Why $50,000 Wouldn't Change My Life

So many people think that a sizable sum of money would change their lives.  Perhaps it would, or perhaps only for a time.  But after some contemplating, I came to the conclusion that if I suddenly came into possession of an extra $50,000, it wouldn't change my life all that much.

Why?  Because of what I would do with it.  Here's the summary.

Tithe:  I would give at least $5,000 to my church.  Balance: $45,000.

Retirement Savings:  There are two major reasons why it would be wise to maximize the amount of this part of the windfall.  First, to mitigate the tax consequences of my sudden jump in income.  Second, because it is the wise thing to do.  Ideally, I would like to retire before I die.

Since my wife and I are still well short of the age of 50, we can each put a maximum of $5,000 into an IRA, and we would do so.  Furthermore, I would immediately, and for the rest of the calendar year, sharply increase the amount I put into my 401(k) at work, compensating for a smaller paycheck by drawing from the windfall.  Depending on the time of year, I could possibly see $15,000 moved into tax-sheltered retirement savings.  Balance:  $30,000.

[Note: Some of you might be wondering whether my wife and I would use traditional or Roth IRAs; conceivably, we could each open a different kind.  I don't know.  I would consult people more knowledgable than myself.  The suddenly-higher marginal tax rate for the windfall year would make me lean toward a traditional IRA, but further research would be required.]

Taxes:  The amount of the $50,000 subject to income tax (both state and federal) would be diminished by the tithe, the amount going to the 401(k), and the amount going into traditional IRAs.  Even if it dropped all the way to $30,000, I would plan about $10,000 for taxes.  Balance:  $20,000.

Big-ticket Items:  Most likely, the balance would be going toward one or more big-ticket items.  A new car.  A remodeled kitchen or bathroom.  A hot tub on the patio (in my dreams).  A daughter's wedding.  Consequently, most of the remaining $20,000 would be put into savings until such time as it is needed.

Anything Else?  Sure.  We'd probably take a week's family vacation somewhere we would really like to go.  And a celebratory dinner at Olive Garden.  I might get a new suit.  But really...not much else.  To fritter the final $20,000 on a miscellaneous wishlist of not-really-needed items would be wasteful.

And I certainly wouldn't quit my day job.

The IRS Gets Something Right, But....

One of the obscure benefits of being a tax preparer is getting regular e-mails and news releases from the IRS. At least 90% of them are irrelevant to me or repeat things I already know well, but Friday saw the arrival of some important news. Here is the quote:

Individuals and business taxpayers will no longer receive paper income tax packages in the mail from the IRS. These tax packages contained the forms, schedules and instructions for filing a paper income tax return.

The IRS is taking this step because of the continued growth in electronic filing and the availability of free options to taxpayers, as well as to help reduce costs. In early October, the IRS will send a postcard to individuals who filed paper returns last year and did not use a tax preparer or tax software. The information will explain how to get the tax forms and instructions they need for filing their tax year 2010 return. The forms and instructions will be available in early January 2011.

This will probably save the IRS—in other words, the taxpayers—tens of millions of dollars, and for this I applaud them. The IRS is also making a similar change for businesses, although relatively few businesses use paper returns. Of course, nearly all tax forms and their (sometimes voluminous) instructions are available on the irs.gov website, further reducing the need for paper forms to be mailed.

So the IRS got one right. They also got one wrong. Included in the same e-mail news was the following:

Publication 4845, Key Points about Residential Energy Credits, is now available in Spanish, Chinese, Vietnamese, Korean, and Russian. The flyer highlights key points about the Nonbusiness Energy Property Credit and the Residential Energy Efficient Property Credit.

So our tax dollars were spent writing a document in languages which it need not be written in. This also gives immigrants (legal and otherwise) one less incentive to learn the English language and better assimilate into our culture. Of course, if English were the official language, this would be much less of an issue.

South Carolina DMV, Part 2. And Part 3.

Last Saturday saw my wife and I spending about an hour and a half just getting our shiny new SC driver's licenses, good for ten years, at a cost of $25 each. One afternoon this week, on an extended lunch break, we headed back to Greenville to get our license plates.

