Texas Fiscal Notes

We are lucky to live in a state that is urban and urbane, but still celebrates the rural traditions that make Texas what it is.
In this issue of Fiscal Notes, you will learn that hunting is big bucks to the state’s economy – $2.2 billion annually. And deer are the most popular quarry. But to me, deer hunting has a more personal connection.

When I was a young girl, Thanksgiving meant going to my grandparents’ East Texas farm near Magnolia. Early on Thanksgiving morning, the men would go hunting. Invariably, my grandfather would return with a deer, dressed and freezer-bound. To my child’s mind, deer hunting and the holiday were synonymous. I thought families everywhere were hunting!

I know better now. But it’s hard to live in Texas and not be touched by hunting. It is not just a sport for rural Texans. Six in 10 hunters live in urban areas. Eight percent are women. I didn’t grow up to be a hunter. I prefer to bait a hook and try my luck. But Texas is a better place because of our great outdoors and the hunting it affords.

Enjoy this issue and please share with others.
Delane Caesar
Director
Public Outreach & Strategies

Read Fiscal Notes.

Estate Tax Relief and Extenders

On December 2, Democratic members of the House Ways & Means Committee predicted that the House would take up an estate tax relief bill this week. H.R. 4154, the “Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009, ” is slated to be considered by the House of Representatives on December 3. Ways & Means Select Revenue Subcommittee Chair Richard Neal (D-MA) said he expected that the House would actually pass the bill on December 3. An extenders bill may be taken up as early as next week.

(Checkpoint’s Newsstand)

The Flu and Contingency Planning

Kate Barr of the Nonprofits Assistance Fund writes:

I have not had the H1N1 flu.  I hope to keep it that way. However, this flu is starting to really affect me because of the number of people who are not so lucky.

As an example, in just the last week:

  • I attended two important meetings where key participants were missing in action.
  • Three training events and webinars were canceled.
  • A professional associate stayed home with his son for several days.

Two days ago we had to scramble to replace the speaker for one of our own training events.  That really brought this home.

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Labor Day

Labor Day was established to honor American workers.  The form for the celebration of Labor Day was outlined in the first proposal of the holiday: A street parade to exhibit to the public “the strength and esprit de corps of the trade and labor organizations,” followed by a festival for the workers and their families.

whd-bannerThe US Department of Labor Wage and Hour Division works to promote and achieve compliance with labor standards to protect and enhance the welfare of the of the nation’s workforce.  The FLSA establishes minimum wage, overtime pay, record keeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.

Fans Pay Either Way for TV Blackouts

reports Richard Sandomir in the September 5, 2009, edition of the New York Times.  NFL Commissioner Roger Goodell refuses to back down from his position of not waiving the blackout policy for the people of Detroit where the unemployment rate approaches 30%.  Goodell is quoted as saying that the 36-year-old blackout policy has been very good for the game, for the fans, and for the teams.

But if enough people can’t afford the tickets, why penalize a team’s hometown fan base with the blackout hammer — making them drive 75 miles outside the market or searching for a pirated TV or Internet signal to catch the game?

Independent Contractor or Employee?

The IRS has compiled the following top ten list of things every business owner should know before classifying a worker as either an employee or independent contractor  (IRS Summertime Tax Tip 2009-20, 8/21/09) :

(1) Three characteristics are used by the IRS to determine the relationship between businesses and workers: behavioral control, financial control, and the type of relationship.
(2) Behavioral control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means.
(3) Financial control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
(4) The type of relationship factor relates to how the workers and the business owner perceive their relationship.
(5) If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
(6) If you can direct or control only the result of the work done — and not the means and methods of accomplishing the result — then your workers are probably independent contractors.
(7) Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
(8) Workers can avoid higher tax bills and lost benefits if they know their proper status.
(9) Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.
(10) You can learn more about the critical determination of a worker’s status as an independent contractor or employee at the Small Business/Self Employed Tax Center on the IRS website at http://www.irs.gov/businesses/small/index.html. Additional resources include IRS Publication 15-A (http://www.irs.gov/pub/irs-pdf/p15a.pdf), IRS Publication 1779 (http://www.irs.gov/pub/irs-pdf/p1779.pdf), and IRS Publication 1976 (http://www.irs.gov/pub/irs-pdf/p1976.pdf).
  1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: behavioral control, financial control, and the type of relationship.
  2. Behavioral control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training, or other means.
  3. Financial control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
  4. The type of relationship factor relates to how the workers and the business owner perceive their relationship.
  5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.
  6. If you can direct or control only the result of the work done — and not the means and methods of accomplishing the result — then your workers are probably independent contractors.
  7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.
  8. Workers can avoid higher tax bills and lost benefits if they know their proper status.
  9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.
  10. You can learn more about the critical determination of a worker’s status as an independent contractor or employee at the Small Business/Self Employed Tax Center on the IRS website   Additional resources include IRS Publication 15-A , IRS Publication 1779 , and IRS Publication 1976 .

