WE ARE GOING TO TALK TAXES/REVENUE FOR A FEW DAYS. I MOSTLY FOCUS ON THE COPIOUS GIVE-A-WAY OF BUSINESS TAX CREDITS AND THE FACT THAT MUCH FRAUD IS HAPPENING. AS WE KNOW, FRAUD AND CORRUPTION IS PERVASIVE IN MARYLAND AND AS SUCH WE DON'T HAVE TO LOOK FAR TO FIND MORE OPPORTUNITY FOR THE WEALTHY TO GET AWAY FROM PAYING TAXES.
AS WE KNOW, MANY BUSINESSES DOING BUSINESS IN BALTIMORE COME FROM THE WASHINGTON SUBURBS (CAPITAL OF FRAUD) AND IF NOT THERE, THEN THE CORPORATIONS AND THEIR SUBCONTRACTORS ARE GENERALLY FROM OUT OF STATE. IT IS THE RARE BIRD INDEED THAT GETS TO BE FROM THE BALTIMORE AREA AND BE ANYTHING OTHER THAN A SUBCONTRACTOR. SO HOW DO ALL THESE BUSINESSES PAY TAXES? FIRST, WE KNOW MARYLAND LOSES TAXES WHEN IT GOES WITH ALL THESE NATIONAL CORPORATIONS WHO SEND TAX MONEY BACK TO THEIR HOME STATES....CORPORATE AND EMPLOYEE. THESE COMPANIES DO OWE SOME TAX FOR DOING BUSINESS IN MARYLAND. LARGELY IT IS THE WASHINGTON SUBURB BUSINESSES THAT HAVE TAX RESPONSIBILITY FOR DOING BUSINESS. THE TRICK IS THAT MOST OF THESE CORPORATIONS ARE DESIGNATED S CORPORATIONS AND AS SUCH, ALTHOUGH THEY DO OWE EMPLOYEE TAXES, THEY GET TO PUSH ALL TAXES ON PROFITS ON TO THEIR SHAREHOLDERS. AS THE ARTICLES BELOW SHOW, IT IS HIGHLY LIKELY THAT NONE OF THESE ENTITIES ARE PAYING THOSE TAXES AT THE FEDERAL OR STATE LEVEL.
WE SEE THAT MARYLAND HAS A CORPORATE NET INCOME TAX RATE OF 8.25%. I'M GOING TO ASK OUR STATE COMPTROLLER FRANCHOT HOW HE MAKES SURE THESE TAXES ARE PAID. LOOK AS WELL AT THE PERSONAL NET INCOME TAX RATES TO SEE THAT A THIRD WAY DEMOCRATIC LEADERSHIP REFUSES TO TAX WEALTH AT A RATE WE NEED TO SEE TO REVERSE INCOME INEQUITY. THE BRACKETS ADDED WERE UNDER A MILLION AND MARYLAND HAS LOTS OF WEALTHIER CITIZENS.
THE ARGUMENT IS THAT THESE CORPORATIONS OR WEALTHY PEOPLE WILL LEAVE THE STATE IF TAXES ARE HIGHER AND JOBS WILL BE LOST. WE HAVE THOUSANDS OF PEOPLE WAITING TO OWN BUSINESSES THAT WILL GLADLY TAKE WHAT BUSINESS IS LEFT. RIDDING OURSELVES OF THE STATE'S 1% WOULD BE CELEBRATED!
TAKE A LOOK AT THE END WHICH POLITICIANS IN ANNAPOLIS ALLOW THIS TAX SCAM TO HAPPEN AND WITH NO OVERSIGHT. DEMAND THAT LAWS BE ENFORCED AND THAT EVERYONE PAY WHAT IS OWED FROM THE PAST, PRESENT, AND INTO THE FUTURE. THIS HAS BECOME STATUS QUO BECAUSE THE SAME PEOPLE ARE SEND BACK YEAR AFTER YEAR!