The trek did not start with the DMV. No, our first destination was the county building, where we had to pay our taxes on our cars. In SC, taxes are assessed based on the value of the car—which, thankfully, meant we didn't have to pay too much. [Comparison note: What we ended up paying by the end of the day was comparable to what we paid for the same cars in Michigan each year. However, it appears new/newer cars are taxed more severely in South Carolina.] But even this stop was not singular: We first had to have a tax bill for each car generated by one clerk, who then sent us to another room where we paid the bills.

The DMV is across the street from the county building, so we headed over there and took a number...and waited...and after sitting for about a half hour finally got to the counter. We chose the "In God We Trust" license plates [Note to other states: No additional charge] because the Bob Jones University license plates cost an extra $70—each. This choice meant waiting for another clerk. After being separated from more of our money, we left with license plates in hand. The total time spent: About another hour and a half.

Some final comparisons:

1. When it comes to one-stop shopping, Michigan has South Carolina beat easily.
2. Our costs were comparable to what we paid before in Michigan, but the time factor is won by Michigan.
3. Michigan probably would win the cost comparison if we had a newer car(s).

Maybe next year I can re-register my cars by mail. I sure hope so.

How's This for Public Shame?

Similar to an article I blogged about two months ago, another person has been punished by the IRS for providing (what might loosely be called) incorrect tax advice. Here is the complete news release from irs.gov; note especially the final sentence.

WASHINGTON — The Internal Revenue Service has accepted an offer of consent to suspension from bond attorney Michael W. McCall. Under the terms of the settlement agreement, McCall will be suspended from practice before the IRS for at least 24 months for writing a false tax opinion. Thereafter, he may petition for reinstatement.

“Practitioners have a duty to their clients, the system, and the municipal finance bond community to ensure that the tax advice they are giving their clients complies with the law and is complete and accurate,” IRS Office of Professional Responsibility (OPR) Director Karen L. Hawkins said.

McCall was engaged by a state of Washington county municipal sewer district to act as co-bond counsel and special tax counsel to write an opinion as to the tax-exempt status of the district bonds issued in October 2000 and to perform due diligence with respect to certain transactional matters relating to the bond issuance. The district issued the bonds for its utility local improvement district for a proposed commercial development. The bonds were issued in violation of state law as the utility local improvement district was located outside of the sewer district boundaries. The bonds defaulted and have been determined to be invalid.

The OPR alleged that McCall’s opinion on the tax-exempt status of the district bonds was false under Circular 230, Section 10.51(j), and that McCall's opinion on certain transactional matters was also false under Section 10.51(j). In addition, the OPR alleged that McCall failed to perform due diligence under Circular 230, section 10.22, with respect to transactional matters related to the bond issuance, including an undisclosed payment to him from bond proceeds received by the developer.

Following an OPR investigation, McCall admitted to violations of Circular 230 for giving false opinions, knowingly, recklessly, or through gross incompetence (Treasury Department Circular 230, Section 10.51(j) (2000)), and for failing to exercise due diligence (Treasury Department Circular 230, Section 10.22 (2000)).

The settlement agreement included a disclosure authorization that allowed the IRS to issue this release.

This is, as you might suspect, a highly specialized field—but if you're going to make the big bucks that people make in this field, you'd better know your stuff.

Thoughts From the IRS Commissioner

In an unusual (and brief) fit of boredom, I read an e-mail I received from the IRS (Note: As a tax preparer, I get e-mails regularly. I'm on their list. Nothing more). It included the prepared remarks of IRS Commissioner Doug Shulman at the National Press Club yesterday. You can read the whole thing here, if you are so minded. Here are a few tasty excerpts:

You also see police officers and guards keeping a close watch over their safety… park rangers giving directions or explaining a bit of history…landscapers keeping the City beautiful…and teachers leading and educating their students.

And they have one thing in common. They’re all public servants, who are working to serve our fellow citizens, families, neighbors and friends.

However, there are other public servants you probably won’t see, including thousands of IRS employees who right now are answering taxpayer questions over the phones, processing returns, issuing refunds and helping taxpayers struggling through these tough economic times.

