The Endless Economic Cycle
- posted by KLR
Riddle: What is it that happens on a continual basis and yet, is always ignored until it’s too late? Answer: Economic downturns. The world economy is in an endless cycle of expansion and contraction and the only thing that changes is how extreme the highs and lows reach before reversing. But somehow, no one wants to think of the lows until they are actually facing them.
Expansions are easy to deal with. As revenues increase; businesses, governments, and households find ways to spend their new found wealth. It’s the contractions that are a problem. Most businesses are able to fend off reductions in revenue by cutting costs. Payroll being the quickest, explains the run up of unemployment at every contraction. Households don’t fare as well. Most of their expenses are related to basic needs like food and shelter with the rest being debt. The problems arise when there’s not much that can be cut. In this light, government fairs the worst. They get a double whammy at every economic downturn. Revenues decrease and expenses increase - as support is given to shore up the sagging economy. But something has happened in this downturn that is shining a bright light on some real problems.
One is, government spends all the money they take in – good times or bad. Which is understandable since there is constant pressure to do as much as possible with the resources available. The flaw that becomes very evident in this downturn is that most of this spending is fixed either by law, contract, or entitlement. No one stands up and volunteers for a cut, and worse – all proposed cuts are fought tooth and nail. If spending can’t be reduced, we are faced with deficit spending, which means borrowing against future tax collections. This simply isn’t sustainable and just makes the problem worse later on. Ask any homeowner who got caught up in the equity splurge - you can’t borrow your way out of trouble.
Expansions are easy to deal with. As revenues increase; businesses, governments, and households find ways to spend their new found wealth. It’s the contractions that are a problem. Most businesses are able to fend off reductions in revenue by cutting costs. Payroll being the quickest, explains the run up of unemployment at every contraction. Households don’t fare as well. Most of their expenses are related to basic needs like food and shelter with the rest being debt. The problems arise when there’s not much that can be cut. In this light, government fairs the worst. They get a double whammy at every economic downturn. Revenues decrease and expenses increase - as support is given to shore up the sagging economy. But something has happened in this downturn that is shining a bright light on some real problems.
One is, government spends all the money they take in – good times or bad. Which is understandable since there is constant pressure to do as much as possible with the resources available. The flaw that becomes very evident in this downturn is that most of this spending is fixed either by law, contract, or entitlement. No one stands up and volunteers for a cut, and worse – all proposed cuts are fought tooth and nail. If spending can’t be reduced, we are faced with deficit spending, which means borrowing against future tax collections. This simply isn’t sustainable and just makes the problem worse later on. Ask any homeowner who got caught up in the equity splurge - you can’t borrow your way out of trouble.
So – wouldn't it make sense to have a balanced budget based on average tax revenue instead of projected revenue? This probably sounds easier than it is, but it sure would go a long way in smoothing out the extremes. Some form of this has been tried with things like rainy day funds, but somehow those funds always seem to get tapped even before the rain. How about trying something like, excess revenues collected during upturns are only spent on things that can be put on hold during downturns – like road repair or building improvements. Locking in an endless stream of fixed costs will always bring us back to where we are today – massive deficits and unpleasant remedies.
By. Norman LeBlanc, CPA
Tax Services Group
Labels: Accounting, CPA, Cutting Costs, Economic Downturns, Economy, Fixed Costs, Fixed Spending, Government Spending, KLR, LeBlanc, Projected Revenue, Tax, Tax Collections, Tax Planning, Tax Revenue 2010
Last-Minute Moves to Save 2009 Taxes
- posted by KLR
There are only a few weeks left before the year ends and your 2009 tax life is sealed in stone. However, there is still time for considering a few tax-wise moves that could save you money now or in the future.
