Our favorite minority attention whore, House Republican leader and next Speaker of the House John Boehner, seems to feel as though all this nonsense over extending the Bush tax cuts is chicken crap, whatever that is supposed to be. Did he mean bullshit? Just tell us what’s on your mind, Mr Boehner, we won’t hold it against you if you say bullshit on C-SPAN. “I’m trying to catch my breath so I don’t refer to this maneuver going on today as chicken crap, all right?” he said. “But this is nonsense, all right? The election was one month ago. We are 23 months from the next election, and the political games have already started trying to set up the next election.” No no, homie, this has nothing to do with the next election, this has to do with y’all just getting around to this now when no one’s cared since 2002.
If there are any doubts as to the stimulative or depressive effect of a tax rate change in terms of tax receipts received by the Treasury, check out this WSJ op-ed by W. Kurt Hauser which tells us that historically, tax revenues as a share of GDP have averaged just under 19%, whether tax rates are cut or raised.
Anyway, regardless of our feelings on the matter (many of which include expletive-filled rants like “WTF, why are you guys just now trying to figure this out?!”, “please! Can’t you work well with others for just once in your life” and/or “Gee, maybe if we addressed the problem of an overly complicated tax system this wouldn’t be such an epic pain in the assets”), the House has finally made a decision. Frankly we couldn’t be happier to see the light at the end of the W-2 on this at last.
A mere 29 days before the scheduled December 31st Tax Cut Armageddon, the
threats votes have been counted and it appears as though the yeas have it. With 6 minutes to go on the vote and with little help from House Republicans, Democrats rallied together to get the 218 votes they needed to extend tax cuts to those earning up to $250,000 and then some.
It doesn’t really matter because there’s no way the Senate is going to let this fly so you may go back to whatever you were doing and start socking away a few bucks for your 2011 tax bills.
Ahhh political process. It’s like watching a car crash in slow motion from the driver’s side.
Some of you seemed less than enthused when we shared an AccountingWEB piece on the AICPA’s new “Clearly Pretty Awesome” campaign two weeks ago so I’m here to get a good hoo-RAH out of you in the hopes that you, our brilliant, bitter and oftentimes inappropriate Going Concern readers, might have 2 or 3 cents to add.
Here’s the deal, the AICPA is giving away cash and prizes (to be used strictly for educational purposes, that is) for whomever (between ages 15 – 19) can come up with the best made-up job title using those all important three letters: C P A. Since the efforts of both the Obama administration and Ben Bernanke seem to be useless in creating jobs, perhaps high schoolers can boast a better success rate in creating new jobs. Sorry, Certified Public Asshole is already taken and frankly, kind of played out. But that doesn’t mean you can’t have similar ideas for made-up jobs, though whether or not anyone actually becomes a Chief Private Asshat remains to be seen.
The obvious inspiration behind the campaign is to plant the seed of public accounting in young little future beancounters’ brains when they are still pliable and easily influenced. After all, it’s easier to get them now, as opposed to later on down the road when they’re bitter and pissed off, overworked and saddled with a family and a career. While we admire the AICPA’s efforts in painting the profession in as cool a light as possible given the circumstances, we don’t quite see the point in rewarding whomever makes up “city park accordionist”.
Instead, here’s what I propose: take your high school student to work day for CPAs. Cops do it, why can’t we? Invite high school students to go on a ride-along to the client and hell, while they’re there why not have them partake in such exciting awesomeness as inventory counts? It will look great on their résumés when the job market looks up in 3 – 7 years!
Or better, encourage students to become forensic accountants by taking them to a real prison to follow a day in the life of Jeff Skilling complete with orange uniform and over-aggressive cellmate. That kills two birds with one stone as the impressionable youngsters could also get a great lesson in sexual harassment from a tattooed dude named Spike and save themselves an employee training or two down the road. Perfect!
So, go on then, what do you think CPA could stand for?