And that’s what I want to talk about today: public servants and public service…

The first of the big refundable tax credits – the Earned Income Tax Credit – was enacted in 1975, and it was official: The tax system and the IRS were now viewed by policymakers as an efficient distribution system for societal benefits, not just the mechanism to raise the funds to run the government.

Let me conclude with this thought. I firmly believe that the spirit of public service is part of who we are as IRS employees.

But the men and women of the IRS are often under-appreciated public servants. At its core, we are an agency of professionals working to serve the hardworking taxpayers of this country: processing returns, sending out refunds, answering questions on the phone, and trying to help people navigate a complicated tax system.

I'll let you draw your own conclusions for now.

More From irs.gov....

You know you're in big trouble when the IRS makes an example of you on its website. Here we learn of someone who got into a mess of his own making:

WASHINGTON — Massachusetts Tax Attorney Kevin Kilduff was barred from practicing before the Internal Revenue Service for 48 months for failing to file one federal tax return and for filing another five returns late.

“Professionals who demonstrate a lack of respect for our tax system by failing to meet their own tax filing obligations should not expect to retain the privilege to practice before the IRS,” said Karen L. Hawkins, Director of the IRS Office of Professional Responsibility (OPR).

The OPR had originally sought the 48-month suspension, alleging Kilduff’s conduct was willful and disreputable. OPR enforces standards of conduct under Treasury Circular 230, which governs enrolled agents, attorneys and certified public accountants. Kilduff formerly worked for the IRS Office of Chief Counsel.

The Administrative Law Judge (ALJ) subsequently set the penalty at a 24-month suspension. Kilduff appealed the ALJ decision to the Secretary of the Treasury’s Appellate Authority, which in fact ultimately imposed the harsher 48-month suspension.

Kilduff’s suspension is for a minimum of 48 months. OPR has sole discretion regarding his reinstatement to practice before the IRS. At the very least, Kilduff must file all federal returns and pay all taxes he is responsible for, or enter an acceptable installment agreement or offer in compromise. [Emphasis mine]

So let's sum up what not to do:

• Fail to file your own tax return and/or pay your taxes for several years, when you are supposedly helping other people do just that.
• Work for the legal arm of the IRS and then cross it.
• Appeal a 24-month suspension when you have been that foolish already.

Yes, I do work for H&R Block during this time of year. I don't read this stuff strictly for amusement. :-)

From irs.gov....

When you make money doing other people's tax returns and read information from the IRS, sometimes you encounter facts like these [data is the most recent available]:

Individual income tax returns reporting a tax liability in 2007 faced an average tax rate of 13.8 percent, the same as in 2006. Taxpayers with AGI of at least $410,096, the top 1 percent of taxpayers, accounted for 22.8 percent of AGI in 2007, an increase of 0.8 percentage points. These taxpayers accounted for 40.4 percent of total income tax reported in 2007, an increase from 39.9 percent in the previous year.

Points to note:

1. "reporting a tax liability" means that all those people who did not make enough money to owe the IRS are eliminated from the statistic. In other words, their "taxable income" was zero.

2. Does it bother you that 1% of the taxpayers are paying 40.4% of all the income taxes? On the other end, over 40% of "taxpayers" are paying no income taxes...and in many cases, claiming credits, such as the Earned Income Credit, that provide them with robust refunds anyway.

Hiding Money Offshore? Be Warned!

As a professional tax preparer for part of the year, I have signed up for the IRS e-mails that are put out several times a week. This one I received struck me as rather interesting.

Context of the e-mail: In its never-ending quest to see that all income taxes are, in fact, collected, the IRS will soon be "cracking down" with greater penalties for those who are caught hiding money in foreign ["offshore"] bank accounts.

The e-mail is copied below. It is also found on the IRS website here. Consider this a sort of public service announcement.

WASHINGTON ─ The Internal Revenue Service today announced a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009.

Under special provisions issued in March, taxpayers with these hidden accounts originally had until Sept. 23, 2009 to come forward. Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution.

IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it. The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.

The IRS also announced that there will be no further extensions.

Random Thought on an Important Bible Verse

The verse is Mark 12:17:

And Jesus answering said unto them, Render to Caesar the things that are Caesar’s, and to God the things that are God’s. And they marvelled at him.

This verse clearly teaches we must pay our lawful taxes.

But why is it that Caesar demands so much more of our earnings than God does?

Is the Obama Presidency Going to Implode?

Why the Obama Administration Will Implode in Weeks

The article linked above gives an encouraging yet serious perspective on the prospect of the Obama administration going down in flames due to Americans' long-delayed rendezvous with the realities now being proposed in Washington. Consider what Obama has been doing just in the past few months:

• The pushing of a healthcare "reform" that Americans neither want nor care to pay for;
• Support of a cap-and-trade bill that amounts to nothing less than the largest tax increase in the history of our country;
• Beginning to hem and haw about whether or not there will be higher taxes, when nearly everyone paying attention knows it must happen;
  
• Making disingenuous comments about the above; and
  
• Standing at the helm of a record-shattering budget deficit, with no apparent concern for the ramifications.

Americans are waking up. Some of us never fell asleep, but we weren't in the majority of voters last November. The Tea Party movement and the fantastic responses at the various "town hall" meetings across the country are illustrating this.

May God give our country grace and our leaders wisdom!

Michigan is 41st in "Top States for Business"...Why?

In a survey reported by NBC on its Nightly News broadcast this evening, and found here at the cnbc.com website, Virginia and Texas finished as the top two states in the nation for business, based on an analysis of the following ten factors (Michigan's 50-state rank in parentheses):

Cost of Doing Business (31)
Workforce (39)
Quality of Life (40)
Economy (45)
Transportation (20)
Technology & Innovation (7)
Education (34)
Business Friendliness (39)
Access to Capital (10)
Cost of Living (23)

I decided to order these categories in this manner: From those which the government is most obligated to have a role in, to those which the government should least be involved in. Here's what I got* (Michigan rankings still in parentheses):

Economy (45)
Business Friendliness (39)
Cost of Doing Business (31)
Transportation (20)
Education (34)
Workforce (39)
Cost of Living (23)
Quality of Life (40)
Access to Capital (10)
Technology & Innovation (7)

*The ranking is my own subjective interpretation, and I won't be at all offended if you would choose to engage in a little reordering of your own. The data sources are not explicitly noted and consequently, I'm not certain precisely how these rankings were obtained or what precisely they measure...although they seem reasonable.

Do you notice a trend here? If the categories were simply numbered from 1 to 10 (using my order) and a linear correlation were completed, it would be -0.67, implying that the more government involvement, in general, the lower the rating. [Disclaimer: Rigorous statistical analysis would demand more work on my part. This is only an estimate from an estimate.]

Observations, beginning at the top of my list:

The government is inescapably tied to the economy by its policies related to taxation, spending, and legal regulation of economic activity. This is clearly tied to business friendliness and the cost of doing business. Michigan is doing poorly in these categories.

Government—especially at the state level—has responsibilities for transportation (roads, airports, other infrastructure) and for public education. In this survey, however, I suspect that "education" measures the attainments of the populace, which is a collective measure of choices people make. That is why transportation comes ahead of education in my list.

The workforce metric is probably tied to the education metric to some degree, as the overall measure of a workforce is in a large degree tied to its level of education. A large manufacturing sector generally doesn't rate well in this kind of metric.

Cost of living is tied to a variety of factors beyond government, including such things as geography, natural resources, and whether an area is rural or urban.

Quality of life, in my book, is founded primarily on things spiritual and familial—areas which are properly outside the scope of government. Yet, economic issues impact quality of life, so the government has a tangential effect on this. (And if we get Obamacare, it will be a lot more than tangential!)

Access to capital and Technology & Innovation are free-market qualities which, aside from policing illegalities, are usually outside the proper realm of government. Michigan was a top-ten state in both of these areas...and only in these areas.

Notice, by the way, which two categories Michigan finished best in. There is still hope...if we get active and vote!

