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No, I was referring to the EITC. I looked around and it looks like my poor friend may have been misinformed by the library.

The IRS shows no change in the EITC for this year. She had been told it was cancelled starting this year and her taxes on her $12,000 annual income would go up by about $500 by the free tax preparation service at the library.

From here: http://www.irs.gov/individuals/article/0,,id=233839,00.html

Tax Year 2012 maximum credit:
$475 with no qualifying children

It looks like her taxes will still be lowered by $475 if she makes up to $13,980.

http://www.irs.gov/ makes me want to blow something up every time I see it.

The prices are NOT $49,900, $59,000 and $69,000. That is the price after you redeem your government coupon (Plug-In Electric Vehicle Credit (IRC 30 and IRC 30D)). You will still have to front the full price and then wait until your next tax filing in order to claim your maximum tax credit of $7500. The credit itself will be phased out after 200,000 qualifying vehicles have been sold.

Not to mention almost the exact same thing happened last year with the 2011 tax cuts. Fool me once, shame on you. Fool me twice, shame on me.

When money isn't involved, no tax is paid (or even due).

Depends on jurisdiction, but barter is usually not tax exempt.

Excellent point!!!!!

Employees are paid by the hour. Independent contractors are paid by the piecework or by the job.

Here's what the IRS has to say about it

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no âoemagicâ or set number of factors that âoemakesâ the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

So, what are these factors? From the same web page ...

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

These sites, dictating how the job is accomplished, sure look like it.

Financial: Are the business aspects of the workerâ(TM)s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Paid by the hour sure sounds like it's not "contract work."

Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Microsoft got into trouble with this with their perma-temps programs. You can't just repeatedly hire the same person "as a contract worker" forever - at one point, in the eyes of the IRS and the courts, they become an employee.

I prefer the "S" corporation over the LLC...you can save on the employment taxes (SS, Medicare) that way.

May I suggest the LLC with S corporation tax election? File a Form 8832 to elect taxation for your LLC as a corporation, then file a Form 2553 to elect taxation under subchapter S.

Best of both worlds: get the benefits of S corporation income splitting with the "no fuss" LLC. It's nice not to have to do yearly shareholder meetings, board of directors elections, etc, if you have a corporation consisting of 1 or 2 owners.

However, beware the IRS. That crazy guy that crashed a plane into the IRS back in 2010 actually brought up a legitimate point: the law specifically discriminates against single person corporations in the field of "technical work" (eg. computer consulting, software development, etc).

Yes, the law has a specific "fuck you" for Slashdotters who start their own consulting corporations in our particular field. For any other field a single-person consulting corporation is fine, just as long as it isn't computer/technology consulting.

Anon, because who wants to be designated a Potentially Dangerous Taxpayer by the IRS?

I prefer the "S" corporation over the LLC...you can save on the employment taxes (SS, Medicare) that way.

May I suggest the LLC with S corporation tax election? File a Form 8832 to elect taxation for your LLC as a corporation, then file a Form 2553 to elect taxation under subchapter S.

Best of both worlds: get the benefits of S corporation income splitting with the "no fuss" LLC. It's nice not to have to do yearly shareholder meetings, board of directors elections, etc, if you have a corporation consisting of 1 or 2 owners.

However, beware the IRS. That crazy guy that crashed a plane into the IRS back in 2010 actually brought up a legitimate point: the law specifically discriminates against single person corporations in the field of "technical work" (eg. computer consulting, software development, etc).

Yes, the law has a specific "fuck you" for Slashdotters who start their own consulting corporations in our particular field. For any other field a single-person consulting corporation is fine, just as long as it isn't computer/technology consulting.

Anon, because who wants to be designated a Potentially Dangerous Taxpayer by the IRS?

Likewise, the top 1% are almost the only people making any fucking income above the poverty line, or even any money at all, so are, in fact, almost the only people paying income tax.

The first hint that perhaps the entire comment should be ignored is the sophisticated approach of resorting to profanity rather than logic.

The second hint is that this claim is ridiculous - check here for a quick summary or here for more details on who/how many pay what in income taxes.

Likewise, the top 1% are almost the only people making any fucking income above the poverty line, or even any money at all, so are, in fact, almost the only people paying income tax.

