Don't Mess With Taxes

Here goes with the first of some promised catch-up on tax items that got pushed to the side while I was out of town last week.

On Dec. 12, the Senate approved a $1.2 billion measure to provide tax relief for servicemen and women.

The Defenders of Freedom Tax Relief Bill of 2007 (S. 1593), however, differs from H.R. 3997, a similar House-approved measure. So that means the Senate version goes back across Capitol Hill for reconciliation before it can be sent to Dubya for his signature.

S. 1593, includes:

• A permanent allowance for soldiers to count their nontaxable combat pay when figuring their eligibility for the earned income tax credit;
• A refundable federal income tax credit;
• A tax cut for small businesses when they continue paying some salary to members of the National Guard and Reserve who are called to duty; and
• The ability for active duty troops to withdraw money from retirement plans and replace it without  tax penalty within two years.

Despite general support of pro-military measures, the prez might have some problems with this bill since it offsets the cost of the military tax relief with taxes in other areas.

A couple of the possible sticking points include requiring individuals who give up U.S. citizenship to pay the same federal taxes for appreciation of assets that current citizens or residents pay and increasing the failure-to-file penalty.

Click here for more on the bill as it was originally introduced (back in June) by Senate Finance Chairman Max Baucus, D-Mont.