Experts were surprised when presidential candidate Rick Santorum released four years of tax returns this week.  Although he earned less than his republican rival Mitt Romney, he paid at a higher rate.

The details of his tax records showed that he and his wife Karen earned more than $3.7 million over the last four years (2007-2010) and paid almost one-quarter of it in income tax.

He made his millions as a corporate consultant and a media commentator after serving as Senator of Pennsylvania.  His earnings jumped from $600,000 in 2007 to $1.1 million in 2009. His 2010 tax return showed his income as $923,000.

In 2009, Santorum’s income tax rate was 28% while Mitt Romney only paid an effective income tax rate of 13.9% on earnings of about $27 million.

The release of Santorum’s tax returns could affect his campaign. During his campaign, Santorum has claimed to have close ties with middle-class blue collar Americans.

Expect to see Mitt Romney use Santorum’s tax records against him. He’ll try to label him as a “Washington insider” and not a friend of the working class.

It seems out of nowhere, President Obama has made a significant change in his tax plan proposal.  Obama’s 2013 budget year now calls for more taxes on the wealthy, specifically a higher tax on dividends.

His new tax plan calls for an increase of the dividend tax to a maximum of 40% for households earning $250,000 a year.  Coincidentally, that is equal to the higher maximum income tax rate set to go into effect in 2013.

According to the Obama administration, the increase in the dividend tax rate is needed to pay down the federal deficit and to make the tax code more progressive.

“Choices had to be made,” a senior Obama administration told reporters, explaining the bid to raise more than $200 billion over a decade with the steeper dividend taxes on the wealthy.

In addition to an increase in the dividend tax rate, the Obama administration is proposing to raise the current 15% long-term capital gains tax to 20% for the wealthiest Americans.

If you look closely, the Obama tax plan to tax the rich seems like an election year campaign ploy to win the lower and middle class vote.  Fortunately for the wealthy and big corporations, it is extremely unlikely that Obama’s tax provisions will be become law, including his dividend tax increase.

“This is a reversal of what was a very specific policy feature of the first three budgets to keep dividends and capital gains taxed at the same rate,” said Michael Mundaca, a former top Treasury tax official under Obama, now at the accounting firm Ernst & Young.

“Companies may be more likely to retain earnings or seek alternatives ways to distribute their earnings such as by buying back stock,” Mundaca said.

Tax experts believe that big corporations may accelerate 2013 dividend payments into 2012 to dodge tax hikes.

“I wouldn’t be surprised if we see moving all their 2013 dividends into 2012,” Kies said. “A lot of U.S. companies are sitting on cash.”

source: reuters.com

The IRS announced today an expanded version of its smartphone application. The improved IRS2Go 2.0 App is designed to provide taxpayers easier access to practical income tax tools and free tax help.

The new IRS income tax app is available both Apple and Android platforms. The 2.0 version has been expanded to include a new YouTube feature, news feed and tax transcript service to go along with it’s existing income tax tools.

“The new smartphone app provides an easy way for people to get helpful information about their taxes,” said IRS Commissioner Doug Shulman. “IRS2Go reflects a wider commitment at the IRS to find innovative ways to serve taxpayers in a rapidly changing world.”

The IRS released the first version of IRS2Go in 2011, and had more than 350,000 downloads. The phone app offers taxpayers a number of safe and secure ways to access information and keep current on practical tax information. The 2.0 version of the phone app includes three new tools:

The free IRS2Go app will continue giving taxpayers access to the free tax help and tax tools offered last year:

• Get Your Refund Status. Taxpayers can check the status of their federal tax refund through the phone app with a few basic pieces of information. An updated refund status is available about three days after the IRS acknowledges receipt of an e-filed return, or four weeks after mailing a paper return.
• Get Tax Updates. Phone app users enter their e-mail address to automatically receive simple, straightforward tips and reminders to help with tax planning and preparation. Tax Tips are issued daily during the filing season and periodically throughout the rest of the year.

Apple users can update or download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

For more information about the second version of the IRS Smartphone, IRS2Go 2.0, and other products and services through social media channels, visit www.IRS.gov.

source: irs.gov