The latest twist in this seemingly unending logo-mama drama was brough to our attention by a reader who saw an eery resemblance between
PwC pwc’s new look at the new look of recently rebranded and ridiculed retailer The Gap.
Does is strike you as odd that soon after PWC changes their logo the GAP changes theirs to a similar style? Although Deloitte is currently GAP Inc. auditors, the company may be opinion shopping. Changing the company logo to look like their would be auditors’ is a surefire way to get the desired opinion.
This may be a total coincidence. However should GAP grab headlines in the style of the Universal Travel Group and hop over to PWC, at least now you won’t be surprised.
Our reader brings up an excellent point. We admit that the new logos aren’t identical but there’s more than a slight chance that they are brothers from another mother. So what’s the deal here? Maybe it is a coinky-dink. But then again, you would think that the cheap denim, khakis and plain t’s business would be thriving in this economy. If our reader is to be believed, Gap may be trying to find an auditor that’s willing to look the other way on [ideas on financial reporting chicanery are welcome]. And it just so happens that a certain professional service provider has also been recently taken some heat for their rebranding.
The only thing we can be sure of is that if Ernst & Young is serious about their makeover, they should resist the temptation to stick with squares.
Like we said, the motives here are not obvious and it’s imperative that we get to the bottom of this mystery, so that involves getting your ideas. Nothing is too crazy.
There are two things that really stick in the craw of many Americans: 1) The freedom-hating IRS and 2) Muslims thinking that they can build mosques in this country wherever they want.
Well now, according to a report issued by The Investigative Project on Terrorism (“IPT”) there is reason to lump the two together because a report now shows that Imam Feisal Abdul Rauf – the leader of the Islamic Community Center planned two blocks away from Ground Zero – obtained a ‘sketchy tax break‘ for a religious group he founded.
The IPT investigation found that “Feisal Abdul Rauf filed for ‘church’ status to the IRS for his newly formed Islamic group in 1998 and listed an apartment building where he claimed in the federal application that 400-500 people worshiped there.”
More alleged chicanery detailed in the IPT press release:
[A] review of the building and real estate records indicates there is nowhere in the building to house that many congregants. ASMA lists its office address as 201 W. 85th St., Apt. 10E on the federal tax form, while it cites only the building address as its location for prayer services.
In the article, IPT also shows:
• Rauf’s American Society for Muslims Advancement listed its office as the apartment of Rauf’s wife, Daisy Khan.
• Khan was listed as an ASMA director living at 201 W. 85th St., Apt. 10E, in the group’s 1997 incorporation papers filed with the state of New York. A year later, the group’s IRS filing does not list Khan as a director but instead gives her home address as ASMA’s address.
• ASMA told the IRS in 1998 that it planned to build a prayer center that would hold up to 1,000 worshipers at a time. That was never built.
• Although ASMA has tax-exempt church status, its website shows it has no permanent prayer site and the group no longer touts religious services as part of its mission.
The Post – likely acting on orders from the News Corp. overlords – inflames things bit further (citing IPT’s report) pointing out all the benefits that the ASMA enjoyed as a result of the exemption:
“Church status” is more than just an exemption — it means never having to pay taxes, file returns or reveal the sources of a congregation’s money or how it’s spent, according to the Washington-based Investigative Project on Terrorism, which discovered the group’s startling claims on the IRS form it filed seeking the special status.
On that form, the organization said it held services at 201 W. 85th St.
That’s a 17-story apartment building with no public space big enough to accommodate the 450 to 500 worshippers the group claimed regularly showed up five times a day to pray.
So now that the IRS has been twisted (albeit marginally) into the Burlington Coat Factory Mosque controversy, opponents of one or both will likely be reenergized for their holiday weekend protesting plans. Although, since the IRS has already been accused of anti-Israel it should make things slightly more interesting.
The big winner in this morning’s auction of some primo seats at Texas Stadium went to Hank Wendorf of Dallas-based Ticketsource.com.
