Commonwealth Conversations: Revenue

AARP Tax-Aide looking for volunteers

Last year, some 24,000 older, low- and middle-income Massachusetts taxpayers received assistance and tax preparation from the nation's largest, free tax assistance program, AARP Tax-Aide.

The Massachusetts Department of Revenue is proud to partner with the American Association of Retired Persons (AARP) and the federal Internal Revenue Service (IRS) in the training of volunteers, 600 of whom provided help to individuals returning their state and federal income taxes.

AARP has provided an enrollment form for those who are interested, as well as a press release with more information. The commitment to work with clients in locales such as public libraries and senior centers extends from Feb. 1 to April 15.

This is a meaningful and challenging opportunity for community service. We'd like to hear from anyone who has volunteered in the past as an AARP Tax-Aide.

IRS strikes blow against refund anticipation loans

Posted by:

Robert Bliss, Director of Communication, Department of Revenue

In what is widely viewed as a blow against refund anticipation loans, the Internal Revenue Service announced earlier this month it would end in the coming tax season its policy of releasing information about back taxes and other debts owed by taxpayers.

In its story on the move, the Associated Press wrote that:

"The information, called debt indicators, has been included on acknowledgments the IRS sends tax preparers when it receives returns filed electronically ...The indicators served as warning that some or all of a person's refund might be held to cover old debt, including back taxes, unpaid child support or delinquent federal student loans."

Banks that fund refund anticipation loans use debt indicators to decide whether a taxpayer expecting a refund is a good risk for such a loan. The loans themselves have been criticized for years for charging high interest rates and fees in exchange for providing cash that may arrive only days ahead the federal tax refund check.

The National Consumer Law Center estimates that in tax year 2008, some 8.4 million taxpayers paid more than $738 million in fees taken for refund anticipation loans. In essence, taxpayers wind up paying the loan issuers interest on what is their money.

"We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days," said IRS Commissioner Doug Shulman. "We encourage taxpayers to use e-file with direct deposit so they can get their refunds in just a few days."

DOR agrees for all the reasons we outlined earlier this year in a statement urging taxpayers to file electronically and to forget about refund anticipation loans. Why pay interest on your own money?

Average single-family home property tax increase of 3.3 percent lowest in a decade

City and Town, the weekly on-line newsletter of the Department of Revenue's Division of Local Services, has just published a well-researched and quite comprehensive article on average single-family property tax bills for FY10.

In a nutshell, the article concludes that "the weighted average tax bill increased in 2010 by $140 or 3.3 percent, to $4,390, the smallest percentage increase of any year in the past decade. The percentage increase during this time ranged from the current low to a high of 6.7 percent in 2002.

"The cumulative percentage increase of this period is 55.3 percent, an average of 5.5 percent each year. Generally speaking, the average bill has recently increased at a slower pace suggesting a few factors are at play, such as leaner budgets, reduced excess levy capacity, and Proposition 2.5 override fatigue."

Proposition 2.5 allows a community's tax levy to increase 2.5 percent annually, with new growth adding additional levy capacity. 

The article written by Terry Williams of the Division of Local Service's Bureau of Accounts, and James Paquette, of DLS's Bureau of Local Assessment, looks at property tax bills, property values and community trends. It also includes a link to an easy to read spreadsheet ranking each city and town and comparing previous year's property tax rates.

(Editor's note: DLS has also published a spreadsheet outling the annual percentage average single family tax bill increase over each of the past 20 years. Not only was the 2010 increase the smallest in those 20 years, it also marked the fourth consecutive year of decline in the average annual increase, which is the first time that has happened in 20 years.) 

Gov. Patrick signs sales tax holiday law for August 14-15

A sales tax holiday is on tap for the weekend of August 14-15 now that Gov. Deval Patrick has signed an Economic Development bill that includes a provision for the sales tax holiday.

The rules of the road for this holiday are virtually the same as for all the previous sales tax holidays. Many non-business retail items costing $2,500 or less are exempt from the sales tax, but some items --motor vehicles, motorboats, meals, telecommunications services, gas, steam, electricity, tobacco products, and anything else costing more than $2,500 -- are not.

The sales tax exemption applies to sales of tangible personal property bought for personal use only; purchases by corporations or other businesses and purchases by individuals for business use remain taxable.

There is no sales tax on beer, wine and alcohol during the holiday. There is also no sales tax on single items of clothing that cost up to $2,500.

The Department of Revenue estimates that taxpayers will save somewhere between $20 million and $23 million over the holiday period. There was no sales tax holiday last year. In previous years, the holiday has saved taxpayers between $15 million and $17 million.

For detailed information on the sales tax holiday weekend, DOR has published a Technical Information Release. For a copy of the announcement of the bill signing, and details on other provisions of the economic development law the Governor signed today, click here.

July gets new fiscal year off to a healthy start

The Department of Revenue today reported that the monthly revenue collection for July came in at $1.353 billion, an increase of $103 million over July of a year ago, representing an 8.2 percent increase and exceeding the montly benchmark by $79 million.

July is a small month for revenue collection as there are no estimated payments for individuals and virtually no such payments for businesses, so the growth spurt came in income tax collections (mostly withholding) and in sales tax.

To examine a one-page spreadsheet outlining the month's collection, click here.

The Commonwealth's target revenue collection for FY11 is $19.098 billion. To put that in perspective, the Commonwealth in FY08 collected $20.88 billion, before the economy went into recession, so there is still nearly a $2 billion gap between FY08 and projected FY11 collections. The FY10 collection was $18.538 billion.