The first hint that perhaps the entire comment should be ignored is the sophisticated approach of resorting to profanity rather than logic.

The second hint is that this claim is ridiculous - check here for a quick summary or here for more details on who/how many pay what in income taxes.

IIRC, SS wasn't cash flow negative in 2011 - but only because of the income from interest on the funny bonds. But, there's no question about the trend as you say.

Although I've liked the notion of a Federally mandated 401(k), I don't think it's practical. The average person's education and math skills in the US are simply inadequate (thanks in part to our failed education system and the low expectations US society/culture has for children). My guess is that if one picks a random sample out of the US population aged 18 or over, well over half could not explain compounded interest, let alone compute it - and that understanding seems to be necessary but nowhere nearly sufficient skill to manage one's own investments.

While it's tempting to think that individuals would take "individual responsibility" for their retirement via a "Fed401(k)", it won't end up that way. Those that lose money or realize inadequate returns (due to bad investment decisions, being taken advantage of, or just bad luck) will need money to retire on and, ultimately, we are not going to let them starve in the streets (at least until the entire US economy collapses relative to the world so a large proportion of the population is in such a state) and the government will have to step in. At that point, the government will have no funds set aside for such purposes.

The fact that the government limits the investment options will make the government even more responsible for dealing with the problem. The money the "little guy" lost will be sucked up by the investment banks/fund managers etc. and eventually will have to be replenished by the government -- i.e., this will ultimately result in a massive transfer of wealth from the taxpayer to the corporate world with the average worker as an intermediary. But, the banks and investment houses would love it -- a whole crop of ignorant suckers they can suck money from for decades!

Also, SS benefits are highly progressive and a Fed401(k) would not replicate this without a lot of politically unpopular tweaking. Roughly speaking, the first penny an employee and employer pay in SS payroll tax returns six times the retirement benefit as the last penny put in before the cap. As well, SS retirement benefits are taxable if one has sufficient outside income (including required 401(k) and IRA distributions, work, other investment income - including tax exempt interest) which results in benefits paid to people who DO plan for their own retirement routing some of the SS benefits being routed into the Federal general fund - another "progressive" (depending on how one uses that term) feature of SS.

Unfortunately, due in a significant part to programs spawned directly or indirectly from the New Deal and Great Society, generations of Americans have lost the notion of "individual responsibility" and expect that the government will take care of them even if they don't plan ahead. I don't see how to turn this around except by a horribly painful realignment of necessity - i.e., something worse than the Great Depression. Unlike Greece, whose citizens can still expect to be slackers sucking at the government teat, in the current economy there's no one that could afford to bail the US out. Perhaps, by the collapse, the US will be small enough in economic and population terms that we can get UN food rations distributed in our refugee camps - if China and India are in a good mood that year.

LLC == Limited Liability Company. Really, it's not a corporation.

It stands for company, genius.

No, I know that it's short for Limited Liability Company.

I know that it stands for "company". Were you under the mistaken impression it stood for "corporation"? They are similar to corporations, but are not one. They can be file taxes as one if they choose to, but it is not their only option.

Nearly 100,000 millionaires pay lower tax rates than middle class

If you actually read the article you linked to, you find that it says nearly 100,000 millionaires (about 24% of people with AGI over $1 million) pay a lower tax rate than 10% of those with moderate income (folks with income under $100k). So basically, 100,000 people making over $1 million pay a lower tax rate (how much lower is not specified) than 1 in 10 of the middle class, and pay a higher rate than 9 in 10 of the middle class.

Somehow this has become warped into "100,000 millionaires pay lower tax rates than the middle class." Phrased in a way that implies that they pay a lower tax rate than all the middle class. In reality the problem is not that big, and all that's needed to correct it is a tweak to the alternative minimum tax.

and capital gains (gambling on the stock market and commodity futures) has half the tax rate as a working person's income tax

No it doesn't. Long term capital gains tax is flat. The working person's income tax is graduated (as is short term capital gains). A graduated tax rate means the highest rate you pay is not your actual overall rate. If you're in the 28% bracket, that does not mean you fork over 28% of your pay to the government. Your actual tax rate is significantly lower than your tax bracket.

Best case capital gains tax rate is 15% (well, 0% if you make less than $33,950, but those people wouldn't be considered rich).