There was only one other registered bidder at the IRS auction and the total damage ended up being $311,000 which was in Wendorf’s range and he’s pretty flippin’ stoked, “These seat options are not available from the Cowboys. I think it’s a great opportunity for me to add to my inventory,” he told the Dallas Morning News and saying, “In my opinion, these are the best seats in the stadium.”
The package includes seasons tickets for this year plus options to buy the same seats – located behind the Cowboys bench near the 50 yard-line – for the next 30 years, hence, you’ll never get them.
Since the starting bid was around $180k, Wendorf wasn’t too concerned about too much competition showing up to today’s auction but at least he wasn’t smug about it, “If fans want to judge the seat quality for themselves, ‘they can buy tickets from me,’ he said with a laugh before heading off to sign lengthy legal documents.”
Prime Dallas Cowboys seats go to ticket broker for $241,000 in IRS auction [Dallas Morning News]
From Big 4 Blog:
Ernst & Young China is announcing the grand opening of its new office in China’s tallest building and premier location – Shanghai World Financial Center (SWFC) in the Pudong District of Shanghai. All of Ernst & Young’s 2,500 Shanghai people (of the 9,000 total China employees) will be one single location to help provide better services to clients and laying the groundwork for our further expansion in the China market. Prior to this, E&Y was in three different Shanghai locations.
Jim Turley managed to ignore the issue entirely saying, “Our confidence in the long term prospects in China is demonstrated in the investment in our business and our people. We currently have over 9,000 people in China, and will further grow our manpower with the business.”
E&Y’s annual intern conference invaded Orlando yesterday and the ‘Berg had Director of Campus Recruiting, Dan Black on to discuss Gen Y and why they are pre-tay, pret-tay, pret-tay important to the future of the firm.
Despite their technology savviness, it appears that Gen Y is still relying on rock-paper-scissors as a key decision-making tool. Apparently, darts and jigsaw puzzles are important too.
Oh, and the time you put in as a line cook at Applebees’s in college really doesn’t translate into anything useful so don’t be too concerned about that.
Welcome back, Joe.
Yesterday we learned about Joe Biden not taking too kindly to a custard shop manager’s suggestion that he can eat all the free custard he wants as long as JB & the rest of the crew “lower our taxes.”
The Veep retorted that maybe the dude in the funny paper hat should try saying nice for change instead of being a smartass. It was the typical Joe Biden charm that you would expect. Perhaps he should have suggested visiting the White House’s tax savings tool instead of name-calling but the past is the past and we’ll just chalk up another Joe Biden moment of hilarity/political liability.
But wait! What if the VP was right about this portly custard slinger? We read over a little mini memoir over at Daily Intel that indicates that the guy probably had it coming:
First of all, as anyone who has ever lived in Milwaukee knows: Kopp’s Frozen Custard is the most delicious dessert on the planet. It’s basically ice cream with twice the fat. So when Smilin’ Joe Biden showed up at Kopp’s in Glendale, Wisconsin, last week, you can only imagine his annoyance at being interrupted in the middle of his first taste — from the looks of things, Friday’s special flavor, chocolate chip cookie dough — by a store manager cracking that the cone was free, as long as the vice-president would agree to “lower our taxes.” Biden being Biden, he called the manager “a smartass.” And who was that smartass? None other than my nemesis of twenty years ago — the first boss I ever hated and feared.
Said smartass is Scott Borkin and the author of this piece, Dan Kois, proceeds to tell a tale of a lunatic boss from hell (thanks, Richard Lewis):
Once, very late on a long, hot night of customers piling in and the custard machines jamming and the store’s owner, Carl Kopp, walking around in his apron and hat terrifying everyone, Scott Borkin came over to collect a shake for order number 87. “What the hell is this?” he asked me.
