The Tax Deadline That Wasn't: Keeping Your Distance 14

Our little garden, as observed this morning.

Has it grown in the couple of weeks since planting?

This is as it was initially planted. 

I'll let you be the judge.

Typically, in my profession, there is a great sigh of relief, as the dreaded April 15th deadline has now left the building.

Not this year.

The first tax deadline for individual returns was extended to July 15th.  We still had returns come in, but it was nowhere near the level of prior years.

Much of the slack of this was more than taken up by assisting businesses and non-profits with applications for PPP (Payroll Protection Program) and EIDL (Economic Injury Disaster Loan).  I don't usually name names, but two of the staff have to be noted for putting effort above and beyond the normal call to duty, Ronald Paulk and Chris Arney.

Many of these vital loans are lost in a maze and haze of bureaucratic mess and overload.  I know that many are frustrated by the delay in receiving these.  All I can tell you is that your accountants and local bankers are working hard to prod the process to completion.  Yes, I'm not always the banker's best friend in my commentary, but I really feel like they're trying as hard as they can to meet the ever-shifting paperwork requirements to get this to those who need as quickly as they can.  

I'm not even assigning a lot of blame to Congress.  Could it have been thought out better?  Sure.  But they had to do it quickly.  Speed was more important than pretty.  Given the bitter divisions between parties, it was a miracle we got what we did.

Look at the bright side.  At least you're not waiting for these loans so that HE can slap his name on it.  At least you're not one of those waiting for a check in the mail because HE held them so HE can add HIS signature to them, delivered via USPS, a service he wants to gut and cripple and hijack to a more expensive private system.

This does represent a downturn in the number of hours that I will work.  I want to contain accounting to a couple of days a week, especially during this stay at home period.

Today I go into the dentist.  I know.  I'm bad.  But Monday, I had my one and only dental work (except for a few filled cavities), a crown, fall out while eating a grilled Chick-fil-a nugget.  I didn't even know that was possible.  So, I'm in some pain and have to eat and drink out of one side of my mouth, and therefore have to do something.

I probably won't be able to wear a mask when they re-attach it.  Or whatever they do. God, I hope they don't have to make a new one.

I just hope the crown is still under warranty.

Back in the Old Sub

Every time I try to get out, they pull me back in .... and under.

Semi-retired or not, this is the time of year I put in the most hours at work.  And I find even with the time I am putting in, I'm still fogging over and finding it difficult to concentrate.  I operate in a fog most of the time.  Fiction writing has disappeared, and I can only pray that it comes back after April 15th.

There has been a lot of talk about what effect the tax changes passed in December 2017 had on taxpayers.

My sample is not huge.  Still, I've seen more than most of you.  And I'll tell you this -

It's a mixed bag.

Some stayed about the same.  Some were worse off.  A few did better.

The biggest things I've seen?

1)  Many people who use to itemize, don't pass the new threshold now.  People are still submitting their itemized deductions, but a good number no longer cross the threshold where it makes sense to use them.  For me personally, until the tax law changes again, it makes no sense to even keep track of things like mortgage deduction, charitable contributions, property taxes and such.  I'm not sure how many understand that those things may not be useful anymore.

2) The loss of personal exemptions mute some of the benefit of the increase in the standard deduction.  Many don't understand that the parade of dependents does not help to the degree that it used to, especially if those dependents are over the age of 16.  There is a $500 credit for dependents over 16.  On the other hand, the child dependent credit for 16 and under is now up to $2,000 so those with children may have seen a drop in the bottom line owed.

3) The Trump administration wanted to upfront the potential tax reduction impact of their plan, so they adjusted the tax withholding tables for wage-based employees in a way that most increased their paychecks.  Even so, the adjustment was too small for most taxpayers to notice, but they did notice it's other effect - some found that although their total tax responsibility might be slightly lower, their refund was reduced from what they were used to, or they actually had to pay in.  Those who claimed a plethora of dependents on their W-4 were in the worse shape.

4)  For those who usually do qualify for itemized deductions, even with the higher threshold, some may have found some of their deduction categories capped.  The amount you can take for different taxes - property, state, local, etc., - is capped at $10,000.  That's high by middle-class standards, but I have seen some returns limited by it.  One person had an unusually high tax year in 2017, and with their income more routine in 2018, are unable to take the full deduction on the large amount of state taxes they had to pay the prior year.

5)  If you are a wage slave and paid for some of your work expenses yourself  - too bad, so sad.  That deduction is gone.  On the other hand....

6)  If you are self-employed or get your income primarily through a partnership or 1120S corporation -  woohoo!  There is a new deduction that takes off 20% of your NET income!  I had one taxpayer whose income was mainly through self-employment (Schedule C) and 1120S (a type of corporation where the income flows through to individual returns), and with similar income compared to the prior year, saw their total tax bill go down by about ... 20%!