Worst case Federal income tax is:
0% of $5,700 (standard deduction)
10% of the next $8,350
15% of the next $25,600
25% of the next $48,300
28% of the next $89,300
33% of the next $201,400
35% of anything else

That means the true income tax rate is:
0% at $8,350
5.9% at $14,050
11.8% at $39,650
15% at $52,375
19.0% at $87,950
23.6% at $172,250
28.6% at $378,650
30% at $486,230

So you have to make at least $52,375 for your true income tax rate to be higher than the 15% capital gains tax rate. And you have to be making at least $486,230 for the 15% capital gains tax rate to be half your true income tax rate.

According to the IRS the median AGI in 2008 was $33,048, or $38,748 after adding in the standard deduction, which corresponds to a 11.1% tax rate. Additional IRS stats show that $40k AGI ($45,700 minimum gross income) corresponds to the 58th percentile, and a 14.0% true tax rate. So the 15% capital gains tax rate is higher than the true income tax rate for 6 out of every 10 Americans.

Nearly 100,000 millionaires pay lower tax rates than middle class

If you actually read the article you linked to, you find that it says nearly 100,000 millionaires (about 24% of people with AGI over $1 million) pay a lower tax rate than 10% of those with moderate income (folks with income under $100k). So basically, 100,000 people making over $1 million pay a lower tax rate (how much lower is not specified) than 1 in 10 of the middle class, and pay a higher rate than 9 in 10 of the middle class.

Somehow this has become warped into "100,000 millionaires pay lower tax rates than the middle class." Phrased in a way that implies that they pay a lower tax rate than all the middle class. In reality the problem is not that big, and all that's needed to correct it is a tweak to the alternative minimum tax.

and capital gains (gambling on the stock market and commodity futures) has half the tax rate as a working person's income tax

No it doesn't. Long term capital gains tax is flat. The working person's income tax is graduated (as is short term capital gains). A graduated tax rate means the highest rate you pay is not your actual overall rate. If you're in the 28% bracket, that does not mean you fork over 28% of your pay to the government. Your actual tax rate is significantly lower than your tax bracket.

Best case capital gains tax rate is 15% (well, 0% if you make less than $33,950, but those people wouldn't be considered rich).

Worst case Federal income tax is:
0% of $5,700 (standard deduction)
10% of the next $8,350
15% of the next $25,600
25% of the next $48,300
28% of the next $89,300
33% of the next $201,400
35% of anything else

That means the true income tax rate is:
0% at $8,350
5.9% at $14,050
11.8% at $39,650
15% at $52,375
19.0% at $87,950
23.6% at $172,250
28.6% at $378,650
30% at $486,230

So you have to make at least $52,375 for your true income tax rate to be higher than the 15% capital gains tax rate. And you have to be making at least $486,230 for the 15% capital gains tax rate to be half your true income tax rate.

According to the IRS the median AGI in 2008 was $33,048, or $38,748 after adding in the standard deduction, which corresponds to a 11.1% tax rate. Additional IRS stats show that $40k AGI ($45,700 minimum gross income) corresponds to the 58th percentile, and a 14.0% true tax rate. So the 15% capital gains tax rate is higher than the true income tax rate for 6 out of every 10 Americans.

The IRS website is... incomplete. You'd want to refer to the actual IRS regulations, which have provisions for just such orders as that. The judge will order the custodial parent to file IRS Form 8332, end of story.

This is why you hire a lawyer.

The StreetScooter is probably light enough (sub 400 kg without batteries) and low enough power (sub 15 kW net, and for electrics, that's continuous, not intermittent) that it falls under Europe's heavy quadricycle laws.

Legally, a heavy quadricycle is treated as a four wheeled motorized tricycle, not a car - so safety regulations go out the window.

Also, the batteries aren't included in that $7000 price.

The Leaf and Focus EV are required to meet NHTSA regulations, which aren't too much more strict than EuroNCAP standards, but they're a hell of a lot more strict than what a heavy quadricycle has to meet.

Oh, and the tax credit info is right here: http://www.irs.gov/irb/2009-48_IRB/ar09.html

4 kWh minimum battery capacity, $2500 base credit, $417 for every kWh higher than 4. So, at 16 kWh, you have the $7500 credit. But, the StreetScooter concept, as it is now, may not qualify at all depending on how you interpret the wording, or it may only qualify based on the minimum battery capacity of one battery, as no battery is included. (But, interestingly, I'm not seeing anything on how big the batteries it uses are.)