On involves making gifts to others. A person can give any other person up to $13,000 in 2009 without incurring any gift tax. The annual exclusion amount increases to $26,000 per donee if the donor's spouse joins in making a gift. Anyone who expects eventually to have estate tax liability and who can afford to make gifts to family members should do so. In addition to avoiding a gift tax today, if the property you are gifting (such as stock) increases in value, that increase in value is also out of your estate. With today’s deflated stock prices, this may be worth considering a bit more carefully than in prior years.
Double check your potential tax liability for 2009 and compare it to amounts paid in via withholding or estimated taxes. If you think you may be underpaid – perhaps you missed an estimated tax payment earlier in the year – you can increase your withholding for the last one or two pay periods in the year. All amounts paid via withholding count as if they were paid evenly throughout the year. So if you missed an estimated payment and face a penalty for the late payment of the amount, you may be able to eliminate that penalty by increasing your withholding before year-end.
If you have a health flexible spending account (FSA) at work and you must use the account before year-end, check to see if you have any unused funds in your account. If you have unused funds that you are in danger of losing, consider expenditures such as eyeglasses, contact lenses, etc. And, don’t forget that nonprescription drugs like antacid, allergy medicine, pain relievers or cold medicines qualify for FSA reimbursement. You need to make the purchase prior to year-end even if you are not able to submit the reimbursement until after the first of the new year.
While I am not expecting anyone to go out and buy a new car because of my blog, it is worth noting that depending on meeting certain conditions you can deduct qualified motor vehicle taxes paid on the purchase of a car in 2009 that you will not be able to deduct in 2010 (unless Congress changes the law). There are also tax credits available for the purchase of a qualifying fuel efficient car. The most widely available type of these vehicles is the hybrid.We don’t want you to miss any of these opportunities. If you have any questions, call your KLR tax advisor today.
By. Frank Monti, CPA
Not For Profit Group
On involves making gifts to others. A person can give any other person up to $13,000 in 2009 without incurring any gift tax. The annual exclusion amount increases to $26,000 per donee if the donor's spouse joins in making a gift. Anyone who expects eventually to have estate tax liability and who can afford to make gifts to family members should do so. In addition to avoiding a gift tax today, if the property you are gifting (such as stock) increases in value, that increase in value is also out of your estate. With today’s deflated stock prices, this may be worth considering a bit more carefully than in prior years.
Double check your potential tax liability for 2009 and compare it to amounts paid in via withholding or estimated taxes. If you think you may be underpaid – perhaps you missed an estimated tax payment earlier in the year – you can increase your withholding for the last one or two pay periods in the year. All amounts paid via withholding count as if they were paid evenly throughout the year. So if you missed an estimated payment and face a penalty for the late payment of the amount, you may be able to eliminate that penalty by increasing your withholding before year-end.
If you have a health flexible spending account (FSA) at work and you must use the account before year-end, check to see if you have any unused funds in your account. If you have unused funds that you are in danger of losing, consider expenditures such as eyeglasses, contact lenses, etc. And, don’t forget that nonprescription drugs like antacid, allergy medicine, pain relievers or cold medicines qualify for FSA reimbursement. You need to make the purchase prior to year-end even if you are not able to submit the reimbursement until after the first of the new year.
While I am not expecting anyone to go out and buy a new car because of my blog, it is worth noting that depending on meeting certain conditions you can deduct qualified motor vehicle taxes paid on the purchase of a car in 2009 that you will not be able to deduct in 2010 (unless Congress changes the law). There are also tax credits available for the purchase of a qualifying fuel efficient car. The most widely available type of these vehicles is the hybrid.We don’t want you to miss any of these opportunities. If you have any questions, call your KLR tax advisor today.
By. Frank Monti, CPA
Not For Profit Group
Labels: Accounting, CPA, KLR, Monti, Tax
Simple Taxes
- posted by KLR
There’s been some talk in Washington recently about simplifying the tax codes and there’s hardly anyone who wouldn’t agree -- our income tax system is too complicated. Why is that? Hasn’t congress simplified the system before?