VOTE YOUR INCUMBENT OUT OF OFFICE
FRANCHOT, MCFADDEN, BRANCH, JONES-RODWELL, AND JON CARDIN.......WHY ARE YOU NOT SHOUTING LOUDLY AND STRONGLY ABOUT ALL THE TAX REVENUE LOST ON S CORPORATION LAW AND LACK OF OVERSIGHT AT BOTH THE FEDERAL AND STATE LEVEL?
Maryland Business Corporate Tax, Maryland Personal Income Tax, Maryland Sales Tax Rates
What is the Maryland corporate net income tax rate(s)? 8.25%
What is the Maryland personal net income tax rate(s)?
3,000-150,000 4.75% MOST OF US FALL HERE
500,000-1 million 5.5%
1 million + 6.25% MOST OF MARYLAND'S WEALTH IS HERE...ONLY 1.5% HIGHER THAN US EVEN FOR BILLIONAIRES
There are also a lot of local income taxes with a average rate of 3%
What is the average Maryland sales tax rate(s)? 6%
BELOW YOU SEE THE FEDERAL GOVERNMENT STATING THAT THERE IS CONCERN AS TO WHETHER CORPORATIONS AND SHAREHOLDERS ARE PAYING THEIR TAXES. MOST CORPORATIONS THESE DAYS ARE S CORPORATIONS BECAUSE, AS YOU SEE BELOW, THEY CAN GET AWAY MORE EASILY FROM PAYING ANY TAXES. NOW, WHILE S CORPORATIONS MOVE THE BURDEN OF TAX PAYING ONTO SHAREHOLDERS, THEY ARE STILL REQUIRED TO PAY TAXES FOR THE WORK THAT SHAREHOLDERS DO IN THIS PROCESS. NOT ONLY ARE THE SHAREHOLDERS NOT REPORTING THESE GAINS, THEY ARE NOT REPORTING WORK DONE AND TAXES OWED BY CORPORATIONS.
SO, YOU LOOK AT MARYLAND WHO HAS AN 8.25% S CORPORATION TAX ON MARYLAND BUSINESSES AND BUSINESSES DOING BUSINESS IN MARYLAND. WHAT ARE THE CHANCES THAT A STATE HAVING HARDLY ANY OVERSIGHT AND AUDITING HAS EVEN LOOKED INTO THIS? THAT'S RIGHT......NIL.
LET'S ASK THE STATE COMPTROLLER THIS QUESTION......FRANCHOT.
IRS study of S corporation reporting compliance
In 2005, the IRS launched a study to assess the reporting compliance of S corporations The study began in late 2005 and examined 5,000 randomly selected S corporation returns from tax years 2003 and 2004. The IRS intends to use the results to measure compliance in recording of income, deductions and credits from S corporations, and to formulate future audit criteria to better target likely non-compliant returns. This is part of a larger IRS effort to improve tax compliance and reduce the estimated $300 billion gap in gross reported figures each year. A large portion of that gap is thought to come from small businesses, and particularly S corporations, which are now the most common corporate entity, numbering over 3 million in 2002, up from about 750,000 in 1985. _________________________________________________
NOW, WE ARE SEEING A GREAT DEAL OF MARYLAND'S AND BALTIMORE'S CONTRACT BIDDING GOING TO BUSINESSES OUT OF STATE. IF THEY ARE IN STATE, THEY WILL BRING SUBCONTRACTORS IN FROM OUT OF STATE. SO, WHO TRACKS TAX OBLIGATIONS IF SHAREHOLDERS ARE RESPONSIBLE FOR TAXES AND THESE COMPANIES ARE REGISTERED IN OTHER STATES?