How did Ohio do? Some interesting observations here.

Late Night Theology & Politics

I was (and apparently still am) having difficulty falling asleep tonight, so I began reading my Bible. I encountered this passage from II Kings 15:

18 And he [Menahem] did that which was evil in the sight of the LORD: he departed not all his days from the sins of Jeroboam the son of Nebat, who made Israel to sin.
19 And Pul the king of Assyria came against the land: and Menahem gave Pul a thousand talents of silver, that his hand might be with him to confirm the kingdom in his hand.
20 And Menahem exacted the money of Israel, even of all the mighty men of wealth, of each man fifty shekels of silver, to give to the king of Assyria. So the king of Assyria turned back, and stayed not there in the land.

So to summarize, we have a wicked king who taxes the wealthy in order to accomplish a political payoff. I wonder how much you had to make a year to be considered "wealthy" back then?

There is nothing new under the sun (Ecclesiastes 1:9)!

I Samuel 8, and Our Present Day

In the eighth chapter of I Samuel, the people of Israel come to Samuel and demand that they be given a king to rule over them, so that they might be like the nations around them. [They apparently wanted a "change."] Samuel, realizing that this was neither the will of God nor a particularly good idea, gives them ample warning about the king they would receive, in these verses:

11 And he said, This will be the manner of the king that shall reign over you: He will take your sons, and appoint them for himself, for his chariots, and to be his horsemen; and some shall run before his chariots.
12 And he will appoint him captains over thousands, and captains over fifties; and will set them to ear his ground, and to reap his harvest, and to make his instruments of war, and instruments of his chariots.
13 And he will take your daughters to be confectionaries, and to be cooks, and to be bakers.
14 And he will take your fields, and your vineyards, and your oliveyards, even the best of them, and give them to his servants.
15 And he will take the tenth of your seed, and of your vineyards, and give to his officers, and to his servants.
16 And he will take your menservants, and your maidservants, and your goodliest young men, and your asses, and put them to his work.
17 He will take the tenth of your sheep: and ye shall be his servants.
18 And ye shall cry out in that day because of your king which ye shall have chosen you; and the LORD will not hear you in that day.

Notice the italicized and bold print words...and think about the "king" [i.e., president] we have in Washington D.C. today! He will take what's yours, and give it to his servants. Scary! And in verse 12, notice the phrase "his chariots," which reminded me of certain auto companies. Even the mention of taking "the tenth" sounds ominously like a national sales tax somehow....

Now It's Kathleen Sebelius's Turn...

It's hard to be surprised anymore....even as a professional tax preparer!

This time, Kathleen Sebelius has admitted to errors on her tax return and has repaid over $7000 to the IRS for the past three years. Here is a summary of the statement she submitted:

In her letter to Baucus and Grassley, Sebelius wrote that the accountant [hired to "scrub" her returns] discovered these errors:

--Charitable contributions over $250 are supposed to include an acknowledgment letter from the charity in order for a deduction to be taken. Out of 49 charitable contributions made, three letters couldn't be found.

--Sebelius and her husband took deductions for mortgage interest that they weren't entitled to. The couple sold their home in 2006 for less than what they owed on the mortgage. They continued to make payments on the mortgage, including interest. But since they no longer owned the home they weren't entitled to take deductions for the interest. The same thing happened with a home improvement loan. Sebelius said they "mistakenly believed" the payments were still deductible.

--Insufficient documentation was found for some business expense deductions.

Perhaps she should have hired this new accountant for the first go-around.

Let's take a look at these three matters individually.

(1) As a recognized tax professional myself, if a client comes to me and says, "I made a contribution of [insert dollar amount here] to [insert charity or church here], but I do not have documentation of it," here's what I tell them: "I can only include this on your Schedule A if you have documentation of the gift." I would then inquire if they had (or could get) a canceled check, receipt, or other documentation besides a formal statement. If they said they could, I would include the gift on the return...and remind them that they needed to track down and secure that documentation.

But notice—I take the word of the client in this case, and do as the client instructs.