Build your real estate knowledge

With the attractive opportunity to receive up to $8000 from your fellow taxpayers if you are a first time home buyer or have not owned a home for three years,  there are some important issues to consider before you buy a home:

Set realistic price guidelines:
 Determine what size mortage payment will fit into your monthly budget.  As a general rule,  your monthly housing cost should not exceed 25 to 30 percent of your gross monthly income (before taxes).  Monthly housing costs include your mortgage principal payment, interest payment, property taxes and home insurance.

Don’t forget the extras:
 Remember the other expenses you’ll be paying each month.  You may also need to pay for items such as moving expenses, new furniture, home appliances, and improvements and repairs.  Ideally, you should include in the percentage given above an amount saved as a repair allowance.

Your credit situation:
Before starting your home search, evaluate your current credit situation and credit history.  This allows you to take steps to repair your record before you apply for a mortgage.

Remember the tax advantages:
On your rearly tax return, you can deduct the interest you pay to buy, construct, or improve your principal residence.  You can also deduct the real estate taxes you pay on your home.

House health reform bill includes surtax on high-income-earners

On July 14, the House Democratic leadership released the text of the ”America’s Affordable Health Choices Act of 2009,” which is slated to be taken up by the House Ways & Means Committee on July 16. Title IV of the Act would make numerous tax changes to pay for the projected $1 trillion price tag of comprehensive national health care reform.

Title IV of the bill includes the following changes to the Code:

  • High income individuals married filing a joint return or surviving spouses would face a surtax equal to: 1% of modified adjusted gross income (AGI) over $350,000 but not over $500,000; 1.5% of modified AGI over $500,000 but not over $1 million; and 5.4% of modified AGI over $1 million. The dollar amounts for separate filers would be half of the joint filer amounts; for other filers the amounts would be 80% of the joint filer amounts. The surtax for modified AGI over $350,000 but not over $1 million would rise for post-2012 tax years unless federal health reform savings hit a predetermined target level.
  • A tax on individuals who don’t have acceptable health benefit plan coverage (as defined by the bill). In general, the tax would equal 2.5% of modified AGI in excess of the taxpayer’s exemption amount, but not more than the “national average premium” for that year. A number of exceptions would apply (e.g., for dependents, objectors on religious grounds).
  • Health insurers would be required to file information returns for the individuals they cover.
  • Employers that fail to satisfy the bill’s health coverage participation requirements would face a tax of $100 per day per each non-covered employee.
  • Employers electing not to provide health benefits for employees would pay an excise tax equal to 8% of wages (the excise tax would be less for small employers).
  • Small businesses would get an employee health coverage tax credit.
  • The application of the worldwide allocation of interest would be delayed (until the first tax year beginning after 2019) and as a anti-tax-avoidance measure, there would be new limitations on treaty benefits for certain deductible payments.
  • The economic substance doctrine would be codified. An accuracy related penalty would apply for underpayments due to transactions lacking economic substance, and a stiff penalty would apply for nondisclosure of “noneconomic substance transactions.”

Protest Those Property Tax Appraisals

From the Texas Comptroller’s email:

A new slide show on the Texas Comptroller’s Web site can help homeowners who are protesting their property tax appraisals.  County appraisal districts establish the taxable value for residences, but in most counties, homeowners have until June 1 to file a protest.

How to Present Your Case at an Appraisal Review Board Hearing: A Guide for Homeowners makes the property tax process more transparent by providing easy-to-understand information about what to expect at a property appraisal protest hearing.

“Homeowners are empowered by understanding the protest process, knowing what information to present to the local Appraisal Review Board and how to present it,” Texas Comptroller Susan Combs said. “It helps homeowners make convincing appeals and helps the review boards make better decisions.”

Appraisal review boards generally hear property appraisal protests between May 15 and July 25, except in major urban areas with extended protest periods.

Harris County Appraisal District Chief Deputy Sands Stiefer said the slide presentation is a welcome new resource for property taxpayers.

“We plan to link our Web site to the Comptroller’s video, and we are considering running the video in the waiting room at our ARB hearings,” Stiefer said.

To view the narrated slide show and read much more information about the property tax appraisal and appeal process, visit the Comptroller’s Web site at www.window.state.tx.us/taxinfo/proptax/index.html.