pocket of “Big Labor,” including the same teachers’ unions that supported Householder and have opposed the backpack bill.

“Conservatives in Ohio are aghast at the backroom deal-making that led to the speakership of Jason Stephens,” said former U.S. Senate candidate and Ohio Strong Action PAC Chair Mike Gibbons. “Because we have seen time and again, these deals end up sacrificing principled conservative policy.”

He said he represents a group of conservative leaders, and groups that have a clear agenda. They are pushing to retire Ohio’s income tax and for a suite of bills that died last session, including the backpack bill, a ban on transgender student-athletes in girls sports and one prohibiting gender affirming surgeries to minors.

They also back a ballot proposal that would raise the threshold for changing Ohio’s constitution from 50% to 60%. That idea arose suddenly during last year’s lameduck session, just as issues guaranteeing abortion rights, reforming redistricting and legalizing recreational marijuana were being contemplated. Then-Speaker Bob Cupp, also a Republican, declined to bring the issue to the floor for a lack of votes. Under Stephens, the House missed a Feb. 1 cutoff for getting it on the spring ballot.

Gibbons said his coalition will be bringing its issues “straight to the voters of Ohio, making the case” in the coming weeks.

___

Samantha Hendrickson is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.

Originally Appeared Here

In this file photo from April 23, 2020, former President Donald Trump’s name is seen on a stimulus check issued by the IRS to help combat the adverse economic effects of the COVID-19 outbreak. The IRS announced Friday, Feb. 10, 2023, that most relief checks issued by states last year aren’t subject to federal taxes, providing 11th hour guidance as tax returns start to pour in.

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In this file photo from April 23, 2020, former President Donald Trump’s name is seen on a stimulus check issued by the IRS to help combat the adverse economic effects of the COVID-19 outbreak. The IRS announced Friday, Feb. 10, 2023, that most relief checks issued by states last year aren’t subject to federal taxes, providing 11th hour guidance as tax returns start to pour in.

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The IRS announced Friday that most relief checks issued by states last year aren’t subject to federal taxes, providing 11th hour guidance as tax returns start to pour in.

A week after telling payment recipients to delay filing returns, the IRS said it won’t challenge the taxability of payments related to general welfare and disaster, meaning taxpayers who received those checks won’t have to pay federal taxes on those payments. All told, the IRS said special payments were made by 21 states in 2022.

“The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administrators as the IRS and Treasury worked to resolve this unique and complex situation,” the IRS said Friday evening in a statement.

The states where the relief checks do not have to be reported by taxpayers are California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. That also applies to energy relief payments in Alaska that were in addition to the annual Permanent Fund Dividend, the IRS said.

In addition, many taxpayers in Georgia, Massachusetts, South Carolina and Virginia also avoid federal taxes on state payments if they meet certain requirements, the IRS said.

In California, most residents got a “middle class tax refund” last year, a payment of up to $1,050 depending on their income, filing status and whether they had children. The Democratic-controlled state Legislature approved the payments to help offset record high gas prices, which peaked at a high of $6.44 per gallon in June according to AAA.

A key question was whether the federal government would count those payments as income and require Californians to pay taxes on it. Many California taxpayers had delayed filing their 2022 returns while waiting for an answer. Friday, the IRS said it would not tax the refund.

Maine was another example of states where the IRS stance had created confusion. More than 100,000 tax returns already had been filed as of Thursday, many of them submitted before the IRS urged residents to delay filing their returns.

Democratic Gov. Janet Mills pressed for the $850 pandemic relief checks last year for most Mainers to help make ends meet as a budget surplus ballooned.

Her administration designed the relief program to conform with federal tax code to avoid being subject to federal taxes or included in federal adjusted gross income calculations, said Sharon Huntley, spokesperson for the Department of Administrative and Financial Services.

Senate President Troy Jackson called the confusion caused by the IRS “harmful and irresponsible.”

“Democrats and Republicans worked together to create a program that would comply with federal tax laws and deliver for more than 800,000 Mainers,” the Democrat from Allagash said in a statement Friday.

Originally Appeared Here