(2) If a client came to me with a mortgage interest statement [Form 1098] for their own home (which can be lawfully deducted), another for a home they didn't live in, and at least one more for a home equity line of credit, I would be asking some questions. I might not think, however, to ask if the client still owned the home. It is not uncommon for people to own two homes, and mortgage interest can be deducted for one's principal dwelling and one other (assuming other conditions are met).

But again notice—It would be expected that the client would share the relevant facts with the tax preparer.

(3) This is a no-brainer. No document, no deduct. While I might include a deduction on a Schedule C if the client did not physically show me receipts, I would be doing it on the client's word that the documentation exists.

And at the end of the interview with the client, I would tactfully emphasize the importance of proper documentation of all these things, and remind the client that these documents (which you tell me you have) need to be kept in the event the client is audited.

Or nominated to an Obama cabinet post.

Tuition = Taxes??

Here in Michigan, Gov. Granholm wants to see two things happen this year:

1. Michigan public universities freezing tuition
2. A 3% cut in state operating support to public universities

As if often the case, our governor has ideas which lack a basis in economic reality. Honorable ideals, perhaps (sometimes)...but generally out of touch with economic reality.

Then we have this quote on Granholm's desires, originally reported in Gongwer:

Granholm did not reveal any specifics on how that would be done, but reiterated her view that it is important that tuition be frozen so students don't see "their tuition taxes go up."

Tuition taxes?? What?? Students who attend Michigan public colleges (or their benefactors) are paying for a service—education—which they receive. This service is already deeply subsidized by me and the other taxpayers of Michigan. For the government to merely "subsidize something to a lesser degree" (when many of us would prefer not to see it subsidized at all) does not amount to a "tax" on those who purchase that service.

Students, like other consumers, are free to take their tuition dollars where they choose. To call their tuition a "tax" is disingenuous; we are not free to take our "taxes" where we choose!

Obama: The Top Five Broken Promises...So Far

I came across this list today of the five biggest broken promises that our President has made. Here is a summary:

1. His campaign website said, “Too often bills are rushed through Congress and to the president before the public has the opportunity to review them. As president, Obama will not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House website for five days.”

2. His campaign website also said, “No political appointees in an Obama-Biden administration will be permitted to work on regulations or contracts directly and substantially related to their prior employer for two years. And no political appointee will be able to lobby the executive branch after leaving government service during the remainder of the administration.”

3. He has also said on multiple occasions (see website for details) that "no family making less than $250,000 a year will see any form of tax increase," or substantially similar words. The truth: Already raised taxes on cigarettes, and has proposed massive new taxes on energy; these will affect plenty of people who make less than $250,000!

4. On 3/10/08: “The system is broken. We can no longer accept a process that doles out earmarks based on a member of Congress’ seniority, rather than the merit of the project." The truth, of course, is that he has signaled his intent to sign a bill full of such earmarks as soon as it reaches his desk. It has already passed the House.

5. “Not because I believe in bigger government — I don’t.” More a statement than a promise...but it is a lie.

Fuller details are given here.

How to Fund Highways?

This foxnews.com article discusses how the Obama administration is less-than-united on the topic of raising tax dollars via a gasoline tax (as is done now) or via "new" means of tracking the miles driven by automobiles using—in the words of some—Orwellian technology.

Unlike so much of what our government spends money on today, highway maintenance is a proper object of government care. And consequently, some of our tax dollars should go toward building and maintaining roads, bridges, and the like. Currently, gas taxes provide the majority of those tax dollars.

The trend toward more full-efficient cars, combined with the advent of cars which do not use gasoline, has resulted in the consumption of fewer gallons of gasoline and therefore fewer tax revenues. Environmentalists should be lauding this, and in truth, this is a generally good thing.

However, while gasoline consumption is decreasing, highway usage is not; and roads continue to deteriorate with time. Government needs to consider how to fund the needed highway and bridge work using other sources.

So here's my solution: In order to increase money for highway and bridge work, decrease an equal (or more) amount of money somewhere else! This will have the side benefit of forcing government leaders to think in the same sort of way we "common folk" think, and might even get them in the habit of using this same thought pattern for other fiscal issues that may arise. Furthermore, once it is realized that the reduction of wasteful spending makes money available without reducing what actually gets done, even greater efficiencies can be acheived!