The answer is: yes, the tax code has been rewritten many times. Sometimes to make sections of the code simpler and twice, in 1954 and 1986 the tax code was completely rewritten cover to cover. If that’s the case, why does the current code stand at 70,000 plus pages? The answer is simple… it has to be.
Every time congress makes the tax code less complicated, two things happen. One, savvy tax advisors find loopholes in the law and show their clients how to save money by structuring their transactions accordingly. There is nothing illegal about this, the tax code is there to be adhered to, whether that helps or hurts. Congress then reacts by modifying the law and closing the loophole. The second phenomena we see is congress realizing that many things can be accomplished quickly by putting a monetary incentive to it. This tool can really rack up the page count.
These are just two of the reasons you probably will never see a simple tax system in the U.S. Another major factor is fairness. Believe it or not, our tax system is designed to allow taxpayers with the lowest incomes to pay the least tax (as a percentage of income). Despite all the commentary, high income earners pay a much higher percentage than their lower income counterpart and many of the deductions and credits afforded to lower bracket taxpayers are passed out or disallowed for higher earners. This is partially what complicates the tax code. There are countless triggers and mechanics to calculate and formalize who gets a deduction/exemption/ credit and who doesn’t.
So what are the alternatives? There’s always a flat tax, but is that the best way to administer a tax system considering the same total dollars need to be collected? Wouldn’t it shift the tax burden? If it doesn’t, how would it be different than what we have now? Many European countries have implemented a variation of a flat tax by using a value added tax. The disadvantages of a value added tax are: anyone who provides goods or services becomes the tax collector and, the tax is continuously rolled into the cost of the product so no one really knows how much tax they are paying. Ask a European how much tax they pay and many will respond with - I don’t pay tax. In the U.S. there have been proposals of a national sales tax. This, unfortunately, isn’t much different than a value added tax because tax is paid as part of the cost of goods and services.
There have also been proposals to have the IRS prepare income tax returns for all tax payers having simple sources of income like W2 wages and bank interest. Does this really help considering that the real complexities of the tax law don’t affect this category of taxpayer?
So what’s the solution? Do we continue with the system we have, do we opt for stealth taxes like the value added tax or do we have the IRS do tax returns for us? It’s likely that there is no easier solution than the tax code we have. For every gain in simplification, we lose in transparency, fairness, and administration. How about no tax at all? Oh yea, that doesn’t work either.
The answer is: yes, the tax code has been rewritten many times. Sometimes to make sections of the code simpler and twice, in 1954 and 1986 the tax code was completely rewritten cover to cover. If that’s the case, why does the current code stand at 70,000 plus pages? The answer is simple… it has to be.
Every time congress makes the tax code less complicated, two things happen. One, savvy tax advisors find loopholes in the law and show their clients how to save money by structuring their transactions accordingly. There is nothing illegal about this, the tax code is there to be adhered to, whether that helps or hurts. Congress then reacts by modifying the law and closing the loophole. The second phenomena we see is congress realizing that many things can be accomplished quickly by putting a monetary incentive to it. This tool can really rack up the page count.
These are just two of the reasons you probably will never see a simple tax system in the U.S. Another major factor is fairness. Believe it or not, our tax system is designed to allow taxpayers with the lowest incomes to pay the least tax (as a percentage of income). Despite all the commentary, high income earners pay a much higher percentage than their lower income counterpart and many of the deductions and credits afforded to lower bracket taxpayers are passed out or disallowed for higher earners. This is partially what complicates the tax code. There are countless triggers and mechanics to calculate and formalize who gets a deduction/exemption/ credit and who doesn’t.
So what are the alternatives? There’s always a flat tax, but is that the best way to administer a tax system considering the same total dollars need to be collected? Wouldn’t it shift the tax burden? If it doesn’t, how would it be different than what we have now? Many European countries have implemented a variation of a flat tax by using a value added tax. The disadvantages of a value added tax are: anyone who provides goods or services becomes the tax collector and, the tax is continuously rolled into the cost of the product so no one really knows how much tax they are paying. Ask a European how much tax they pay and many will respond with - I don’t pay tax. In the U.S. there have been proposals of a national sales tax. This, unfortunately, isn’t much different than a value added tax because tax is paid as part of the cost of goods and services.