All of this relates to the age-old question - WHAT ABOUT ME?

Sorry to interrupt that thought, but I have to ask - WHAT ABOUT THE COUNTRY?

The tax code changes reduce the amount of incoming tax revenues by an ungodly huge number, thereby massively increasing the nation's deficit spending.  The benefits are focused almost exclusively on the wealthiest of our taxpayers (not something I see much of in the returns I do - we have some well-off people, but I don't prepare anyone's return that is in this category), further super-charging the income gap. 

The economy is good (albeit beginning to slow), but the long term prognosis of this kind of concentration of wealth is not promising.  There is already pressure to make up the difference by further cutting programs that help the working poor and the middle class. 

There is a lot more I could say in this regard (and those who faithfully follow my blog probably have already read it), but the old clock on the wall is telling me it is time to hoof it to work once again.

File away, America!  We CPAs will do the best we can to help you through it!

And after that, I can return to the wonderful world of fiction!

Ads That Make My Brain Short Cicuit

Last month, we switched to a new service for our television channels, going from satellite to a streaming service.  It only costs about 40% of what we were paying for satellite, and we receive many of the same channels, and all the ones we most frequently watch.  There is one small flaw to it, in that it is harder to skip through commercials.  I am seeing a lot of ads that I would have fast forwarded through under the old system.

Besides some of them being very repetitive (some services use the same ads in virtually every break), and the usual mess with so many of them being for drugs where over half the commercials are warnings for all the horrible side effects you risk, there are some early standouts that have me riled up, and my brain short circuiting. 

Number One is the girl who smarily asks "What's a Computer?" in an ad for a high powered laptop/tablet hybrid from Apple.  Really?  You don't know what a computer is?  And do you have to be so blithely arrogant about it?

It makes you want to reach through the screen and give this child, who has been wandering alone throughout the city, a big what-for! But then I remember, this isn't her fault.  She's just an actress giving a line in a way that the directors and producers probably chose out of dozens of takes.    This is what the creators of the ads wanted.  This is what executives of Apple approved and greenlit.

It's amazing how many people in line to stop this thing, looked at it and said, "Yeah!  That's what we want!"

Number Two (good description) are the ads that Jon Hamm is doing for H & R Block.  First, when I sit down to relax and watch something, the last thing I want to do is be reminded that it's TAX SEASON. But beyond that, is the idea that this supposedly first-rank A-List celebrity is out shilling for early refund loans.  No!  No! A thousand times no!  Early refund loans are just a scam for the company doing them for you.  You lose a chunk of it just to get it early, and if the refund doesn't come through in the way you think it would (late or not the amount hoped for), you're the one on the line for the difference.  You've gone from lending the government your money tax free (which is what happens when you deliberately arrange your taxes in a way to generate large refunds) to paying usurious interest rates for getting an advance on your interest free loan to the government.  Jeesh, Jon Hamm, have some dignity!

Listening is the new reading

Sorry.  I couldn't find a meme for this one.  Audible has a new ad suggesting that the most successful people in our society read a lot.  True.  Maybe.  But I don't read to be "successful".  I read because I LOVE TO READ!

It proposes that in our busy world, the way to read is to listen to audio books.  It directly equates reading with listening.  Ergo, listening is the new reading.

NO!  NO!  A thousand times NO!  I have nothing against audio books.  I hope to do some audio books soon, of mine and other's works.  Reading aloud is, all modesty aside, the thing I do best (well, at least of those things I can talk about here).  And I understand their popularity.  I used to listen to some audio books when I had to cross Atlanta in order to get from home to work.

But, it is not the same thing as reading!  No, it is not.  Listening and reading a book are different things.  One is auditory. The other is looking at words in print, and translating them into grand stories, enveloping your mind and being into other worlds. 

Can a listener get absorbed into other worlds?  It's possible, but ask yourself why so many want  audio books?  It's so they can multi-task while doing it.  Walking, exercising, hosuehold chores, drving, rote computer work.  Get too absorbed and you might wind up in a ditch or smashed on the highway.  Not so with reading books.  You submerse yourself into the world you are reading about. 

So go ahead, Audible.  Promote yourself.  I'll sure appreciate as I get started in narrating audio books.  Just don't equate listening to reading.  It's not the same thing.  It's just not.

Our Great Political Cycle: Saturday Political Soap Box 174

And so we do it again.

We repeat the cycle of our American politics, one that has been a constant, at least since Nixon,  Republicans mess up, Democrats clean up.

Republicans complain about deficits and overspending, then come in and cut taxes, mostly to the upper echelon, and then don't cut enough spending to prevent ballooning deficits, which suddenly they decide they don't care about anymore. When the Democrats regain control, they have to be the grown ups and raise taxes, and do whatever grown up things are necessary in order to reduce the deficit.

