In Support of the Obama Administration’s Proposal to Reform the Corporate Tax Rules




Laura D’Andrea Tyson, a professor at the Haas School of Business at the University of California, Berkeley, wrote an article that was published on the NY Times online newspaper on March 9, 2012, entitled “The Merits of a Corporate Tax Overhaul”. 


She is open about her potential for bias - she served as chairwoman of the Council of Economic Advisers under President Bill Clinton, and was a member of the Economic Recovery Advisory Board where the president recommended reforming the corporate tax code to limit loopholes, deductions, credits and other “tax expenditures. 


However, she presents the policy and rationale behind the Obama Administration’s proposals from the perspective of someone who is informed.  This makes her piece a very valuable read.  


Laura reminds us that “in a world of mobile capital, corporate tax rates matter.”  For this reason, she argues that it is essential for the United States to reduce its corporate tax rates to remain competitive.  The proposal includes a reduction in the corporate tax rate to 28 percent, which Laura identifies as being within the vicinity of the weighted average for statutory rates of the other O.E.C.D. countries, as well as broadening the tax base from which the United States can impose tax and reducing the tax preferences for pass-through businesses. 


Click here to read Laura’s entire article


Guidance on Foreign Financial Asset Reporting

On December 14, 2011, the IRS issued a press release providing details on the requirements for filing a Statement of Specified Financial Assets.   

The IRS plans on releasing a new information reporting form that taxpayers must use to report specified foreign financial assets for tax year 2011.

According to the press release, Form 8938, which is called the "Statement of Specified Foreign Financial Assets", must be filed by taxpayers with specific types and amounts of foreign financial assets or foreign accounts. Failure to file this form will result in substantial penalties.  

Failing to file when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification.  A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.The purpose of this new form, from the perspective of the government, is to improve tax compliance by U.S. taxpayers with offshore financial accounts. The types of individuals who may have to file the form are U.S. citizens and residents, nonresidents who elect to file a joint income tax return and certain nonresidents who live in a U.S. territory.

The filing requirement kicks in when the total value of specified foreign assets exceeds certain thresholds.  The press release provides as an example the situation where a married couple lives in the U.S. and files a joint tax return.  The couple would not be required to file the form unless their total specified foreign assets exceed $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

Taxpayers who reside abroad are subject to a higher. So, a married couple residing abroad and filing a joint return would only need to file the statement if the value of specified foreign assets exceed $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

If an individual does not have an income tax return filing requirement they are not required to file the statement.

Further, the new filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR (Report of Foreign Bank and Financial Accounts). 

For more information on the thresholds for reporting requirements, determining what constitutes a specified foreign financial asset, how to value relevant assets, what assets are exempted, and what information must be provided refer to the Instructions for Form 8938.

Marsha Henry


Year End Tax Planning Tips for the Last Minute Planner

2011-year-end-tax-planningIt’s crunch time!  Actually, it’s really crunch time!  If you plan on implementing any year-end tax planning slash savings strategies, the time is now.  Literally, Now!  You have approximately 48 hours to do something that will save you some money for 2012.  Are you anxious yet?  You should be.  You don’t want this opportunity to pass you by and not be able take advantage of it.  So what can you do, you ask?  Here are three things that you can do in the next 48 hours to get you started on the right tax –planning foot for the New Year: 


  1. Donate to Charity:  If you make a donation to a qualified charity by December 31st you can deduct the value of your donation for the 2011 tax year.  Where you decide to make the donation is completely up to you.  Just make sure that it is a registered charity.  The IRS requires that you have a cancelled check, a bank statement, credit card statement or written statement from the charity that sets out the amount of your contribution and identifies the charity.  Remember, your donation does not have to be monetary.  You can also make contributions of clothes, furniture or other household items.