There have also been proposals to have the IRS prepare income tax returns for all tax payers having simple sources of income like W2 wages and bank interest. Does this really help considering that the real complexities of the tax law don’t affect this category of taxpayer?
So what’s the solution? Do we continue with the system we have, do we opt for stealth taxes like the value added tax or do we have the IRS do tax returns for us? It’s likely that there is no easier solution than the tax code we have. For every gain in simplification, we lose in transparency, fairness, and administration. How about no tax at all? Oh yea, that doesn’t work either.
By Norman LeBlanc, CPA
Tax Services Group
Regulation and Compliance Continue to Invade the World of Not-for-Profit Organizations
- posted by KLR
Once upon a time not-for-profit organizations were left alone to devote as much of the resources they could marshal together on their mission. The board, comprised of individuals from the community, was the only oversight in place charged with making sure the organization did the right thing. This lack of regulation and red tape along with exemption from Federal and State income taxes was part of society’s “gift” to the not-for-profit organization as gratitude for their mission oriented work.
All of that is changing and changing rapidly. The IRS Form 990, annual information return, completed by most not-for-profit organizations has completely changed and is now a document that will consume 40 or more pages and contain information and disclosures never before seen by the general public. Throughout 2008 we conducted half-day seminars for our clients just to get ready for the requirements imposed by this new form. As our clients struggle with the preparation of this form, the learning continues as we both examine transactions and relationships that had not been subject to this level of scrutiny in the past.
The not-for-profit pension plan created under Section 403(b) of the Internal Revenue Code was once a pension plan with an unusual ease of creation and administration. Beginning in 2009 these pension plans come under new levels of regulation including a requirement that the plan be audited by independent accountants if the plan has more than 100 participants.
Executive Directors and board members who may have been identified as the plan administrators of these 403(b) plans are suddenly hearing about the potential of fiduciary liability that has suddenly been identified with these plans. How could I as a Treasurer of a not-for-profit organization have a liability in connection with an employee of the not-for-profit deciding to save for retirement? The organization withholds the money as directed by the employee from their pay and sends it along a few days later to the investment company for deposit into an investment vehicle selected by the employee. What could be easier than that? There is so much more to this simple transaction under the new regulations that we are conducting additional half-day seminars designed to get the information out in a timely manner. The next one is scheduled for October 21, 2009 in our Waltham office.
What is behind all of this increased interest in the not-for-profit organization? One factor is that the not-for-profit organization is much more prevalent in our society than it was 30 years ago. Some estimates have the not-for-profit sector accounting for as much as one third of the general economy. Some would say that the not-for-profit sector, which has always been important to society for the mission work that it does in that society, is now such a significant factor in the economy as a whole that it needs the same level of control, monitoring and oversight imposed on the rest of American business. Another factor may be that there have been some spectacular failures in not-for-profit organizations. By this I mean not-for-profit organizations that were engaged in activities or practices that they should not have been according to their not-for-profit mission. While these failures are really a failure of the Board oversight role, the response to the failures is additional oversight and regulation from the government sector rather than training and qualification standards for Board members.
Whatever the reason, the fact is that the landscape for the not-for-profit organization has changed and the prospects of returning to those days of yester-year are non-existent.
For further information or to register for our upcoming 403(b) seminar please RSVP to Ashley Levesque at: 888-557-8557 or email ALevesque@KahnLitwin.com
By. Frank Monti, CPA
Not For Profit Group
All of that is changing and changing rapidly. The IRS Form 990, annual information return, completed by most not-for-profit organizations has completely changed and is now a document that will consume 40 or more pages and contain information and disclosures never before seen by the general public. Throughout 2008 we conducted half-day seminars for our clients just to get ready for the requirements imposed by this new form. As our clients struggle with the preparation of this form, the learning continues as we both examine transactions and relationships that had not been subject to this level of scrutiny in the past.
