Everybody is interested in avoiding taxation legally because no one likes to pay taxes. There is generally no tax liability in case of annuities and this is what makes it so popular. After all, ‘a penny saved is a penny earned’ therefore why not invest in these since they do not require you to pay tax? The tax-deferred growth that one can enjoy from an annuity is probably one of the most attractive features about it. The government isn’t going to tax you on any of the earnings as long as the money stays inside the annuity. Thus, if you were filing for 2009 taxes then your annuity wouldn’t come under it.
However, it cannot remain like this forever since all good things should come to an end. Therefore your deferred annuity will get taxed in its later stages. To understand this, it is necessary to take a look at the two stages of a deferred annuity. The accumulation phase is the first phase and during this phase the annuity is allowed to grow and there is no tax liability on it.
In the second phase, i.e. the distribution phase, the annuity is paid out and the payment can be made in a single lump sum or it can be segregated into a series of payouts at fixed intervals over a lifetime or a pre-determined period of time. It does not matter which mode of payment is opted because the income tax will be due on each of the annuity payment which the recipient receives.
Following in the footsteps of presidential candidate Mitt Romney, Paul Ryan has agreed to release his tax returns for the past two years.
The ‘Paul Ryan taxes’ story broke when he announced that he would be releasing the details of his 2010 and 2009 taxes on CBS’ “60 Minutes” television program.
As Chairman of the House Budget Committee, Ryan has made quite a stir in the political world with his proposed Social Security and Medicare policies.
According to an assessment made by the Los Angeles Times newspaper, Ryan’s net wealth is estimated to be anywhere between $2 million and $7.7 million.
Despite these large figures, Ryan insists that voters want to know about the economy (and how it can be improved) and are not bothered about the contents of his tax returns and how much money he makes (which is estimated to be $174,000 a year).
Speaking to CBS’ Bob Schieffer, Ryan said: “They’re asking where the jobs are. Where’s the economic growth. Those are the issues that matter”.
Romney, who is with an estimated net worth of around $250 million, has long been criticized for his reluctance to make his tax returns public, despite pressure from President Obama.
The speculation as to whether Paul Ryan would release his tax returns was something that had been boiling up for a while, with several news outlets (such as ABC News and Yahoo News) all publishing stories titled “Will Paul Ryan Release His Tax Returns?”
It was public knowledge that Ryan handed turned over “several years” of tax returns (how many years no-one quite knows) to Romney’s office during as part of the vice presidential vetting process. However, whether any of those tax returns were to be made public was speculated upon for some time, and it seems that only now we have an answer.
According to emerging news reports, Romney has a vast amount of wealth invested in funds through Bain Capital LLC. This powerhouse is one of the offshore tax havens often used to help lower the 2012 taxes. Several of the Bain funds have connections offshore that are allowing the financial elite to take advantage of tax breaks.
These news sources are interested in dissecting Romney’s tax returns to see how his use of offshore strategies has allowed him to avoid taxes. Investments by Romney and others in Bain funds, have money scattered from Delaware, to Bermuda, the Cayman Islands, Ireland and Hong Kong, according to sources at Reuters News Group.
The question is if these things add up to the charges of tax evasion or avoidance of taxes. While corporations do not pay taxes on the income unless the money is repatriated, individuals do. The findings of this investigation could have a negative impact on Romney’s campaign.
There are limited numbers of ways to shelter one’s income offshore and these ways are generally transparent as offshore income sheltering. The IRS has become very skilled at locating these attempts and these people are generally required to pay the taxes on the earnings.
If indeed, the investments are listed on Romney’s tax return, then they cannot be the tax haven that others once found in offshore investments. While the tax code is complex and Bain may have found a structure allowing some sheltered income, that structure should not be included on the Romney’ or anyone else’s tax return.