Inside, I panicked. What had I done wrong this time? But I had the ticket right in my hand — malt with chocolate — and was positive that’s what I had made. “It’s a chocolate malt.”
“No, this,” he said, pointing at my Sharpied “7” on the lid. I’d written it with a line through the center because once someone had mistaken my non-lined 7 for a 2.
“Uh, it’s a seven,” I replied.
“This is a seven,” he said, taking the ticket from my hand and drawing a non-lined numeral. “Do it right or you’re outta here.” He plucked the malt off the counter and stalked away. “This isn’t Germany!” he called over his shoulder.
Christ. Threatening termination because of lined 7 and anti-Germany? PLUS he likes bitching about taxes? This guy could be the next Joe the Plumber. Oh wait, he’s already been on Fox & Friends. Mission accomplished.
And neither does PricewaterhouseCoopers. They and the rest of the Big 4 are all over this diversity thing, strategically placed fliers around the office, the constant barrage of emails and the training. Thank the Maker for the diversity training. However, we did note something that is part of the diversity strategy that probably has better intentions than it sounds:
One of those people I interviewed is Niloufar Molavi, who is the U.S. Chief Diversity Officer for PwC (PriceWaterhouseCoopers.) She is very proud of the diversity and inclusion work of PwC. When I asked Niloufar which of their programs, policies or processes were the most innovative, she said, “At PwC we’re proud of all our diversity efforts, but if I had to choose one to highlight, it would be our white male strategy. Men comprise over half our firm and it’s critical to engage them in the dialogue about inclusion.”
Diversity Is Dead? Not According to PwC [Fast Company]
Okay, so Arizona is spending $1.25 million to build bridges for the endangered Mount Graham red squirrel and of course a bunch of people are in a big huff.
ABC News reports that without the bridges, approximately five squirrels would be killed a year and there are only 250 are known to be in existence.
Yes, that works out to $5,000 a squirrel but considering the fact that animals are far more responsible and respectful inhabitants of the planet than humans, we’ve got no beef with this.
And by a little late, we mean three months. Rahm found out the news from WBBM radio in Chicago let him know about it. So a slight embarrassment that was likely met with a response of “well, f*ck me,” “get the f*ck out of here” or simply, “F*ck.”
But the worst thing that Rahm Emanuel will endure for forgetting to pay his property taxes isn’t the questions from the media, it isn’t the $445.56 penalty that he and his wife incurred on the balance of $7,400, it’s that he just gave material to Glenn Beck for the rest of his time as the Chief of Staff.
Since delinquent taxpayers in the Obama Administration has been a favorite target of Beck but since he had his own tax troubles maybe he’ll just let this blow over.
Then again, GB could spin this into the jobs report that came out today which in turn encouraged a nice little drop in the markets which parlays into a Deepwater Horizon connection and pretty soon someone will be calling for someone else’s resignation.
That accountant is Ren Carlton, CPA, CSMC and “native Michigander.” Although Ren is hesitant to broach the subject because, “this information can be abused to defraud investors and cheat on taxes.” Who knew?!?
Despite that caveat, Ren has decided that sharing this information is too critical to be kept to himself, “I have decided that lega s is a critical skill for attracting investors and lenders, as well as satisfying the occasional customer or vendor requests.”
Okay then! So if we understand correctly, the rationale here is that cooking the books is sort of like drinking alcohol. In moderation, it’s fine and sometimes even the right thing to do but if you abuse it, you start making an ass out of yourself and probably some bad decisions that could lead to, ya know, jail.
But wait, do you really even know what “cook the books” means? You may be under the cockamamie notion that it’s a bad thing. Well, it’s not and Ren explains it for us:
Cooking the books (also known as creative accounting and earnings management) are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers toward the interpretations desired by the authors. The terms “innovative” or “aggressive” are also sometimes used.