Not only does this make the Democrats look terrible in having to be the bad parents raising taxes, it also constrains the Democrats in establishing new programs in order to help people, in order to address the mounting concerns in our society (infrastructure, health care, education, climate change, wage inequality, etc.).  It's a win-win for the Republicans.  For the American people?  Not so much.

The Republicans are currently on the verge of creating a huge tax reduction windfall for the wealthy and large corporations.  It doesn't even have the pretense of making a small feint of  benefiting the poor and middle class as Bush, Jr.'s plan did.  One of the smartest things Bush, Jr. did was hand everybody a check as a retro result of their tax plan.  Was it a cheap stunt that had no long lasting effect?  You bet!  But in the short term, it got more people on board with a plan that primarily benefited the rich.  The current crop doesn't even the common sense to pretend.

That's one of the most bizarre things about our con-man President.  You would think he would have enough carny brains to do something more than to just blatantly lie about what the plan does.  But he's not showing anything that would make people believe what he says.  Polls indicate that many are finally starting to wake up, with poll support fro the President now in the low 30's. 

Republicans try desperately, but never actually get to, what they call entitlement reform.  But that's not what it is.  They would love to kill Medicaid altogether, and turn Medicare and Social Security over to private Wall Street vultures, who, trust me, will not have your best interests at heart.  Seniors will have to pay ever-increasing amounts for health insurance (if they can get it at all), and your retirement will be at the mercy of the market (not to mention the increasing amount of fees you will have to pay), and instead of being a social insurance program, it becomes a free-for-all crap shoot.  But they never get to the point of doing it - even their own base rebels at this.

The current plan will create a predicted deficit of a trillion and a half dollars.  Even under the rosiest economic projections, it still is a trillion or more.  The Republicans aren't worried about that.  It will either give them an excuse to cut more spending, or blame the deficit on the Democrats, constraining the Democrats from enacting new programs, or blaming them for cutting popular programs because they have no fiscal choice.

Deficit and debt mean different things.  The deficit is the annual shortfall between spending and collected revenue.  Debt is the accumulated shortfall between the same.  You can have a surplus in a given year, and it may not make a significant dent in the debt.  That is why Republicans could still natter at President Obama, because even as he cut the yearly deficits at an historic pace, the overall debt still increased.

The American people may be finally starting to wake up.  The current tax reform bill is the most unpopular tax cut package in American history.  It's even more unpopular than the President, and that's saying a lot!

I think the political tides will turn before the Republicans can successfully gut Social Security and Medicare.  But that still will leave a huge deficit problem.  Will the American people understand where that came from?

You know what?  Call me a cock-eyed optimist, but this time. I think that they will.

Republicans, the jig may be up.

We can only hope.

Taxing Notes

Here I am, hurling towards another ending to an intense tax season, trying to focus long enough on something that could be used as a newspaper column, thoughts of how to finish partially completed returns swirling, instead of thoughts of complete, coherent sentences.

I will try.  Here are some of my impressions of the tax season so far -

Most people are doing the best they can to responsibly report under a very chaotic system.  It is hard to gather everything you need to make a complete tax return.  Yes, there are those of us who simply can turn in a W-2 and have it done, but even those have considerations that are hard for the average person who is not drenched in the knowledge of tax laws and regulations.  Do you qualify for earned income tax credit?  Do you have dependents, and who exactly qualifies for a dependent or not?

To get something as simple as a child tax credit, or a tuition credit, now requires more forms and questions than ever before.  Proof of health insurance has become necessary.  Every action is requiring more and more information.

The IRS is not our enemy.  Yes, there can be impolite or bureaucratic agents, but those exist in every line of work.  They are just trying to enforce and advise about the jungle of laws and regulations enacted by Congress.  And Congress seldom acts in the interest of all, but convolutes and complicates the law in order to benefit whatever special interest they cater to. It makes things even more difficult that they are understaffed and overworked.

My father used to pride himself in preparing his own taxes.  He would do so by hand, no assistance from computers or accountants.  As he aged, he would send me his information to prepare for efile submission, even though he had hand completed his forms.  I was always amazed at how accurate he was.  Now that kind of thing has become too complicated for even some of the smartest of us.  Even I prepare my own taxes using computer software.

Every year I hear calls to reform the tax system and to make it simpler.  That is something that we can all agree on, no matter our place on the political spectrum.  Instead, every year Congress seems to make it more and more complicated.  They see the tax code as a way to legislate and complete their priorities.  Want to improve education in the country?  Instead of rebuilding schools or providing more materials and supplies, or better paid teachers, why not simply instead raise the credits and deductions for education expense?  Worried about energy?  Just give more tax loopholes to the energy providers.  Sadly, we have decided to advantage the fossil fuel users instead of alternative energy, but that is just an example of how we use the tax  code to influence the direction of the country, for good or ill.