  1. Adjust your Investment Portfolio:  This is especially relevant for taxpayers who have incurred any gains in 2011.  Now, this is obviously a decision that must be considered in the context of the current economic environment.  If you believe that there is potential for your stock to recover in the near future, a year-end sale may be a bit premature.  However, if the stock is unlikely to recover in the short run and it has incurred a considerable loss on paper a year-end sale may be appropriate.  Generally, you can deduct capital losses up to the amount of capital gains, plus $3,000 from other income.  If you are worried that you may not be able to use up all your losses, remember that you can carry-forward the excess amount to be deducted in future years. 



  1. Make the Maximum Contribution to Retirement Accounts:  The IRS recently issued a reminder for taxpayers who have made elective deferrals to employer sponsored 401(k) plans or similar workplace retirement programs for 2011.  An elective deferral contribution allows a taxpayer to set aside part of her pretax compensation as a contribution.  This arrangement requires that contributions must be made by December 31.  However, if you set up a new IRA or plan on making a contribution to an existing IRA, you still have until April 17, 2012 to make a contribution that can be counted towards your 2011 limit and deduction.   


Happy tax savings; and Happy New Year!


Written by Marsha Henry

December 29, 2011


FIN 48: The More Likely Than Not Standard. Accounting for Uncertainty


Almost six years ago, in June 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48, affectionately known as FIN 48.  FIN 48 is an interpretation of the Statement of Financial Accounting Standards No. 109, referred to as FAS109 in the accounting and tax community, which was originally issued in February 1992. 


FAS109 basically provides rules to govern the appropriate method for accounting for income taxes for financial accounting and reporting standards purposes.  The acceptable approach requires an asset and liability approach when accounting and reporting for income taxes.  The objective of FAS109, is to assist accounting professionals with presenting a consistent view on how to recognize the amount of taxes that are payable or refundable for the current year, as well as accurately identifying deferred tax liabilities and assets to determine tax consequences for future tax years.  


FIN48 specifically provides clarification on how to account for uncertainty in income taxes that have been recognized in an entities financial statement.  FIN48 provides a recognition threshold for financial statement recognition and measurement of a tax position.   It is important to understand the terminology to appreciate how FIN48 is applied in practice.


Tax position:  This includes tax positions taken in previously filed returns or expected to be taken in future tax returns.  These position measure current or deferred income tax assets and liabilities.  A tax position can have the following impact on an entity’s overall tax payable:


(1) permanent reduction;

(2) deferral;

(3) change in “realizability” of a deferred tax asset


Recognition:  The appropriate standard for determining whether a tax position needs to be recognized – accounted for – in an entity’s financial statements is “more-likely-than-not”.  Because this is an objective standard, there are variations on what types of items are considered to fall on the “more-likely” side rather than the “ “not” side of the equation.  The rule of thumb, however, requires that the person making this judgment base the decision on the technical merits of the tax position being sustainable in the event of an examination.  On a percentage basis the appropriate assessment threshold that can support that an entity is more-likely to be entitled to an economic benefit from a tax positions is above the 50% threshold. 


In order to substantiate a more likely than not position, a tax professional must consider the technical merits of the position based on authorities in tax law, which includes legislation and statutes, legislative intent, regulations, rulings and case law.  Each tax position must be evaluated independently.  In other words, there can be no reliance on the possibility of offsetting a tax position or aggregating a tax position with another one.  Further, the measurement of a tax position (how much should be recognized if the threshold is met) must consider the probability of the outcome based on the governing authority.


There are circumstances where an entity’s initial categorization of a tax position may change over time.  For example, if an entity accounted for a certain amount of liability in a class action lawsuit which would have been payable in 5 years, but the matter is dismissed a year after it was initiated then the entity must make adjustments to their accounting records.  Similarly, where the statute of limitations for a reassessment of tax expires and the entity no longer has an obligation to pay an anticipated additional assessment then the benefit of the tax position can be recognized.   Although in this example the tax position is legally extinguished this is not a requirement for making a change.  Management is simply required to make its best judgment given the facts and circumstances and the information available at the reporting date.