See? Cooking the books just doesn’t follow the “spirit of those rules,” it’s not breaking the rules. Strangely enough, Ren’s definition is strangely similar to this Wikipedia entry for creative accounting:
Creative accounting and earnings management are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers towards the interpretations desired by the authors. The terms “innovative” or “aggressive” are also sometimes used.
Cooking the books, creative accounting – they’re the same right? Close enough, anyway. Now that the semantics are out of the way, what other words of wisdom can we get from Ren? How about an example of acceptable book cooking? Say, revenue recognition:
One example of cooking the books is acceleration of revenue recognition. This tactic is used to recognize revenue before it is considered earned by GAAP (Generally Accepted Accounting Principles). Methods for accelerating revenue include recognizing sales that are not yet earned or complete. Another method is to book sales that are actually earned in another period (e.g., recognizing January 2011 sales on your 2010 income statement). Flagrant abuse of the Revenue Recognition Principle includes backdating sales and fabricating fictitious sales.
How are you going to impress that bank with your revenue numbers if you ram in some revenue from a future period? What if you need another investor to help you reach the next stage of your business? It’s your God-given right to present them with phony numbers in order to get them on board. This is America, people. Don’t let the spirit of GAAP hold you back!
First off, we can’t remember the last time BDO graced these pages twice in one day. You’d think something would come out of B to the D to the O more often but whatevs. BDO 2.0 today is a little bit of good news for the firm in the form of an exclusive spot on an obscure “Best Places” list.
God forbid our lives be devoid of a ranking in the last half of May but since it’s graduation season and there are some job hunters out there that need to start paying back school loans and credit cards debts, perhaps the timing isn’t so bad. A list we might add, that did not previously have an accounting firm on it. Progress people. Progress.
BDO shattered the glass ceiling on Experience’s “Best Places to Work for Recent Grads” that “picked 20 organizations whose entry-level hiring and retention practices are exceptional.” The list is specifically aimed at those companies that are hip to the Gen Y crowd, although we don’t really know any “recent grads” list that wouldn’t be.
Regardless, BDO has some decent company on the list that includes Accenture, Kellogg’s and Morningstar but BDO is the sole accounting firm. The fact that not a single accounting firm (let alone a Big 4 firm) is on the list is a travesty of the highest order. We then realized that the list’s very nature is severely flawed.
It’s too short. Any employer list with less than 50 companies on it simply cannot be taken seriously.
And since there were no accounting firms on last year’s list, this might as well have been random list of companies thrown together for the sake of keeping communications professionals busy.
This year, the Experience folks must have recognized their gross error and that since no employer list could be taken seriously devoid of a professional services firm. Not wanting to make it too complicated, BDO’s inclusion be probably chalked up to an alphabetical advantage.
[caption id="attachment_10491" align="alignright" width="260" caption="Is that Five Guys?"][/caption]
We realize that the above statement will likely result in an army of KPMG lawyers threatening this here site with libel and possibly putting every single person associated with GC in mortal danger but the question needed to be asked.
At the Players Championship, the freshly jacketed Phil said the following, “I grew up on In-N-Out. I thought that was the best burger until I had Five Guys. That is hands down the best burger I’ve ever had.”
At first this may seem like an over-eager chubby man enjoying a newfound joy in life. The guy is happily married, so he’s not going to make like Tiger and bang all the Laker Girls or anything. Anyhoo, it turns out that Phil failed to mention that he hearts Five Guys so much (apparently he went there SIX DAYS IN A ROW last week) that he dropped some coin into the franchise.
Fellow duffer Stewart Cink caught wind of Mick’s little endorsement of FG and took it upon himself to let the cat out of the bag:
We don’t watch
a lot of golf but we do know that Phil pulls some decent scratch putting those four squares on his head. And we’ve never heard him say a single word about the kick ass professional services put forth by all you Klynveldians out there.
Of course this doesn’t really mean anything, Phil could have a special place in his heart saved just for KPMG but he’s just not able to verbalize it. That’s probably what it is.