The not-for-profit pension plan created under Section 403(b) of the Internal Revenue Code was once a pension plan with an unusual ease of creation and administration. Beginning in 2009 these pension plans come under new levels of regulation including a requirement that the plan be audited by independent accountants if the plan has more than 100 participants.
Executive Directors and board members who may have been identified as the plan administrators of these 403(b) plans are suddenly hearing about the potential of fiduciary liability that has suddenly been identified with these plans. How could I as a Treasurer of a not-for-profit organization have a liability in connection with an employee of the not-for-profit deciding to save for retirement? The organization withholds the money as directed by the employee from their pay and sends it along a few days later to the investment company for deposit into an investment vehicle selected by the employee. What could be easier than that? There is so much more to this simple transaction under the new regulations that we are conducting additional half-day seminars designed to get the information out in a timely manner. The next one is scheduled for October 21, 2009 in our Waltham office.
What is behind all of this increased interest in the not-for-profit organization? One factor is that the not-for-profit organization is much more prevalent in our society than it was 30 years ago. Some estimates have the not-for-profit sector accounting for as much as one third of the general economy. Some would say that the not-for-profit sector, which has always been important to society for the mission work that it does in that society, is now such a significant factor in the economy as a whole that it needs the same level of control, monitoring and oversight imposed on the rest of American business. Another factor may be that there have been some spectacular failures in not-for-profit organizations. By this I mean not-for-profit organizations that were engaged in activities or practices that they should not have been according to their not-for-profit mission. While these failures are really a failure of the Board oversight role, the response to the failures is additional oversight and regulation from the government sector rather than training and qualification standards for Board members.
Whatever the reason, the fact is that the landscape for the not-for-profit organization has changed and the prospects of returning to those days of yester-year are non-existent.
For further information or to register for our upcoming 403(b) seminar please RSVP to Ashley Levesque at: 888-557-8557 or email ALevesque@KahnLitwin.com
By. Frank Monti, CPA
Not For Profit Group
Labels: Accounting, CPA, KLR, Monti, Nonprofit, Not For Profit Group, Tax
Tax Saving Opportunity
- posted by KLR
Why is the KLR director of the tax-exempt not-for-profit team blogging about taxes? Because I hate paying taxes so much I had to make my career in the tax-exempt area. But in 2010 we individuals have an unusual opportunity to save some taxes for ourselves and our heirs, and it got my attention, so I thought I would share the info with you.
Starting Jan. 1, 2010, all U.S. citizens will have an equal ability to convert traditional Individual Retirement Accounts to Roth IRAs. Currently only taxpayers with modified gross-adjusted incomes under $100,000 are allowed to convert to Roth IRAs--the same limit applies to both singles and couples.
As you know, in a traditional IRA, contributions are tax deductible, but all withdrawals are eventually taxed as ordinary income. While there is no deduction for contributing to a Roth, the contributions are not taxed when they're withdrawn.
Next year, the government is giving us all the opportunity to convert funds that are in our traditional pre-tax IRAs and roll the funds into a Roth IRA. Of course, when you roll the money out of your traditional IRA it will be taxed at the regular 2009 personal income tax rates. But once this money is in the Roth IRA, it is free of tax for you or your heirs who may inherit the Roth IRA account. And, I think it is a safe assumption that income tax rates are going to be higher in the future than they are now. So a Roth conversion may make sense for you.
Although this conversion rule goes into affect in 2010 the old restrictions on who can contribute to a Roth IRA will continue. So if you like the concept of a Roth IRA but your adjusted gross income is high, conversion may be the only way you can get some investment money into the tax-favored Roth IRA vehicle.