Written by Marsha Henry 

"Imagination at Work". When Tax Planning Violates No Law?

Many large multinational corporations in the US have found innovative, above-board ways to reduce their tax burden.  The strategies, when implemented in some situations, completely eliminate the companies tax liability.  Reportedly, this is the case for GE in 2010.

Opponents of sophisticated tax planning, used by companies such as GE, worry that these corporations are not paying their fair share to the government, while smaller less strategic individuals and businesses have to carry the full burden.  

According to an article in the New York Times entitled, "G.E.'s Strategies Let It Avoid Taxes Altogether", tax receipts from large corporations have decreased from 30% in the 1950's to 6.6% in 2009.  

What must be factored into this statistic is the fact that there are more corporations, more individuals and more income streams available for the government to raise revenue from than there were in the 50s. This may distort this statistic in such a way that the actual change in the corporate share of tax receipts may not be as glaring.  However, it is undeniable that tax planning has contributed to this decrease because of the growing presence of tax professionals working in-house for many of these companies.  

Supporters of these strategies defend it as necessary to remain competitive.   In addition, many companies cite shareholder obligations as an strong argument for pursuing an aggressive tax planning agenda.  

If there is no violation of provisions within the code, then should companies like GE refrain from taking the maximum benefit of tax strategies that they develop?  Presumably, not trying to maximize shareholder value would expose these companies to other forms of liability (i.e. shareholder lawsuits).  

However, if no large companies are paying taxes to the US Government then these companies may be obtaining an advantage from being present in the US without the communal responsibility that all citizens share when they pay their taxes.  I'm sure these companies would argue that they provide a benefit by employing those in the community and making contributions to local charities and supporting various local causes.  

What is the right answer?  

Marsha Henry





Teaching Your Child about Investing? Find out How the IRS Will Treat Your Child’s Investment Income


I am in the process of writing a book about financial literacy which focuses on children.  I am passionate about this topic because I have witnessed way to many young people (myself included) who have grown into young adulthood and then adulthood without a good understanding of how money works for them and against them. 


We all imagine that we know what to do with money when it is in abundance: I have fantasized about owning an Audi TT, building my family home to my personal specifications or even hiring my own personal hairdresser to tame the ‘fro every morning before blessing the outdoors with my presence.  Well, what do we need to teach our children about achieving these goals for themselves?  We need to teach them about the struggle to maximize current income flow so that they can celebrate its abundance later.  In other words: delayed gratification through sound investment decisions.  We should let them know that one culprit in the deterioration of our effort to live in abundance can be explained by the amount of interest paid on debt.  On the flip side, they need to know that they can benefit tremendously from the interest income earned on investments they make which will help them to move closer to their goal.


Great!  You’ve taken care of the basics on the investment education side and your child has started to invest.  Now, let’s discuss the taxes.  There are a few things you should know about how this will affect your bottom line or little Jade’s while she is still your dependant.  Once little Jade starts investing, there are some tax rules the IRS wants parents to know about.  These rules will help you, as parents, determine whether Jade’s investment income will be taxed at your rate or at Jade’s rate.        


Investment Income:   Children with investment income may have part or all of this income taxed at their parent’s tax rate rather than the child’s tax rate.  Investment income includes interest, dividends, capital gains and other unearned income.


Age Requirement:   Jade’s tax must be figured using the parent’s rate if Jade has investment income of more than $1,900 and she meets one of three age requirements for 2009:

(i)                  born after January 1, 1992

(ii)                born after January 1, 1991, and before January 2, 1992 and has earned income that does not exceed one-half of their own support for the year

(iii)               born after January 1996, and before January 2, 1991 and a full-time student with earned income that does not exceed one-half of the child’s support for the year.


More information about this rule is available on the IRS website and, specifically, in IRS Publication 929 entitled, “Tax Rules for Children and Dependents”. 