From a source at 300 Mad House:
“I just took the firm wide pulse survey and I laid into them. I told them to stop falsely advertising work life balance.”
Not being intimately familiar the work/life whathaveyous that comes by way of Bobby Mo emails but acutely aware of the motivation techniques employed, we can understand the frustration. Especially judging by some of your reactions to last week’s number. If you feel like sharing your feedback for the year that was at P. Dubs, let it rip.
Since we’ve been out of the number crunching biz on a day to day basis, our reaction to the 16,000 attempts by an SEC accountant to access porn was simply, “Holy shit, that’s a lot.”
Thankfully, we still have plenty of friends that still burn up the 10-key calcs and we got a drop from one of them a little while ago:
I did [a] calc on that accountant that viewed porn sites up to 16,000 in one month. He was averaging 725x per day (including weekends). That is impressive. I don’t think I can hit 725 times in a year (and I don’t even have a girlfriend), let alone one month.
UPDATE: Our stupid friend is obviously rusty on the calc (they’re no longer in public accounting) and we’ve been re-informed by said friend that 725x is based on 22 workdays (i.e. not including weekends).
Even more importantly, how many accountants out there double-checked this pre-update calc and then failed to get all self-righteous about it?
Furthermore, and perhaps most importantly, the bar has been raised in the wasting time department. Granted this accountant was wasting everyone’s tax dollars while those of you in public accounting are wasting your clients’ dollars but these porn surfing numbers are no doubt a challenge worth accepting. Go forth.
Let’s stop digging E&Y for five minutes and talk about Deloitte trying to sex itself up as tax advisory coaches to the group hoping to purchase Manchester United.
Deloitte, which has worked hard to build up its sporting credentials with its annual audits of football’s finances and consultancy work for a host of clubs, is understood to have become the latest big financial hitter to become associated with the Red Knights, the would-be buyers of Manchester United, in an advisory capacity.
Alongside Freshfields, which is supplying legal expertise, and Nomura, the Japanese investment bank that has been responsible for contacting all the 40 or so wealthy individuals who expressed concrete interest in the plan, Deloitte is believed to have been supplying advice on tax structures and how to structure any bid most efficiently.
Yeeeeeeeeeeah I can see it now, “casual football Friday” memos circulated around Deloitte’s UK offices about appropriate garb for the field and some hokey “We Are the World” sing-a-long at the end when Manchester United kicks whomever’s ass (I don’t watch the stuff). Excellent.
In the spirit of not discriminating when ripping on the Big 4, this Deloitte flick nearly brought me to tears. Maybe it was the faux hawk or the overgrown baby beard. Perhaps it was the fucking cape. You decide.
The Green Dot FTW!
It’s been a while since we shared some cost saving ingenuity from Florida’s CFO–cum-Gubernatorial candidate, Alex Sink. However, this time we learn how she managed to spend some of those savings.
According to the Politics blog of the South Florida Sun-Sentinel, CFO Sink’s Department of Financial Services has “purchased 182 assault rifles – costing $255,000, according to Sink’s office – in the last two years.” When you Google “assault rifle” one of the first links takes you to this.
A spokesman for the wannabe Guv made it plain for those GOP haters (who are all of a sudden against guns?) trying to block Sink from purchasing more BFGs:
The rifles are necessary to protect fraud investigators who deal with “dangerous people,” said spokesman Kevin Cate – arsonists, sophisticated car insurance fraudsters, money launderers. If Republican legislators are taking a shot at Sink with the assault-weapon purchasing ban, “that’s a shot at officer security,” Cate said.
Sink said: “I rely on my law enforcement people to evaluate what the risks are and what they need. I’m going to do everything possible to protect them.”
Look. We’ve got no doubt that some white-collar criminals are dangerous but this seems a tad ridiculous.
On the other hand, since it is South Florida and basically anything can happen (including 10 – 26% returns on arbitraging groceries) perhaps this type of firepower is necessary.