I would love for us to have a simpler system.  I think that would benefit all.  Well, except maybe me and others who make a living in part helping people complete those complicated returns.

Once again, a new Congress is looking at tax reform.  They say they want to make things simpler. We'll see.  I have my doubts.  They may have good intentions, but the lobbyists will descend, and we may be left more confused and puzzled than ever before.

What can I say?  Bad for the average citizen trying to do his best to follow the tax code, good for my profession's job security.  And so it goes.

Party Like It's April 16th

It's official now.  April 15th has now passed. A major tax deadline is now over. As a working CPA whose responsibilities include individual and corporate taxes, it is a relief to be now looking on the other side of this date.

I have had people over the years ask me what in the world I do now that April 15th has come and gone, as if that is what a CPA firm spends most of it's time on.  Fortunately if one values full time employment, or unfortunately if one craves a greater degree of leisure, that is not the case in most firms.

It is true that at my age and my desire to have at least some time to pursue other goals, that I personally take a little bit more time off than I do during tax season.  But that is a voluntary choice, one that my firm accommodates.  I am not a partner or sole practitioner, so I don't put in the hours that those dedicated entrepreneurs do.  There is plenty to do year round.  Tax deadlines actually stagger throughout the year, including the non-profit 990 tax form deadline coming up May 15th.  There are payroll services, financial reports, audits, and various different management reports and special assignments. Work has become so steady that it is nearly impossible to hold to the tradition of closing the office for a day or two after April 15th.

The year was a little bit more difficult than most.  Congress and IRS regulations are always adding layers of complications.  This year added the additional requirements surrounding the Affordable Care Act.  We had to ask more questions than we normally do, and had to fill out up to three more forms, depending on the answer we got.  The tax penalties for non-compliance were fairly minimal this year, but will accelerate in future years.  For 2014, it may have been more economical to pay the additional tax than the cost of insurance.  Of course, that only worked if you and your family remained healthy. an awful gamble to take given the cost of medical services.  A few people who got health insurance from the exchanges wound up in trouble because they underestimated their income and had to return some of the premium subsidy they had gotten throughout the year.  If you go to the exchange, please carefully consider the income level you report, noting that it may be more helpful to err on the side of caution.  If you're unsure, you may want to consult with your tax adviser.

Like many of our laws, the Affordable Care Act is complicated, and some aspects are positively Rube Goldbergian,   Most of our legislation is the result of compromise, and therefore often more complicated than it needs to be, but democracy is rarely a straight line.  Unfortunately, many of the fixes that normally occur in legislation are not happening with the Affordable Care Act, because one of our political parties has decided to go to war with it rather than make it better.

Was it worth it?  In my view, if more people are covered, than yes, it's worth it.  And all statistics show that the number of people covered has increased dramatically.  The rise in healthcare costs has slowed dramatically.  The deficit reducing effects of the law have exceeded even expectations.Young adults can be covered on their parent's policy longer.  Pre-existing conditions are no longer the fearful excluder they used to be. Medical bankruptcies should be on the decline.

Some states have not made the progress of other states.  They are fighting setting up their own state exchanges.  They are refusing to extend medicare benefits.  So in some states the number of uninsured is not dropping as dramatically as it is in other states.  Georgia is one of the states, and the strain of our lack of participation is hurting hospitals and care providers, particularly in rural areas.

On the other hand, given the stress involved in the tax system, I am pleasantly surprised by the level of courtesy and cooperation from all involved.  Revenue agents at both the federal and state level are almost always courteous and kind to me when I am able to contact them.  The IRS, in spite of having increasing regulations to enforce and supervise, has had their staff cut repeatedly by Congress, and are becoming a little bit more difficult to secure contact with (if you call them, be prepared to listen to a lot of Muzak).  At the same time, virtually all taxpayers I deal with do their very best to be helpful and informative.  They are doing their best to cooperate and deal with a very complex system that almost no one completely understands.

I can't speak to places that only do taxes, such as Liberty or H & R Block, but as for public CPA firms like the one I work for, don't be surprised when you pass us by on April 16th as to why we're still working.  We are doing many, many things to help you and others, and to contribute to a growing, vibrant, and healthy economy.

Tax Hump Day

As of yesterday, tax season was over half done.  Whoop-e-doo.

It doesn't feel like much this year.  There still is a long way to go, and with other things happening, it is a milestone that has not drawn a lot of my attention.

Nevertheless.....hooray.

This year has been slightly tougher because of the changes enacted by the Affordable Care Act.  There are more forms and questions to answer.  Nothing that is impossible, but it does require more steps and details than last year,  It is a shame that with all the talk of simplifying the tax code, it just gets more and more complex every year.  But this was what we could get through Congress, and the bottom line is that millions more have access to health insurance, a basic necessity in today's modern world.

