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Lewitz, Balosie, Wollack, Rayner & Giroux, LLC
Certified Public Accountants
Newsletter
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Money Secrets
Some topics are difficult to discuss, and financial problems rank high on the list. Most people either turn to family members for advise or have no one they feel they can talk to. Such issues include personal budgeting, loan refinancing, investing, retirement planning, reverse mortgages, and handling an estate. A CPA is uniquely positioned to help because of our independent status and experience in a vast number of situations. For more information on money secrets,
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Storm Charlotte
Penalty Relief
Connecticut taxpayers who, as a result of Storm Charlotte, were unable to comply with state tax payments or filing obligations can request a waiver from penalties and interest. You can obtain a copy of the request for relief by clicking here. |
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Use Tax
Connecticut residents are required to pay use tax on purchases for which they did not pay a sales tax. Generally, these are purchases made from out of state companies but used in Connecticut and would have been subject to sales tax if bought in Connecticut. The use tax is paid on Form CT 1040 or Form OP-186. For more information, see DRS Publication IP 2011(15). |
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Still waiting For Your Refund?
If you have not yet received your refund, there is a way to check its status. For your federal refund, click here to go to the IRS website. For your Connecticut refund, click here to go to the DRS website. Have a copy of your tax return handy so you can key in the necessary information. Refund status is updated every 24 hours, so it is not necessary to check more than once a day. Some refunds may be delayed as the government is working to reduce fraudulent refunds and identity theft. Connecticut has introduced a refund protection program under which they will send some taxpayers a notice requesting them to call DRS to verify the legitimacy of their tax filing. For more information on this program click here to go to a list of frequently asked questions. |
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Medical Expenses:
Whose Can You Deduct?
 Families often find themselves needing to assist a relative with paying for medical expenses, but can you deduct the expenses you pay for someone else? You can deduct the medical costs you pay for yourself, your spouse, and your dependent's. After that, it gets more complicated. The person must be a qualifying relative for whom you provide over half of their support, and the only reason they cannot be claimed as your dependent is because they have income in excess of a certain threshold ($3,800 or more in 2012). Examples include parents or grandparents, siblings, and adult children. The payment must be made directly to the health care provider. For more information, see IRS Publication 502 about medical and dental expenses. |
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Anniversary Of The Federal Income Tax
February was the 100th year anniversary of the ratification of the 16th amendment, which granted congress the power to place a tax on income. The amendment was passed with overwhelming support from the Senate and House in 1909, but it still needed to be ratified by the states, who gave it little support. The amendment sat at death's door until it was revived during the 1912 presidential campaign, and went on to be ratified on February 3, 1913. The first taxable year was 1913, but it wasn't until January 8, 1914, that the first tax forms were produced. One person described the 27-page law this way: "Its complexity is its distinguishing characteristic. To begin with, the language in which the act is couched is involved and its rhetoric bewildering. It contains sentences hundreds of words in length, in which clauses are added to clauses and provisions heaped upon provisions. Its terminology is confusing. Identical passages are variously referred to as paragraphs, sub-sections and sections." One has to wonder what this person would think of the current tax code with over 13,000 pages, not to mention the seemingly endless pages of regulations, rulings and interpretations.
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What Is a Loophole Anyway?
With all the heated debates on tax policy, Americans have been hearing a lot about tax "loopholes". But what is a loophole? The word dates back to when castles were built with narrow windows from which archers could shoot from a sheltered position. These openings were also the only way to gain entry without breaching the wall or gate and were called loopholes. The term came to refer to a gap in a law where someone could avoid the intent of the law without actually breaking it. Thus, the term loophole carries a derogatory connotation. Today, politicians are carelessly using the term to describe all tax deductions, when a more accurate description would be tax subsidy, which is an intentional deduction or credit meant to achieve some purpose, often to benefit society. Examples include education credits to encourage post-secondary education and charitable contribution deductions which provide an incentive to taxpayers to support charitable organizations.
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Connecticut's Own Tax Anniversary
Connecticut taxpayers can count back 22 years to the start of the state's own income tax. The year was 1991 when Lowell P. Weicker, Jr took office as governor after running on a platform of no income tax. He quickly reversed his position and supported the broad-based income tax which some believed was the only way to solve, once and for all, the state's fiscal crisis. Prior to this Connecticut had a tax on dividends, interest, and capital gains. The sales tax was reduced from 8% to 6% and the new income tax was set at 4%. This tax was applied to federal adjusted gross income with few modifications. There was no allowance for itemized deductions, such as medical expenses and home mortgage interest, which Governor Weicker referred to as tax loopholes. |
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Amazon To Collect
Connecticut Sales Tax
Amazon and the state of Connecticut have struck a deal where the world's largest online retailer will be collecting sales tax on its sales to Connecticut residents starting in November. State officials estimate that this agreement will bring in approximately $15 million annually. Presently, federal law does not require online retailers without a physical presence in a state to collect sales tax. This goes back to a 1967 Supreme Court ruling that stressed the need for the physical presence of a company for it to have the obligation to collect sales tax. In the 1980's North Dakota attempted to require mail order companies to collect sales tax. This resulted in the 1992 case Quill Corp. v. North Dakota when the Court reaffirmed the 1967 position and pointed to Congress as the body that needs to act if states want change. There are currently a number of proposals, such as The Main Street Fairness Act, before Congress with the intent of creating a level playing field between local businesses and mail order concerns when it comes to sales tax collection. With an estimated $23 billion in sales tax revenue at stake, states are watching closely. But why did Amazon agree to collect sales taxes for Connecticut? They plan to build a fulfillment center in the state, which will give them the physical presence necessary to be required to collect.
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A word of caution: this is a brief summary and does not include all of the details that may impact your individual situation. Please contact us if you would like more information.
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About Lewitz, Balosie, Wollack,
Rayner & Giroux, LLC
Our five partners have over 150 years of combined professional experience. We provide accounting, tax, and financial services to individuals, businesses, nonprofit organizations, estates, and trusts. Our services include tax return preparation, software consulting, and compilations, reviews, and audits of financial statements. We have been located in the shoreline community of Old Saybrook, Connecticut for over 50 years. Feel free to contact us if we can be of service. We can be reached at 860-388-4451.
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IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any tax advice contained in this communication, unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.
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