TOP HALF OF TAXPAYERS PAY HIGHEST TAX SHARE IN DECADES: The share of income taxes paid by the top half of taxpayers reached its highest level in decades, according to a report from the Joint Economic Committee.According to figures supplied by the Internal Revenue Service, the top half of taxpayers ranked by income paid 96.70 percent of the individual income taxes paid in 2004, compared to 86.05 percent in 1949, 89.35 percent in 1959, and 90.27 percent in 1969. The top 1 percent of tax filers paid 36.89 percent of 2004 income taxes, while the top 10 percent accounted for more than two thirds (68.19 percent) of those taxes. At least part of the increase in taxes paid by the higher percentile may be related to higher capital gains following the reduction of the capital gains tax rate in 2003.
The share of income taxes paid by the top half increased from 96.54 percent in 2003 to 96.7 percent in 2004. The share of income taxes paid by the bottom half declined from 3.46 percent to 3.3 percent. In 1949, the income tax burden of the bottom half was 13.95 percent.
"The new IRS data confirm once again that the tax burden is disproportionately borne by taxpayers in the top half," said Rep. Jim Saxton, R-N.J., chair of the Joint Economic Committee, who added that the recently released data "should be at the center of any future debate about tax policy."
IRS CERTIFIES MORE TOYOTA MODELS FOR HYBRID CREDIT: Several more 2007 Toyota models have been certified by the Internal Revenue Service to qualify for the hybrid tax credit enacted by the Energy Policy Act of 2005.
The certified vehicles are the Toyota Prius, the Toyota Highlander Hybrid, and the Lexus RX 400h 2WD and 4WD vehicles. The tax credit for hybrid vehicles applies to vehicles purchased on or after Jan. 1, 2006, and may be as much as $3,400.
The hybrid vehicles recently certified by the IRS and their full credit amounts are:
* The 2007 Toyota Prius - $3,150;
* The 2007 Toyota Highlander Hybrid 2WD and 4WD - $2,600; and,
* The 2007 Lexus RX 400h 2WD and 4WD - $2,200.
The full credit amount for these Toyota and Lexus vehicles was available to qualifying purchasers through Sept. 30, 2006. The credit replaced the tax deduction of $2,000, which was previously allowed for taxpayers who purchased a new hybrid vehicle before Dec. 31, 2005, for the clean-burning fuel deduction.
The credit for otherwise-qualifying vehicles begins to phase out in the second calendar quarter after the quarter in which the manufacturer sells its 60,000th qualifying vehicle. Toyota had reported sales of 88,610 qualifying vehicles (41,779 in the quarter ended March 31, 2006, and 44,831 in the quarter ended June 30, 2006). The phase-out period for Toyota vehicles began Oct. 1, 2006.
REFUNDS FOR SOME RESERVISTS AVAILABLE BACK TO 2001: The Internal Revenue Service has issued details on the process for military reservists called to active duty to receive payments from individual retirement accounts, 401(k) plans and 403(b) tax-sheltered annuities, without penalties. The Pension Protection Act of 2006 eliminated the 10 percent early-distribution tax that normally applies to most retirement distributions received before age 59-1/2. The new law provides the relief to reservists called to active duty for at least 180 days or for an indefinite period.
Eligible reservists activated after Sept. 11, 2001, and before Dec. 31, 2007, qualify for the relief, though regular income taxes continue to apply to the payments in most cases.
The agency said that because the relief is retroactive, eligible reservists who already paid the 10 percent tax can claim a refund by using Form 1040X to amend their return for the year in which the retirement distribution was received. Eligible reservists should write the words "Active Duty Reservist" at the top of the form. In Part II: Explanation of Changes, reservists should write the date that they were called to active duty, as well as the amount of the retirement distribution and the amount of early-distribution tax paid.
Reservists can choose to recontribute part or all of the distributions into an IRA. Ordinarily, such special contributions must be made within two years after the reservist's active-duty period ends. However, if the reservist's active duty ended before Aug. 17, 2006 (the date the pension law was enacted), they will have until Aug. 17, 2008, to make the contributions.
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