I had hoped that I could let my 10% retirement encroach into tax season.  The physical and mental stamina required to concentrate on this is an increasing challenge to me.  But so far I have not really cut back anymore than I have in recent years.

This is the first year since I could reach a TV dial or remote that I did not watch the Oscars.  So far I haven't even seen clips, although I wouldn't mind seeing the performances of the winning song Glory from Selma, and Everything is Awesome from The Lego Movie.  I didn't care whether Birdman (the I hate Hollywood and it's overcharged superhero blockbusters movie) or Boyhood (the oh look at our fancy aging stunt movie) won Best Picture.  And don't even get me started about American Sniper.

I have completed the first phase of the DASH diet.  It was a struggle, but I kept to it.  I am concerned about continuing progress while I add in more foods.  Portion control has never been my strong suit.

Visitation for Steve Bean is not until Friday, and the funeral Saturday.  They have family from North Carolina coming in.  Both visitation and the funeral will be at Grace Episcopal,  at the church that he so loved and that so loved him.

Taxing Times Saturday Political Soap Box 62

The Internet is a grand and glorious thing.

You can order stuff from around the globe instantly.  And for much of it, the tax rate is zero.  We party and celebrate as if we had gotten away with something.  Those who sell on the Internet swarm Capitol Hill as a plague of lobbying locusts.

Meanwhile, the tax base at all levels suffer.  Your local school gets less funding.  It is harder to build and repair roads and bridges.  State parks and libraries hurt.  Aid to those who most need it is usually the first thing politicians throw on the bonfire of austerity.

You either make this up by sacrificing local and state services, or you experience increases in other taxes.  Property tax rates go up. Income tax rates may accelerate.  There may be an increase in fees or in the sales tax rate rate for the things you buy from box store retailers.

Although our number one priority should be getting people back to work, we do need to look at the long term match of spending and revenue.  I don't view it has cuts or over-burdensome taxation, but as changes that make sense and match the times.  The economy and how we operate within it changes with technology and shifting cultural emphases, and so should our tax system.

The first change is to recognize our changing purchasing pattern.  We should tax Internet sales, both to raise more revenues and to level the playing field.  The local retailer shouldn't have to be charging more and collecting sales tax, while a mega-corp dot com can get away with virtually paying nothing.

I propose a basic three tier rate, with splits going to the federal, state, and local governments. Although the rate may not match exactly the local in-store rate, it should be fairly close.  And it should be based where the consumer lives.  A rate might be as simple as 6%, with 2% each going to the three governmental units mentioned above.

Another idea, which I will just mention briefly, is a financial transaction fee.  Any movement of money could have a small percentage fee attached to it.  Buying stock might result in a 1% fee, and selling it might result in the same 1% fee.  This would be best if it were to be structured as a broader reform that eliminated capital gains taxes.

 The point is, we need to adapt the tax system to the way money really does flow through the economy.  Right now, the burden of taxation is increasingly on wage earners.  We can't keep doing that.  And we can't just making it about trying to target the rich (not that they don't need to pay more).

Just some ideas for these taxing times this early Saturday morning.  I await your responses!

Conservative Shadings Saturday Political Soap Box 53

Very few of us are any one thing.  Just like our physical features, our political as well as social and cultural beliefs can vary and not fit into a neatly categorized box.  It's one of the reasons why voting for any politician can seem like a difficult thing.  It's almost impossible to pick out someone who agrees with you on everything, so you have to prioritize what is most important to you.

Make no mistake about it. I shade very liberal, particularly for this area. But I am not a monolith.  I do have some conservative beliefs.

I believe that abortion is wrong, that life does indeed begin at conception.  The DNA is zipped together and a unique entity is formed.  I do differ dramatically with many religious conservatives as to what to do about it, but we do start with that premise in common.  I think trying to eliminate this through criminalization and intimidation is wrong and ineffective, and only makes the problem worse.  Pulling people out of poverty, supporting young mothers, greater and more available and knowledgeable use of birth control are better answers.  I want solutions that empower women, not criminalize them.

I am not a big advocate of legalizing drugs.  The casual attitude towards drugs in this culture makes me think we have stumbled into Brave New World.  I do think penalties need to be smoothed out.  It's absurd for one type of cocaine used by rich people to have significantly lighter penalties that that used in poorer environments.  I do wish we would all grow less dependent on these addictive substances.  Oh.  I need to get another cup of coffee before I go on.


Okay, I'm back.  Our tax system is a complete mess.  I would like to see it completely reformed. And in some ways that I think conservatives would appreciate.  If you want to see a detailed outline on this, please see the label at the bottom, tax policy, and pull it up.

I do think there are some functions that the government should not be running.  As big a fan of the arts as I am, I don't think government has a place in that.  I even kind of agree with Mitt Romney that is is time to cut the ties to public television.  In all programs we need to more effectively reduce waste, fraud and abuse.