Marsha Henry

Tax Quarry


Copyright 2010 ©

To EITC or Not to EITC. That is the Question. Determining your Eligibility for the Earned Income Tax Credit

One of the things I found quite confusing when I moved to the United States was the concept of the Earned Income Tax Credit.  Frankly, I still find the tax credit a little hard to understand.  Thankfully, the IRS has provided some guidelines on how this credit works that really helps with understanding eligibility and the application of the rules.      The IRS markets the Earned Income Tax Credit (EITC) as “a financial boost for working people adversely impacted by hard economic times”.  Given the current economic climate I’m sure you would not want to miss out on a tax break that will leave some extra spending money in your pocket, right?  Thought so.  Well, keep reading because I have provided 10 tips the IRS wants you to know about so that you can take advantage of this credit.   


1.     Just because you didn’t qualify last year, doesn’t mean you won’t this year. As your financial, marital or parental situations change from year-to-year, you should review the EITC eligibility rules to determine whether you qualify.


2.      If you qualify, it could be worth up to $5,657 this year. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. New EITC provisions mean more money for larger families.


3.     If you qualify, you must file a federal income tax return and specifically claim the credit in order to get it – even if you are not otherwise required to file.


4.     Your filing status cannot be Married Filing Separately.


5.     You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.


6.     You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.


7.     Married couples and single people without kids may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.


8.     Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.


9.     It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.


10.     Free help is available at volunteer assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. If you qualify for the credit you may also be eligible for Free File. You can access Free File at



Marsha Henry

Tax Quarry 2010

Finally, A Little Break for the Unemployed: Government Provides Tax Break for those Receiving Unemployment Benefits

 (Picture taken during the Great Depression)

Some of us may have forgotten, but there was a time when the US did not have a social contract with unemployed citizens.  If you became unemployed, you were on your own.  No social safety net existed for the many men of the Great Depression who lost their jobs when there was a financial market meltdown.   


In 2010, things are very different.  Although countless experts have dubbed the recent financial crisis as the second Great Depression because of the similarities in the scale of unemployment, one important thing exists now that didn’t exist then: unemployment insurance.  By no means will I argue that the amount Americans receive on the unemployment role is anywhere equivalent to what they were capable of earning in a hot job market, but it does keep a great majority of families from starving to death.  It may not help families avoid foreclosure or prevent them from losing a car much needed for a successful job hunt, but it does provide an opportunity to hope for a better day.  Something our Depression brothers and sisters never had. 


Despite this fact, it is no less discouraging for the unemployed masses that are already bleeding money to have to pay a portion of what they receive in taxes.  The US government has recognized this and decided to provide those on the unemployment role with a tax break.  Under the American Recovery and Reinvestment Act of 2009, taxpayers who received unemployment benefits last year are exempted from paying taxes on a portion of this benefit. 


Below are the rules that govern the application of this tax break:      



(1)                            Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a specific state. It includes state unemployment insurance benefits, railroad unemployment compensation benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It does not include worker's compensation.


(2)                            Normally, unemployment benefits are taxable; however, under the Recovery Act, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their federal tax return.


(3)                            For a married couple, if each spouse received unemployment compensation then each is eligible to exclude the first $2,400 of benefits.


(4)                            You should receive a Form 1099-G, Certain Government Payments, which shows the total unemployment compensation paid to you in 2009 in box 1.


(5)                            You must subtract $2,400 from the amount in box 1 of Form 1099-G to figure how much of your unemployment compensation is taxable and must be reported on your federal tax return. Do not enter less than zero.


For more information, visit


Marsha Henry

Tax Quarry

Bought a New Car Last Year? Make sure to claim the New Vehicle Sales and Excise Tax Deduction on your Return when Filing this Year


I gave up my car two years ago because I was so very frustrated with all the costly repairs that were needed just to keep it on the road.  And, I couldn’t imagine paying the escalating gas prices, which at the time topped $1.08/gallon.  When I relocated and decided to build my life in NY, I was happy, elated even, and intensely ecstatic about the idea of not having the responsibility of maintaining a vehicle.   But now, I’m having seller’s remorse.  I don’t miss the old car per se, I miss the lack of mobility.  I miss not being able to go away for the weekend on the drop of a dime without having to prearrange an expensive NY car rental.  If I could afford it, I would much prefer a new car. This way I could avoid all the costly repairs.