When celebrities have tax trouble, the majority of reporting out there feels like schadenfreude. Being of the more helpful mindset (especially when it comes to America’s beloved rich [or not so much] and famous) we try to provide solutions for those celebs down on their luck.
In celeb-tax-trouble du jour, Pam Anderson has been named to the California’s Franchise Tax Board Top 250 Tax Delinquents. She owes the people of California nearly $500k.
Someone equally as famous but without the financial difficulties is former VP candidate Sarah Palin.
We’re not suggesting that SP spread the wealth around but just to help out a real American like herself. What’s $500k between two women that share the uncanny ability to seduce the American psyche? They’re a natural team – both have rabid fans; Pam is currently on a reality show, Sarah’s is in the works. Sarah Palin hates taxes; if Pam didn’t before, she certainly does now.
Sure, SP kills animals while Pam stumps for them but those a small issue like digesting animal flesh or wearing fur can surely be set aside for the good of the country. Plus, it would make for a great Sarah stump speech come 2012.
This morning we shared some best practices on how to keep your ass out of hot water should an IRS audit befall you. The concern is that the government spending is out of control, huge deficits yada yada yada, the IRS will be knocking on more doors.
Well, now it appears that the last entity type standing, the sole proprietorship will join the rest as an IRS target. IRS-criticizer-in-chief J. Russell George’s TIGTA issued another report but this time it cites sole proprietorships for “$68 billion of the $345 billion tax gap in 2001,” in underreported income. Web CPA reports George’s thoughts:
“Sole proprietors who underreport their income can create an unfair burden on honest taxpayers and diminish the public’s respect for the tax system,” said TIGTA Inspector General J. Russell George in a statement. “It is imperative that the IRS institutes policies to address this problem.”
How’s this for addressing a problem? The Internal Revenue Code, you my have heard, is mind-numbingly complex. Sole proprietorships, out of all the entity structures, are the least equipped to ensure compliance with the tax law. Auditing more of them will not result in increased compliance but rather enormous costs to their businesses. As for “diminish the public’s respect for the tax system,” didn’t that ship sail ages ago?
So 47% of our nation’s households will pay no federal income tax this year. Well, stick it to those rich people, then! Help the deserving poor, like Buffy Richgirl.
Buffy is a struggling 26-year single mom with three kids and a checkered romantic history. Yet she does the best she can, earning $16,500 in various jobs in 2009 while taking courses in applied tattoology at the local college, while Mom helps with the kids.
Let’s see how a beneficent tax law helps this struggling mom make ends meet.
Some key facts:
Name: Buffy Richgirl.
Filing status: Head of Household, because of 3 dependent kids – Biff, Cloyd and Muffy.
Income: $16,500, all salary, no withholding.
Housing status: Daddy gave her $200,000 in 2008 to buy a house, which she bought in December 2009. She formerly lived in various apartments or with Daddy.
Educational status: She’s taking tattoo technology courses half-time at the local college (her Mom helps out with the kids), where she ran up $3500 in qualified expenses.
Prospects: She’s the beneficiary of a trust from late Grandpa that will kick out $5 million when she hits age 30, but which distributes nothing right now.
Other cash sources: She gets occasional non-taxable child support, and she has a non-interest bearing checking account with some Daddy cash.
The tax results? Adjusted Gross Income: $16,500. Taxable Income: $0. Taxes withheld and paid: $0. Tax refund: $17,009.
So how did our heroine double her income via her 1040? Through the miracle of “refundable credits” – tax credits that generate a refund even if your tax computes to zero. She wins with:
Don’t believe me? Look at her 1040 for yourself:
So what’s the point? It’s very hard to fine-tune the tax law. That’s especially true with refundable tax credits. No matter how carefully you try to “target” a group with tax benefits, there will be collateral unjust enrichment.
Now don’t you feel better about that check you have to send IRS next week?