Tax News Roundup

Tax News Roundup Every Saturday, we'll take a look at the top tax stories in the news.

IRS Has $2 Billion for People Who Have Not Filed a 2002 Tax Return
If you haven't filed a tax return for the year 2002, drop everything right now and file! Taxpayers could receive a refund, but only if the return is postmarked before April 15, 2006. The IRS estimates that taxpayers could receive an average refund of $570 for the year 2002. With 1.7 million people who haven't filed for 2002, the IRS expects that more than $2 billion of refunds is sitting in Treasury coffers. What happens if taxpayers don't file their 2002 returns by April 15, 2006? Those refunds are gone forever. So get cracking, with these helpful tips for filing back taxes.

Many Low Income Workers Don’t Claim Earned Income Tax Credit
Only one out of five taxpayers takes advantage of the Earned Income Credit, according to this AccountingWeb article. The Earned Income Credit is a refundable tax credit that can give taxpayers more of a refund than they paid in through withholding. Learn more about the 2005 rules for claiming the Earned Income Credit, and use the EIC Assitant from the IRS to figure out if you are eligible for this tax credit.

Things Are Worse Than Previously Reported
The federal deficit is "far worse than previously reported," according to attorney Stuart Levine, author of the Tax & Business Law Commentary blog. Levine comments on the 2005 annual report of the US Treasury on the state of the federal government's finances. His keypoint: the US government is $760 billion in the whole, compared to a previously reported deficit of $319 billion. A deficit happens when government revenues (taxes) isn't enough to pay government expenses (budget). Learn about the federal budget process, and then dig deeper into current issues with the federal budget.

Tax Consequences of California Domestic Partners Law
Domestic partners face unique tax planning issues. Very often, partners may be subject to different tax laws at the federal and state levels. Tax law professor Paul Caron discusses the impact of domestic partner laws on tax issues.

ReadyReturn Not a Ready Answer
California's ReadyReturn program is a pilot program. The Franchise Tax Board sends taxpayers in the pilot program a tax return that has already been prepared using information from the state's database about taxable income. Taxpayers then review the return, make any corrections, and file the return electronically. The program promises to cut the time and hassle of tax preparation. However, tax law professor James Maule says the program is not ready for widespread use over concerns about accuracy and usefulness. Professor Maule considers a wide range of objections to the program.

New Tax Change Allows Startup Costs Deduction
Small business entrepreneurs can now deduct up to $5,000 in startup costs, according to AP business writer Joyce Rosenberg. Taking this deduction "involves a little more paperwork than more typical business deduction," but Rosenberg explains what forms you need.

FedStats: Site of the Day
"FedStats is the new window on the full range of official statistical information available to the public from the Federal Government," according to RefDesk, which selected FedStats as a reference site of the day. The FedStats Web site collects information from over 100 government agencies, and contains extensive statistics on tax returns.

Tax$imple Trying to Crack Consumer Software Market
Software company TaxSimple is trying to boost its reputation among tax professionals and consumers. Business journalist Tim O'Reiley profiles TaxSimple's approach to tax preparation. However, I think the company still has a long way to go. When I tested TaxSimple earlier in the year, I found that the program's ActiveX applet was unforgiveably hard to uninstall, leading me to be quite skeptical about the software's security risk. However, O'Reiley describes the company's efforts to build a useful, relevant software program that has received positive recognition from the professional community.