YOU CAN SEE THIS IS A COMPLEX FINANCIAL INSTRUMENT AND THERE IS A 99.999% CHANCE THAT NO ONE IS PAYING TAXES THAT ARE OWED. THIS IS WHY THEY DO IT. MARYLAND COMPANIES WORK ELSEWHERE AND ESCAPE ALL SCRUTINY. ADD TO THAT THE IDEA OF INDEPENDENT CONTRACTORS WHICH IS A GROWING JOB CLASSIFICATION AND YOU SEE WE ARE LOSING ALL CORPORATE TAX REVENUE. THE BUSINESS TAX CREDITS SIMPLY EXTEND THAT TO PROPERTY TAXES AND LOCAL SERVICE TAXES.
Tax Rate Brackets
Pass-Through Entities A pass-through entity is required to file Maryland Form 510, Pass-through Entity Income Tax Return, if the entity is formed or incorporated in Maryland, does business in Maryland, or has Maryland income (or losses). The following are pass-through entities:
- Partnerships, as defined in § 761 of the Internal Revenue Code.
- Limited liability companies (defined under Title 4A of the Corporations and Associations Article of the Maryland Code Annotated) classified as partnerships, as defined in § 761 of the Internal Revenue Code, and not taxed as a corporation or disregarded as an entity.
- S corporations, as defined in § 1361 of the Internal Revenue Code.
- Business trusts, treated as partnerships, as defined in § 761 of the Internal Revenue Code.
If a pass-through entity has a nonresident member and any nonresident taxable income, then the pass-through entity is subject to the Maryland income tax. The pass-through entity is taxed on the nonresident taxable income, which is the sum of the nonresident members' distributive or pro-rata shares of the pass-through entity's income allocable to Maryland.
A "nonresident member" includes a nonresident individual member (defined as a person or fiduciary) and a nonresident entity member. A nonresident entity member is a corporation or pass-through entity that is not qualified or registered with the Maryland Department of Assessments and Taxation to do business in Maryland or not formed under Maryland law.
If you meet the federal tax law requirements to operate as an S corporation, the IRS allows your business to "pass through" its income to the shareholders. This means that your business will not pay any corporate level federal income tax. However, you'll have to claim your entire share of the business income on your personal federal income tax return even if you did not take any money out of the business. DO YOU THINK THAT CHECK IS MADE? In Maryland, the law extends this favorable tax treatment to state corporate income tax liability for resident members and S corporations with only resident members will not be subject to the corporate income tax.
HERE ARE THE RESULTS OF THE STUDY FROM 2005. WHAT WE SEE IS ACROSS THE BOARD DISREGARD TO THESE TAX LAWS AND HUNDREDS OF BILLIONS/TRILLIONS IN TAX REVENUE LOST AND THIS HAS BEEN THE STATUS QUO FOR DECADES. SIMPLY AUDITING AND BRINGING THIS MONEY BACK TO GOVERNMENT COFFERS WOULD MAKE THE WEALTHY PAY THEIR FARE SHARE.
HAVE YOU HEARD YOUR INCUMBENT SHOUT LOUDLY ABOUT MASS DISREGARD OF TAX PAYMENTS BY CORPORATIONS/SHAREHOLDERS AS THEY TELL YOU THEY MUST CUT PUBLIC SPENDING TO PAY DOWN THE DEFICIT?
Tax Gap Actions Needed to Address Noncompliance with S Corporation Tax Rules GAO-10-195,
Dec 15, 2009
Contact: Michael Brostek
Office of Public Affairs
S corporations are one of the fastest growing business types, accounting for nearly 4 million businesses in 2006. However, long-standing problems with S corporation compliance produce revenue losses in individual income taxes and employment taxes. GAO was asked to (1) describe the reasons businesses choose to become S corporations, (2) analyze types of S corporation noncompliance, what IRS has done to address noncompliance, and options to improve compliance, and (3) further analyze the extent of shareholder compensation noncompliance and identify options for improving compliance. GAO analyzed IRS research and examination data; interviewed IRS officials, examiners and other knowledgeable stakeholders; and reviewed relevant literature.