Finally, Tax Cheats Exit the Stage

It was with pleasure that I read that two tax cheats, Tom Daschle and Nancy Killefer, have withdrawn themselves from consideration from positions in Obama's administration.

Daschle's career has been that of the consummate politician/lobbyist/insider whom most of us decent citizens prefer to see run out of Washington, not invited in. He, Killefer, and the already-in-place new treasury secretary Geithner, as people well-acquainted with the recent history of the democratic party, seem almost certain to have known that they were evading taxes. These issues have been in the news before; any qualified CPA or tax preparer should have advised them on the proper manner in which to handle their own financial affairs.

Yet the President, despite his promises of transparency, high ethics, etc., for his administration, supported each of them even after these tax-evading revelations were public. Nominating a Clinton for a high-ranking post didn't help this cause, either.


And I think we now know with certainty why the democrats in government aren't worried about raising taxes on everyone—many don't pay them!

Common Tax Mistake? Really??

Timothy Geithner, whose nomination as the next treasury secretary has hit a bump with revelations that he did not pay self-employment taxes in 2003-2004 while employed by the International Monetary Fund, has made a "common tax mistake," according to the Obama transition team.

Keep in mind that the author of this post is a trained tax preparer.

There is also a question about his housekeeper and the required paperwork she needed to be in the country. That I can understand, and I would not expect that to stand in the way of his nomination. However, it appears he did not pay (on time) the required withholding taxes for the housekeeper during the 2001-2002 period.

All of these taxes have since been paid, with penalties and interest.

The phrase "common tax mistake" is being used to describe this "oversight" during Geithner's IMF days. And, indeed, many individuals do not know that if they had income as a self-employed individual, as well as certain other categories of income for which no Social Security taxes were withheld, that they must identify this on their 1040 and settle up by April 15.

Any good first-year tax preparer should know this.

The IMF, being an international organization, probably does not withhold United States taxes on income. They may not be required to; I do not know. The simple solution, which Geithner certainly had to know, was to declare this on his properly-filled-out 1040 and pay up by the subsequent April 15. Therefore, the only reasonable causes (listed in order of likelihood) for this "common tax mistake" must be the following:

1. He lied. He intended to evade paying his taxes.
2. He employs an inept or dishonest CPA/tax preparer. (And if so, he'd be justified in demanding a refund of his tax preparation fees. Few people in his tax bracket prepare their own taxes.)
3. He really is ignorant about the basics of personal income taxes. According to one news report I heard today, he did his own taxes in those years. And if so, his ignorance of basic tax law is worrisome.
   

The fact that the mistake is common only makes it more likely that a competent tax prepaper will avoid making it! Is this who we want in charge of the IRS and the Treasury Department?

Today's Reason NOT To Vote For Obama

This one's easy: Obama favors socialist economics! Take this example from foxnews.com [emphasis mine]:

Barack Obama told a tax-burdened plumber over the weekend that his economic philosophy is to "spread the wealth around" -- a comment that may only draw fire from riled-up John McCain supporters who have taken to calling Obama a "socialist" at the Republican's rallies.

Obama made the remark, caught on camera, after fielding some tough questions from the plumber Sunday in Ohio, where the Democratic candidate canvassed neighborhoods and encouraged residents to vote early.

"Your new tax plan is going to tax me more, isn't it?" the plumber asked, complaining that he was being taxed "more and more for fulfilling the American dream."

"It's not that I want to punish your success. I just want to make sure that everybody who is behind you, that they've got a chance for success too," Obama responded. "My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody ... I think when you spread the wealth around, it's good for everybody."

Good for everybody?!?! I think this plumber is on to something! The essence of Obama-nomics is that those with money will be taxed, to pay for programs that we can't afford and can't even start to justify, to give money to those unwilling to work for it like the majority of us do. This is, for all practical purposes, socialism.

And please notice: Obama did not deny that the plumber would be taxed more!!