Buying a new car now, however, is not a serious consideration.  In fact, as filthy as the NY subway may be it allows me to remain within budget, avoiding unexpected expenses and the fluctuation in gas prices that can drive any penny pincher crazy.  For those who may not live in NYC or require a car for other reasons and are able to squeeze the expense into their budge, I envy you.  I envy you not only because of the simple luxury of being hidden from the slush and snow as you careen through the state highways and city streets but also because if you happened to purchase your car in 2009 anytime before January 1, 2010 you also may benefit financially when you file your tax return and claim the New Vehicle Sales and Excise Tax Deduction.    


You’re probably wondering how this works, right?  Well, below, I’ve presented a few tips provided by the IRS to help you take advantage of this special tax deduction, if you fit the eligibility criteria.


(1)          State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.


(2)          Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.


(3)          To qualify for the deduction, the new cars, light trucks and motorcycle must weigh 8,500 pounds or less.  New motor homes are not subject to the weigh limit.


(4)          Purchase must occur after February 16, 2009, and before January 1, 2010.


(5)          Purchases made in states without a sales tax (i.e. Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon – may also qualify for the deduction.  Taxpayers in these states may be entitled to deduct other qualifying fees or taxes imposed by the state or local government.  The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee.


(6)          This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction.  Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.


(7)          The amount of the deduction is phased out for taxpayers who’s modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.


(8)          Taxpayers who do not itemize must complete Schedule L, Standard Deduction for Certain Filers to claim the deduction.


If you need more information about the New Vehicle Sales and Excise Tax Deduction, please visit the IRS website at or search for the instruction video “Vehicle Tax Deduction–Claim It” on YouTube in English and/or Spanish. 



Marsha Henry
February 11, 2010

What you Need to Know about Claiming the First-Time Homebuyer Credit on your US Tax Return


The recent financial crisis has created a very slow housing market.  We have witnessed thousands upon thousands of homeowners who have either lost their homes to foreclosure after losing a job; or lost their homes after their mortgage terms have changed and higher interest rates kicked in.  As a result, people are not as eager to enter into the housing market as they were a few years ago and current homeowners are not finding it easy to sell their homes much less sell at a profit. 


Well, for a lot of people, especially first-time home buyers, this spells opportunity.  The first-time homebuyer group will be lucky enough not to own a home they need to sell before they can move into their new house- something that has handicapped so many other potential purchasers.  This group can also take advantage of the First-Time Homebuyer Tax Credit offered by the government, which was introduced as part of a package of tax incentives expected to stimulate the housing market. The credit, initially put into place by the Bush administration, has been extended and modified by the Obama administration.  One notable change is the ability for not just first time buyers, but long-time residents to claim this credit.    


If you are lucky enough to fit into this category of people and have purchased a home in 2009 (or are planning to purchase a home in early 2010) there are a few things the IRS want you to know about the tax credit before you purchase that home and file your tax return.   



(1)    You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.


(2)    To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.


(3)    To be considered a long-time resident homebuyer you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.


(4)    The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.


(5)    You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Therefore, if you claim the credit you will not be able to file electronically.


(6)    New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the dated certificate of occupancy. Mobile home purchasers who are unable to get a settlement statement must attach a copy of the retail sales contract.


(7)    If you are a long-time resident claiming the credit, the IRS recommends that you also attach any documentation covering the five-consecutive-year period, including Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.


For more information about these rules including details about documentation and other eligibility requirements visit or search for “New Homebuyer Credit – Claim It” on You Tube.



February 10, 2010

Marsha Henry