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Thursday March 5, 2015

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$6.3 Billion in Direct Pay Taxes

In IR-2015-34 the IRS reminded taxpayers that they may use Direct Pay to make their tax payments this year. Direct Pay is a free online tool that may be used either for tax payments or quarterly tax amounts.

The IRS suggested that taxpayers should go to irs.gov/directpay and learn about this method. The tax payments may be scheduled from your bank or savings account up to 30 days in advance.

As of February 26, the IRS reports that it has received over 50 million returns. There are 40 million refunds that add up to approximately $125 billion.

There were over 158 million visits during tax season to www.irs.gov. The use of the IRS website is up over 10% this year.

Are taxpayers using professionals or preparing their own returns with software? Over 25 million returns have been filed through tax professionals. Twenty-two million taxpayers chose to prepare the return themselves –most of these taxpayers used commercially-available tax preparation software.

House Passes Expanded College Savings Accounts

The popular “529” college savings accounts enable parents and grandparents to deposit funds that grow tax-free. You may transfer up to five times the $14,000 annual gift exclusion to a Sec. 529 account for one person. A couple could therefore transfer up to 10 gift exclusions or $140,000 this year into a Sec. 529 account. These funds then grow tax-free until the child or grandchild needs to use them for college expenses.

In addition to tax-free growth, Sec. 529 fund distributions for tuition and other approved expenses are also tax-free.

In an effort to enhance the benefits of these college savings plans, the House passed H.R. 529 on February 25 with a strong bipartisan 401-20 margin. It was cosponsored by Reps. Lynn Jenkins (R-KS) and Ron Kind (D-WI).

Rep. Jenkins noted, “This is a good, sensible bill to improve a critical college savings tool to help more hardworking Kansans and Americans save for their children’s education. Today we sent a clear message to all families that Congress supports 529s, we’ll keep them tax-free, and we’ll work together to strengthen them so parents can secure a better future for their children.”

Rep. Kind also spoke approvingly of the passage and stated, “I am pleased to see the House pass this commonsense, bipartisan legislation that will help keep college affordable for families in Wisconsin and across the nation.”

H.R. 529 has three main provisions. The account may be used for acquisition of a computer for a college student. The bill also eliminates an unnecessary aggregation rule. In addition, there are provisions that allow redeposit of 529 funds without taxes or penalties.

Editor’s Note: This bill is a modest expansion of Sec. 529 plans. The comment by Rep. Jenkins is in response to a White House budget proposal to limit tax-free distributions from 529 plans. Because there is strong popular support for the college savings plan, the White House withdrew that proposal. Passage of this bill demonstrates strong bipartisan support for both 529 plans and college education. It also highlights the basic challenge of tax reform – there is a strong constituency or support base for all tax benefits. That support base will mobilize when any benefit is perceived to be threatened.

Published February 27, 2015

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IRS Tips to Avoid Identity Theft

White House Tax Proposals


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