Another feature of the Roth IRA is that you are not required to take minimum distributions at age 70½ from a Roth IRA that you are required to take from your regular IRA. This means that if you are so inclined, you can leave money to your heirs in a Roth IRA account. And, the money your heirs receive in the Roth IRA account is not taxable but the money they inherit from your regular IRA account is fully taxable to them. Even worse, if you leave a great deal to your heirs, they may face both the estate tax and the income tax on regular IRA inheritance funds.
Roths allow a non-spouse beneficiary to take out the distributions either by the end of the year of the fifth anniversary of the death of the first Roth owner or the beneficiary can take the money out over their life expectancy. This allows the money to come out tax free and compound tax free for the life of your heir.
One more feature of the traditional IRA to Roth conversion. The government says you only have to report the income and pay the tax on the traditional IRA in three equal amounts in 2010, 2011 and 2012.
So, what do you think about this? How attractive is this? What are some key differences that people should keep in mind as they consider this? Who would benefit from such a conversion?
Contact the KLR Wealth Management Services to see if a Roth IRA conversion would benefit your family.
By. Frank Monti, CPA
Not For Profit Group
Starting Jan. 1, 2010, all U.S. citizens will have an equal ability to convert traditional Individual Retirement Accounts to Roth IRAs. Currently only taxpayers with modified gross-adjusted incomes under $100,000 are allowed to convert to Roth IRAs--the same limit applies to both singles and couples.
As you know, in a traditional IRA, contributions are tax deductible, but all withdrawals are eventually taxed as ordinary income. While there is no deduction for contributing to a Roth, the contributions are not taxed when they're withdrawn.
Next year, the government is giving us all the opportunity to convert funds that are in our traditional pre-tax IRAs and roll the funds into a Roth IRA. Of course, when you roll the money out of your traditional IRA it will be taxed at the regular 2009 personal income tax rates. But once this money is in the Roth IRA, it is free of tax for you or your heirs who may inherit the Roth IRA account. And, I think it is a safe assumption that income tax rates are going to be higher in the future than they are now. So a Roth conversion may make sense for you.
Although this conversion rule goes into affect in 2010 the old restrictions on who can contribute to a Roth IRA will continue. So if you like the concept of a Roth IRA but your adjusted gross income is high, conversion may be the only way you can get some investment money into the tax-favored Roth IRA vehicle.
Another feature of the Roth IRA is that you are not required to take minimum distributions at age 70½ from a Roth IRA that you are required to take from your regular IRA. This means that if you are so inclined, you can leave money to your heirs in a Roth IRA account. And, the money your heirs receive in the Roth IRA account is not taxable but the money they inherit from your regular IRA account is fully taxable to them. Even worse, if you leave a great deal to your heirs, they may face both the estate tax and the income tax on regular IRA inheritance funds.
Roths allow a non-spouse beneficiary to take out the distributions either by the end of the year of the fifth anniversary of the death of the first Roth owner or the beneficiary can take the money out over their life expectancy. This allows the money to come out tax free and compound tax free for the life of your heir.
One more feature of the traditional IRA to Roth conversion. The government says you only have to report the income and pay the tax on the traditional IRA in three equal amounts in 2010, 2011 and 2012.
So, what do you think about this? How attractive is this? What are some key differences that people should keep in mind as they consider this? Who would benefit from such a conversion?
Contact the KLR Wealth Management Services to see if a Roth IRA conversion would benefit your family.
By. Frank Monti, CPA
Not For Profit Group
Labels: KLR, KLR Wealth Management, Monti, Nonprofit, Tax
Constantly Changing Tax Laws
- posted by KLR
Have you ever noticed that our tax laws are constantly changing? (and I do mean constantly). When was the last time a tax form had the same lines on it two years in a row? Hint: stop trying to remember.
Do you think it’s because our lawmakers have a strong desire to fine tune the system so it will be as fair and equitable as possible for everyone? Do you think it's because some things are not working quite right and need fixing? If either of these were true, our tax code would be perfect by now with all the “improvements” our governing bodies are making. Why can’t the tax system just get established once and for all and be left alone (with maybe an update now and then for inflation)? Can you imagine if a retail store changed its pricing policies the way are tax system changes? One month you’d get a discount for shopping on Tuesdays between 10 and 2, and the next month you’d get a credit for buying a solar powered flashlight – if bought on a Wednesday and only if paid in cash using bills no larger than $5. Why does it have to be so complicated?