Are you kidding?

Nope. I've never heard of this. Now maybe I just had my head under the sand all this time, but I'd still like to read an article from a reputable source that backs this claim. That's not too much trouble is it?

Not at all. Short summary. Your state might (or might not) require you to write a check for an unpaid sale/use tax (specific to your state and county) whenever you order something online (unless the seller/retailer collects that tax for you.) An even shorter summary: if the seller (either in person, online or through a sales/order magazine) doesn't collect a sale/use tax from your purchase, chances are you are obligated - by the laws of your location - to calculate that tax and mail it to your local/state tax collection agency.

Google to the rescue:

At the federal level, with the onus on the seller:

http://www.irs.gov/businesses/small/industries/article/0,,id=209348,00.html

Internet Sales are Taxable Misinformation about laws such as the prohibition of the taxation of Internet access (Internet Tax Freedom Act) and limiting sales tax on interstate sales have lead some to incorrectly believe that Internet sales income is not subject to income tax.

An online business may be subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. Your sales may result in capital gains, nondeductible personal losses, or you may have ordinary business income.

At the state/local level, similar sales taxes on income might apply to an online seller. In addition to that (and unlike the federal level), a state or local government might require a *sales* or *use* taxes on the purchaser (including on online purchases of items), *and might require the seller* to collect that on the state/county's behalf. In our case here in FL, we pay a between 6% and 7% depending on the county.

http://dor.myflorida.com/dor/taxes/sales_tax.html

Sales Tax

Each sale, admission charge, storage, or rental is taxable unless the transaction is exempt. Sales tax is added to the price of the taxable goods or service and collected from the purchaser at the time of sale. Florida's general sales tax rate is 6 percent.

Use Tax

Use tax is due on the use or consumption of taxable goods or services when sales tax was not paid at the time of purchase. For example:

If you buy a taxable item in Florida and didn't pay sales tax, you owe use tax.

If you buy an item tax-exempt intending to resell it and then use the item in your business or for personal use, you owe use tax.

If you buy a taxable item outside Florida and bring or have it delivered into this state and you didn't pay sales tax on the item, you owe use tax.

Although this particular, state-specific tax regulation does not make any explicit mentioning of online sales or purchases, it is inclusive for all state sales and purchases unless explicitly stated as exempt.

http://jacksonville.com/news/florida/2011-08-11/story/florida-wants-collect-its-sales-tax-online-buys

Just because there isn't a Florida sales tax charge on certain online purchases doesn't mean the buyer doesn't owe the tax. Though many buyers don't know it, they are on the hook to scratch a check to Tallahassee for 6 percent of the purchase or pay it online. Consumers voluntarily paid about $8.7 million last year - pennies on the dollar compared to the $1 billion to $2 billion some estimate goes uncollected every year.

Still, the chance of Fl

If you're a US citizen your income is subject to US taxation even if you live/work overseas.

http://www.irs.gov/businesses/small/international/article/0,,id=97324,00.html

Why aren't corporations subject to the same laws as individual citizens?

Wrong. http://www.irs.gov/pub/irs-pdf/n433.pdf .

This document supports my post. It lists interest rates for underpayments and overpayments up to 2006. It calls the interest rate a "penalty" when applied to estimated tax payments (estimated tax=withholding for self employed), but it is still an interest rate and is the exact same rate as applied to underpayments.

It does list penalties for late filings and late payments but that is a different matter than underpayment, which is what the article is about.

This shows the current interest rates. One thing to note is large corporations pay 6% vs 4% for small business and individuals. The original poster's claim that the IRS treats big corporations better than individual when dealing with underpayments is false.

Wrong. http://www.irs.gov/pub/irs-pdf/n433.pdf .

This document supports my post. It lists interest rates for underpayments and overpayments up to 2006. It calls the interest rate a "penalty" when applied to estimated tax payments (estimated tax=withholding for self employed), but it is still an interest rate and is the exact same rate as applied to underpayments.

It does list penalties for late filings and late payments but that is a different matter than underpayment, which is what the article is about.

