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5 Surprising Tax Facts

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As the deadline looms to file our tax returns, we could probably all use a little diversion. If you're stuck for conversation while waiting in line at the post office, try passing on one of these little-known facts about our least favorite civic duty.

1. No need to dread April 15
If more of the folks around you waiting to mail in their 1040s look cheerier than usual, they may have good reason to smile. The Tax Policy Center reports that roughly 47% of Americans will pay no federal income tax for the tax year 2009. Recent tax cuts for both wealthy and non-wealthy Americans in recent years have helped reduce the number of checks owed to Uncle Sam. (If you're in this camp, know that you still need to file your return, especially if you expect any money back.)

2. A free ride for big corporations
Surprsingly, many huge American companies pay no taxes to the U.S. government. In 2008, General Electric (NYSE: GE  ) owed no U.S. taxes, despite ringing up $10.3 billion in pre-tax income. (The complicated explanation involves the huge losses its GE Capital division posted in the U.S., which offset the gobs of money the company made elsewhere.) Meanwhile, ExxonMobil (NYSE: XOM  ) reported a negative figure for U.S. income taxes in its 2009 10-K annual report. However, the company still paid $15 billion in total taxes worldwide, and says that it did pay income tax in 2009, despite the accounting figures.

Many big U.S. companies with foreign operations can shield their income from U.S. taxation in exchange for paying taxes abroad. The government is looking into tightening these loopholes. But in some cases, as with Ford Motor (NYSE: F  ) and Citigroup (NYSE: C  ) , companies' big losses in past years can allow them to reduce taxes in future years.

3. The tax so nice, you pay it twice
Many taxpayers don't realize that investors in dividend stocks experience double taxation. Sure, AT&T (NYSE: T  ) and Altria (NYSE: MO  ) may tempt investors with hefty dividend yields above 6%. But the companies have already paid tax on the earnings that they use to pay their dividends -- after which you pay taxes on that same dividend when it gets handed over to you.

4. And only half as interesting
At more than 7 million words, our tax code is now more than four times as long as Leo Tolstoy's epic novel War and Peace. The IRS's official taxpayer advocate, Nina Olson, has estimated that we taxpayers spend nearly $200 billion annually complying with income tax requirements.

5. Rich people say, "Tax us more!"
More than 700 wealthy Americans support the Obama administration's plan to roll back tax cuts they received over the past decade, in order to reduce our deficit. These folks have pledged to donate the tax breaks they enjoy in 2010, while pushing for the breaks to be removed in 2011. Their project, Responsible Wealth, is supported by folks like Bill Gates, Sr. -- you know, the father of that guy who co-founded a little company called Microsoft.

Whether you share these tidbits with your fellow 1040 filers, or keep them to yourself, congratulations -- you're now a more informed taxpayer. And for more surprising and occasionally fascinating tidbits, and a bunch of money-saving tips, drop by our Foolish Tax Center.

Dan Caplinger reports on six things every investor should know about taxes.

Longtime Fool contributor Selena Maranjian owns shares of Microsoft and General Electric. Ford is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft, which is a Motley Fool Inside Value recommendation. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools


Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 09, 2010, at 1:25 PM, teejk wrote:

    please stop using the term "loophole" when it comes to corporations not paying US tax on worldwide REPORTED income.

    It isn't a "loophole"...it is the system that the US chose a long time ago and tends to penalize multi-national companies that are based here (and due to its complexity requires a lot of money to comply with).

  • Report this Comment On April 09, 2010, at 7:12 PM, Br0oklyn wrote:

    Many taxpayers don't realize that investors in dividend stocks experience double taxation. :(

  • Report this Comment On April 11, 2010, at 9:19 AM, wolfhounds wrote:

    U.S. taxation of corporate income is not "shielded" and is not a loophole by the taxation of FOREIGN operations by FOREIGN tax authorities. If you can understand the double taxation of dividends, then you can easily apply the same principle to income earned by foreign subsidiaries of U.S. corporations. These subsidiaries have already paid tax on all income earned outside the U.S., and now Obama wants to tax the same income DESPITE IT HAVING NO NEXUS TO U.S. OPERATIONS.

    No European countries do this. In fact, many do not tax dividends earned by their domestic companies from foreign subsidiaries.

  • Report this Comment On December 29, 2012, at 11:23 PM, megapril wrote:

    Well, here we are, 2 years later, and big deal. It really doesn't matter if the 700 wealthiest people in America gave EVERY penny they had towards paying down Obama's debt, and it would not even make a DENT in it...

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Selena Maranjian
TMFSelena

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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