Maybe there’s an ulterior motive in the tax system. Steady now - I’m not suggesting there is a conspiracy or that we are being taken as fools. What I am suggesting is that our tax laws are more than just tax laws. Our tax laws are a huge carrot and stick that pulls us - like a magnet - right into the socially acceptable agenda of the day. The carrot / magnet is the money we save by voluntarily maximizing our tax benefits. For example:
1. Buy a home - get a deduction for interest and taxes. (no deduction for rent)
2. Go to college - get a credit for tuition and a deduction for student loan interest
3. Buy a hybrid car or add solar panels to your house – get a large tax credit
The list could go on for pages. The point you see, is that the leadership’s view of what will help America’s future is written right into the tax code. Sure, the legislators could write other kinds of laws to shape social policy but we all know that nothing works faster than an economic incentive. Besides that, the Constitution protects us from forced actions and violations of our civil rights. So, why not make the actions voluntary by giving a little tax reward to those who are socially compliant. Brilliant!
Hmmm….maybe even more can be accomplished by adding super-incentives to the tax code. More on that next time.
By Norman LeBlanc, CPA
Tax Services Group
Do you think it’s because our lawmakers have a strong desire to fine tune the system so it will be as fair and equitable as possible for everyone? Do you think it's because some things are not working quite right and need fixing? If either of these were true, our tax code would be perfect by now with all the “improvements” our governing bodies are making. Why can’t the tax system just get established once and for all and be left alone (with maybe an update now and then for inflation)? Can you imagine if a retail store changed its pricing policies the way are tax system changes? One month you’d get a discount for shopping on Tuesdays between 10 and 2, and the next month you’d get a credit for buying a solar powered flashlight – if bought on a Wednesday and only if paid in cash using bills no larger than $5. Why does it have to be so complicated?
Maybe there’s an ulterior motive in the tax system. Steady now - I’m not suggesting there is a conspiracy or that we are being taken as fools. What I am suggesting is that our tax laws are more than just tax laws. Our tax laws are a huge carrot and stick that pulls us - like a magnet - right into the socially acceptable agenda of the day. The carrot / magnet is the money we save by voluntarily maximizing our tax benefits. For example:
1. Buy a home - get a deduction for interest and taxes. (no deduction for rent)
2. Go to college - get a credit for tuition and a deduction for student loan interest
3. Buy a hybrid car or add solar panels to your house – get a large tax credit
The list could go on for pages. The point you see, is that the leadership’s view of what will help America’s future is written right into the tax code. Sure, the legislators could write other kinds of laws to shape social policy but we all know that nothing works faster than an economic incentive. Besides that, the Constitution protects us from forced actions and violations of our civil rights. So, why not make the actions voluntary by giving a little tax reward to those who are socially compliant. Brilliant!
Hmmm….maybe even more can be accomplished by adding super-incentives to the tax code. More on that next time.
By Norman LeBlanc, CPA
Tax Services Group
Labels: KLR, LeBlanc, Tax, Tax Credit
About this Blog
KLR is one of New England's premier accounting and business consulting firms. With 160 team members and offices in Providence, Boston, Waltham and Newport, KLR provides a wide range of services to both individuals and businesses.
Recent Posts
- Credit Card Fees on Contributions
- Find Fraud: Know Where You Should Be Looking
- The Endless Economic Cycle
- I Want To Sell My Company But No One's Buying
- Can you identify who’s going to steal from your co...
- Last-Minute Moves to Save 2009 Taxes
- Cut Costs by Increasing Your Efficiency
- Detecting Fraud
- Hidden Savings Within Your Building
- Simple Taxes
