Debt Free America Act Languishes

And a good thing indeed, in our humble opinion.

            This little jewel of a House bill was introduced in February of this year, and has been hanging around ever since–not only looking for movement, but even a co-sponsor or two (which bodes well for its demise.)

            A pearl of wisdom of Representative Chaka Fattah (D-PA), the “Debt Free America Act” states as its purpose the raising of sufficient revenue from a fee on transactions to eliminate the national debt within seven years, and the phasing out of the individual income tax.

            Laudable goals, indeed.  But are you, Mr. and Mrs. America, prepared to pay a 1% “fee” on each and every transaction you enter into which use any of the following “payment instruments”: check, cash, credit card, transfer of of stock, bonds, or other financial instrument?

            Are you ready to hand over 1% on every retail and wholesale sale, purchase of intermediate goods, and financial and intangible transactions?

            Additionally, of course, the measure would require within the Legislative Branch of government, the “Bipartisan Task Force for Responsible Fiscal Action,” to review the fiscal imbalance of the federal government and make recommendations to improve same.

            The bill would repeal, after 2017, the individual income tax, all refundable and nonrefundable personal tax credits, and the (dreaded) alternative minimum tax on individuals, and would direct the Secretary of the Treasury to (1) prioritize the repayment of the national debt to protect the fiscal stability of the United States; and (2) study and report to Congress on the implementation of the Act.

            Nice.  Easier said than done.

            And if you’re a “first time homebuyer” out there, take heart in at least one positive thing emanating from D.C. over the last few days:  the “Homebuyer Assistance Improvement Act of 2010,” signed into law by the Big O on July 2, 2010.  The measure would provide first-time homebuyers some relief if, for whatever reason, they were not able to meet a key June 30, 2010 closing deadline as imposed by prior law.

            This Act provides that if a written binding contract to purchase a principal residence was entered into before May 1, 2010, and was scheduled to close before July 1 but didn’t, the credit may nonetheless be claimed if the purchase is closed before October 1, 2010.

            Besides including form 5405 with the return, first time homebuyers taking advantage of this three month extension must include certain other documentation with their return.  And get this:  there are three options for claiming the credit on a qualifying 2010 purchase.  If a 2009 return has not yet been filed (i.e.–is on extension), the taxpayer can claim the credit for the 2009 tax year or, even if the 2009 return has already been filed, the taxpayer can amend it and claim the credit in 2009, thus securing the tax benefit sooner rather than later.  The third choice, of course, would be to take the tax benefit on the 2010 return when it is ultimately filed.

CONSULT YOUR TAX ADVISOR   – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

            Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He is also a contributor to the recently published 13th edition of Tax Savvy for Small Business, published by Nolo.  He can be reached at 831-7288, and welcomes comments at below.

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