Although I believe the takers at the top are a much more serious problem than those at the bottom, I am upset by those who try to filch the system, particularly disability.  Yes, there are many people legitimately and deservedly on disability.  I have friends who I am very grateful have this available to them. What I am upset with are those who get on it, and then work under the table, off the books, so that they are double dipping.  They are taking from the government and giving nothing back in return.  And I'm angry at every employer who knowingly goes along with stuff like this.

Conservatives should know that I am open to any reform that moves more people to work and taking responsibility for themselves.  You should just be aware that this would involve greater job support and training, more daycare subsidies, more public transportation and infrastructure improvements in general,  a commitment to green jobs and moving this country to the technological forefront in a variety of fields, and a substantial increase in the minimum wage. To do things my way might even cost more money than just handing out checks to people, but I think that in the long run will foster more independence.

I do believe in stronger school discipline, maybe even school uniforms.  I am completely, utterly and adamantly in favor of public schools.  It is the very bedrock foundation of democracy.  We weaken it at our own peril.

So, all in all, not too much of a conservative shading for me, I suppose.  But it is there, just a tiny bit of red in my sea of blue!

Dive! Dive! Dive! The Tax Season Submarine Submerges!

And so it begins.

Not with a bang, or a whimper, but with a wtf was that?  Congress endorsed some deal last night whose tax effects will probably take us a good long while to straighten out.  Most of what they did will effect 2013 taxes, but it should start effecting payroll immediately.  At this point I have no idea whether they kept the payroll FICA tax cut or not.  And whatever changes they made, our payroll tax software is not taking into account and probably won't be for weeks.  However you feel about the fiscal cliff deal, bureaucratically it will be a nightmare.

I tried to stay up last night, under the false impression that if I didn't go to sleep that the tax season could not start.  I'll never know whether that was possible because I did fall asleep, at least for a short time.

So now I wake up, and I,m trying to figure out if I have the time to write or if I should go on ahead in.  I'm thinking of the different stuff I already have to do.  But I will get over this and reach an equilibrium.  And I am going to strive mightily to achieve a better balance than I have in years past.

I should be able to do it.  Last tax season, I directed a play (Wizard of OZ)  over the first two months of tax season.  That was a unique bit of insanity, but it got done, thanks to the kind assistance of many other people.

I hope friends and family do not abandon me during this time, thinking I am too busy to try to talk to and see.  There may be times when I am slightly less communicative, but being able to hear from others is even more important this time of year than others.

And now I finish the last sentences of my blog post.  I drain the last of my coffee, yesterday's headache still maintaining a tight grip on me.  I will need to put on a tie (blech!) and put on my new sports jacket with elbow patches, the kind of jacket I have wanted  all my life.  And prepare to once again submerge.  Sigh!

Don't forget about me, surface dwellers!

A Tax System for the 21st Century Saturday Political Soap Box 42

It may seem hard to believe, but I am a CPA (Certified Public Accountant).  In the past, I have worked mostly in general ledger/financial statement preparation and cost accounting.  But for the last almost fifteen years I have worked in small accounting firms.  Currently I am a working for a firm that I have been at 13 years 4 months and 14 days.  I have to be a broad accounting generalist working in general ledger/financial statements, audits, inventories, payroll, and yes, taxes.  I have seen the insanity of our tax system up close and personal.  For those of all political persuasions who are disgusted by it, I join in your disgust.

Ah, elections!  The time when we should be discussing issues but instead focus on birth certificates and dogs on roofs of cars.  When the latest inadvertent misstatement is more important than the direction they'll take the country.  When the election of the other guy will lead to a thousand years of darkness.  In the face of that, I will continue to try to focus on some basic issues and what I believe is the direction we should take. And yes, I am taking a sacrifice in number of page views by going this route instead of the Mittbot Thurston Howell route or that darn Kenyan Socialist route. 

I believe the tax system needs to be completely abolished and redone.  We need to enhance and preserve it's progressivism and move it into the 21st century.  Individual income tax should be eliminated.  I propose a four tier system that I cannot do justice in this brief blog post.  Just to sketch though, it involves 1) payroll taxes covering social security and medicare for all, 2) a financial transaction fee when investments are sold, purchased or exchanged, 3) a progressive sales tax that raises with the expense and/or luxury level of each item, and 4) a corporate/business fee based upon gross income, with the only deduction being from how much domestic payroll over a living wage the business pays.