An S corporation is a federal business type that provides certain tax and other benefits, including a single level of taxation, limited employment taxes, and the ability to pass through business losses to shareholder returns. Single-level taxation can reduce overall taxes assessed based on business income, and applying business losses to individual returns can decrease shareholder tax obligations. S corporations also benefit from limited liability protection. According to IRS data, about 68 percent of S corporation returns filed for tax years 2003 and 2004 (the years data were available) misreported at least one item. About 80 percent of the time, misreporting provided a tax advantage to the corporation and/or shareholder. The most frequent errors involved deducting ineligible expenses, which could decrease S corporation shareholder tax liabilities. Even though a majority of S corporations used paid preparers, 71 percent of those that did were noncompliant. Stakeholder representatives said that preparer mistakes may be due to the lack of preparer standards as well as their misunderstanding of the tax rules. Shareholders of S corporations also made mistakes in calculating basis - their ownership share of the corporation - when taking losses passed to them from the corporation, potentially decreasing their total taxes. IRS officials as well as stakeholder representatives said that calculating and tracking basis was one of the biggest challenges for shareholders, and that S corporations themselves were in a better position in most cases to calculate basis for their shareholders. Some S corporations also failed to pay adequate wages to shareholders for their labor for the corporation, which led to underpaying employment taxes. Joint Committee on Taxation (JCT) and Treasury Inspector General for Tax Administration (TIGTA) reports show that inadequate shareholder wage compensation is a significant issue. Using IRS data, GAO calculated that in the 2003 and 2004 tax years, the net shareholder compensation underreporting equaled roughly $23.6 billion, which could result in billions in annual employment tax underpayments. Stakeholder representatives, IRS officials, and TIGTA have indicated that determining adequate shareholder compensation is highly subjective and hinders compliance and enforcement. IRS provides limited guidance on determining adequate compensation. Stakeholder representatives indicated that specific IRS guidance for both new and existing S corporations could help improve compliance. Additionally, IRS examiners often were not taking advantage of certain techniques in examining shareholder compensation. Analyzing a random sample of IRS examinations, GAO found that in cases where IRS examiners did document a form of analysis, they were more likely to make an adjustment than when no evidence of such analysis existed. Currently, IRS does not require specific documentation of their analysis for shareholder compensation by examiners. Legislative options exist to improve compliance with shareholder compensation rules; however, these options also raise notable trade-offs.
THESE POLITICIANS BELOW SHOULD BE SHOUTING LOUDLY AND STRONGLY THAT THESE S CORPORATIONS ARE NOT ONLY AVOIDING OVERSIGHT AT STATE AND NATIONAL LEVELS, THE SHAREHOLDERS RESPONSIBLE FOR ALL THE TAX ARE AS WELL. WE WANT OUR MONEY FROM THESE PEOPLE/CORPORATIONS FROM THE PAST AND IN THE FUTURE!
Senate Budget and Taxation (B&T)
Chair: Edward J. Kasemeyer
Vice Chair: Nathaniel J. McFadden
David R. Brinkley Republican, District 4, Carroll & Frederick Counties
Nancy J. King Democrat, District 39, Montgomery County
Richard F. Colburn
Richard S. Madaleno, Jr.Democrat, District 18, Montgomery County
Ulysses Currie Democrat, District 25, Prince George's County
Roger P. Manno
James E. DeGrange, Sr.
Douglas J. J. Peters
George C. Edwards
James N. Robey
Verna L. Jones-Rodwell
Delegate Ways and Means (W&M)
Chair: Sheila E. Hixson
Vice Chair: Samuel I. Rosenberg Kathryn L. Afzali
Anne R. Kaiser
Kumar P. Barve
Eric G. Luedtke
Joseph C. Boteler III
LeRoy E. Myers, Jr.
Jon S. Cardin
Justin D. Ross
Mark N. Fisher
Andrew A. Serafini
C. William Frick
Melvin L. Stukes
Frank S. Turner
Carolyn J. B. Howard