Payroll taxes covering social security and medicare for all

Special notes to show how this part is different than the current system -

        - there would be no cap on either, so that it would continue to be drawn out no matter how much a person made.  Since there is no other direct form of wage taxes, the wealthy would continue to bring home mammoth portions of their paycheck

        -health insurance would be covered in full by a medicare for all plan.  Would this increase the percentage of income taken out from your wages to cover it?  Oh, yes!  But...you would have nothing...NOTHING...more that you had to pay for health care insurance....that would be your plan.  No more insurance premiums  no more worry about medical bankruptcies, no more worrying about whether something's going to be covered, no more worrying about pre-conditions or policy portability.  Stressed about freeloaders?  Well, I hate to break it to you, but you're ALREADY covering them, and as they go to the hospital or care in the most expensive way right now (ER, medical crises), you're paying A LOT more for them than you would under this plan.

     -there would need to be some mechanism so that sole proprietors, partners and S Corporations could contribute as well.

A financial transaction fee when investments are sold, purchased or exchanged

    -forget capital gains taxes.  We can stop arguing about that.  No more paying based on gain.  Conversely, no more taking losses when investments go bad.

    -this would just be a tax when money is moved from one investment to another, whether that be cash, to another stock, or to another instrument of investment.  At what rate I cannot say.

    -an example would be, you buy a stock for $1,000 you might have to pay a 1% transaction fee ($10).  If you sell the stock at, say $900, you might pay $9.  If you sell it for $1100, you might pay $11.  It is irrelevant whether you made or lost money.  You are neither punished nor rewarded,,,it is just a slight cost of investment, like a broker's fee.

    -it may be possible, given our level of computer sophistication, that individuals could be given a break or exemption for transactions under a certain dollar value, either individually or on accumulated year basis.  You could exempt the first $1,000 of each transaction, or for an individual for a year, the first $25,000 of total transactions (as an example).  But understand, the more you exempt, the higher the transaction rate would have to be to generate the same level of revenue.

A progressive sales tax that raises with the expense and/or luxury level of each item

    -since there other tiers of taxation, this may not have to be as sky high as some National Sales Taxes that have been promoted.  For us liberals, the regressive nature of this tax is rather daunting,  That is why I think the rate should be adjusted depending on the nature of each item.  BUT, everyone should pay some tax.  Even necessities should have a rate, even if it is low.  

    - an example, JUST an example, would be if someone were to buy a loaf of whole wheat bread, the tax rate might be 3%.  A $3.00 loaf of bread might then cost $3.09.  A loaf of bread that might have rare milled wheat that was shot out of the butts of cats, designed for the sophisticated gourmet, might be taxed at a higher rate, say 10%.  So this special loaf that is $7.00 would cost $7.70.  Overall, people who are willing to spend extra on luxury or status items are less concerned with cost.

    -a conservative version of this, the Fair Tax, would hand everybody a check each month to cover necessity spending.  I thought conservatives didn't like just handing people government checks, and I think my plan would avoid that while at the same time keeping some progressivity.

A corporate/business fee based upon gross income, with the only deduction being from how much domestic payroll over a living wage the business pays


    -a tax based not on a complicated tax-basis profit loss statement and balance sheet, but a corporate fee based solely on gross income.  Good lord, counties and cities do this, it shouldn't be that hard.  Again, you don't get into how much they made or lost, it's just a straight up fee.  A cost of doing business.

    -the ONLY deduction should be domestic payroll,  You hire people at a living wage, you get to take that in some fashion right directly off the fee.

   -the level of the transaction fee could vary with industry or type of business.  Again, I have seen this at the city and county level.  We are not re-inventing the wheel here.  The difference in rates could be established by regulation and/or Congress.  It would give our Congress something to do. I would hate for them to get too bored.


Is all this likely to happen?  Only if I become dictator, I guess.  But mark my word.  We can't keep going like we are.  Big changes are going to have to happen.  And whichever party gets out front of this the quickest, is likely to be the dominant party for the next generation.

So, wake up, Progressives!  This is one area where you're running behind!

We need a new, progressive tax system for the 21st century!

Somebody take up this ball and run with it!

Release the Hounds of Taxlessville!

Oh, that Harry Reid.  That vile man.  Senate Majority Leader Harry Reid of Nevada is out making claims that he has heard that Mitt Romney paid no taxes in ten years of his returns.  This is sourced from something he supposedly heard from an investor in Bain Capital.  And not only will Harry Reid not apologize, he keeps repeating the same claim.  Over and over and over again!  What is wrong with him?  I'm going to start getting very confused if Democrats start behaving like Republicans!

Masters of the Faux News technique of "some say" , many Republicans lead the charge to innuendo and baseless claims. From birth certificates to death panels to the hoax of trickle-down economics, it's hard to top their level of blarney and rumor.  Not that Democrats don't try on occasion - they're just not very good at it.

So should the Mittbot release his tax returns?  Yes.  Not because of Harry Reid, but because the American people deserve to know.  They need to know just how out of balance our tax system is.  Mittbot 2012 says he paid all the taxes he was legally obligated to do so.   Stripped down that is political gobbledygook for if I didn't pay zero I came as damn close to it as I was able.  Given the tax loopholes available to people like Romney, a zero rate is perfectly plausible.  Hell, he may have even gotten money in rebates and credits that he didn't put in!

The prima facie problem is the one hundred million dollar IRA.  How the heck did that happen?  With limits on how much you can put into an IRA each year, you'd have to have the investment of the century to build up that kind of nest egg.

The powerful lawyers and accountants surrounding the Mittbot Empire must be aggressively taking advantage of everything they can, playing at the edges of permissible law.  And, of course, they and the Mittbot are incapable of mis-step.  Well, Romney did claim to be able to run for Governor of Massachusetts because his tax returns stated he was a Massachusetts resident.  Which they did no such thing.  Why those darn accountants must have goofed up.  No problem, says Mittbot!  I'll just "retro-actively" change it to Massachusetts.  Because tax returns are like magic!  And you can magic them to say whatever you want!

That is, it's easy to magic them when you're extremely wealthy, and you have an army of lawyers and accountants assisting you, and a Congress willing to write any loophole you need to help insure they get future campaign contributions.  Ann Romney got a larger tax deduction from her pet horse than most of the annual salaries of those who read this blog.

We need to see Mitt Romney's tax returns.  Not just because it will help us determine what kind of man and President Mitt Romney might be, but so that we can see the rottenness at the core of our tax system.  They less they pay, the more you pay.  It's time to get a good, strong look at the wealthy's most impressive resort - Taxlessville.









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Tax Day Delay Blues

So some genius thought it would be a nifty-rooni idea to delay the end of tax season until April 18th. Something about the way Emancipation Day falls in the District of Columbia. So they get to celebrate emancipation while us tax preparers continue to be held hostage.

I have to tell you this post was much longer, and, of course, incredibly brilliant, when the computer/Internet malfunctioned, and did not save or post any but the first paragraph.

The first part was my surprise that I had heard that some fellow church members had a Lenten discussion about taxes, and many seemed to feel that the thing that upset them the most was the earned income tax credit. Really? That's the biggest problem with our tax code?

Is there fraud and abuse of the earned income credit? You betchum! But I would doubt if you added up the cost to the treasury of all the misuse of the credit, it would not equal the loss compared to GE's billions of profit going untaxed, and even winding up with a multi-billion refund!

I can also tell you that the number of forms and requested information that a tax preparer has to do is much higher for the earned income tax credit than any other credit or deduction we do. And that the enforcement by the IRS of this credit deploys more time and concentration than virtually any other part of the code.

Big corporations and wealthy individuals can deploy fleets of attorneys, accountants and paid off politicians to get the law to be their ass. The earned income credit users have nobody and no one in their corner.

Finally, my understanding is that about a third of the people who would legitimately use the credit don't, either through pride or lack of knowledge. So, I really feel like my church friends who believe that the earned income tax credit is the chief tax problem, need to get their heard out of the Ayn Rand and back into the gospels!

Messin' With TaxSquatch

With unemployment now at 10.2%, it is imperative that job creation be number one on the President's agenda. That doesn't mean the health care needs to be set aside, as it is one of the most important things to set right if we are to move forward. And I do believe from listening to the President earlier today that he understands this and will be doing everything he can to improve the situation. Infrastructure spending, greening the economy, extending unemployment compensation and job training, increasing the flow of credit to small businesses and community banks - these are all tremendously important, positive steps. But I was also discouraged to hear him mention tax cuts to businesses as another solution.

I am sick to death of politicians, on the right, left, and everywhere in between trying to solve our problems by dicking with the tax code. They see it as a way to influence and shape American life, and all they're doing are making things more and more complicated and unfair. As a CPA, I see the illogic and stupidity every day. All we've succeeded in doing is making the tax code so convoluted that nobody can really follow it. Anybody with more than a W2 has to seek out help. Great for my profession, but not so hot for the American people.

Although campaign finance reform and more competitive elections (more parties, instant runoffs, etc) would go the longest way towards improving our political system, our tax code is another major culprit. Lobbyists swarm Capitol Hill in large part to get the tax code to favor the groups they represent. And more often than not, Congress is happy to oblige.

Does messing with the tax code actually accomplish anything beneficial? Sometimes, maybe. The First Time Homebuyer's Credit may have temporarily stimulated the housing market. But it has done nothing to address the underlying problem - there is a growing mismatch between what people make and how much a home costs. A larger and larger share of income has to go into the purchase of a decent home.

Any tax change that relieves one group may wind up costing another group more money. Unless you're willing to run up large deficits (uhh, well, maybe they are), somebody has to make up for the credit/deduction you've given to someone else. Relieving property tax for a certain class of taxpayer may just raise the rates for another group.

So yes, let's solve the job crisis! But don't waste money on ineffective tax gimmicks. Let's rebuild this country for the future!