This shows the current interest rates. One thing to note is large corporations pay 6% vs 4% for small business and individuals. The original poster's claim that the IRS treats big corporations better than individual when dealing with underpayments is false.

You are 100% wrong. I have lived abroad, and know this from personal experience. But don't take my word for it, ask the IRS:

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

What you're missing is that, since US income tax rates are so ridiculously low, your foreign income tax credit is going to nearly or completely wipe out any income tax you might have otherwise owed to the IRS, especially if you live in a civilized country with social services paid for by income taxes. It's a pain to file a form saying you don't owe any money just because you happen to have been born in the US, and that overhead isn't really free, but it's a far cry from being double taxed. If you paid taxes overseas and paid the IRS, you were almost certainly doing something wrong.

Ian

As an American citizen, if I go live and work in Ireland, or anywhere else, without ANY ties to the US at all, I still am required to pay US Federal income tax on the money I earn(in addition to that countries taxes.)

Nope, if you live in Ireland you do not have to pay US Federal tax. You only have to pay federal tax on money you earn from the USA. That also includes payroll taxes. However, you will not be paying into social security or medicare and that can affect your benefits later. What you cannot do is pretend you live in Ireland, and still make money in the USA. That is what GE is doing.

You are 100% wrong. I have lived abroad, and know this from personal experience. But don't take my word for it, ask the IRS:

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

Well, taxes on the wealthy are at pre-Depression era lows

Well, the wealthy already pay most of the taxes in the US. How much do the rich pay? The top 1% paid 28% of all federal taxes and the top 10% paid 55%. Here's a webpage with links to IRS spreadsheet tables "by Tax Rate and Income Percentile".

Social Security (which does not add a single penny to the deficit) and Medicare are on the chopping block

Two things about this, one is what is true today will not be true in the future. Today there are something like 3.3 people working and paying into Social Security (SS) for every person collecting SS. In 1950 the ratio was 16 | 1 By 2025 it will be 2 |1. If you take the last Baby boomers as being born in 1964, they will retire in 2029 if the retirement age is not raised. The second issue is that if the money workers had paid into SS had been invested in the financial markets, yes Wall Street as well as other places, those workers would have come out ahead. Looking at the historical data for the Dow Jones Industrial Average since 1900 only once has there been a 10 year period in which the average low lower at the end, during the Great Depression. Social Security was created as a consequence, as a safety net. People were still expected to invest while they worked. And with Medicare, I'd rather the government give people money to buy the health insurance they want in a free market than how it is now.

rather than say even one damn dollar of the out-of-control defense budget. If you wanted to talk about "runaway" programs, that is.

I have advocated cutting defense spending too. There isn't a place where the feds spend I have not advocated spending cuts. Hell I've advocate abolishing entire agencies, bureaus, and departments. Not only have I advocated getting rid of the office of the Drug czar, Drug Enforcement Administration or DEA, and others I have advocated legalizing and taxing marijuana and other illegal drugs.

And no, I don't listen to Rush Limbaugh. I used to, I got a kick out of the lies and distortions he told. I don't support any of the Tea parties either, they don't want to be told what to do but they sure want to tell others what they can and can not do.

Falcon

3) Employees With No Social Security Coverage The final category of workers includes those who are not subject to any voluntary or mandatory social security coverage at all. This can only occur where the workers are covered by a qualifying public retirement system. Employers of these workers will not withhold social security taxes or show any 'social security wages' on Form W-2.

I must have been thinking of Medicare, since Medicare switched to "no opt-out" in the 1980s. From page 5-16:

Prior to April 1, 1986, the only way for state and local government employees to be covered for Medicare was by voluntary Section 218 Agreements between the states and the Federal government. This changed with the enactment of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, which mandated that almost all state and local employees hired or rehired after March 31, 1986 must be covered for Medicare, and pay Medicare taxes regardless of their membership in a retirement system.

I still think opt-out is impossible for private sector workers at least for now. There are, however, a few specific types of income which are exempt; gory details in a table starting on page 30 of http://www.irs.gov/pub/irs-pdf/p15.pdf.

3) Employees With No Social Security Coverage The final category of workers includes those who are not subject to any voluntary or mandatory social security coverage at all. This can only occur where the workers are covered by a qualifying public retirement system. Employers of these workers will not withhold social security taxes or show any 'social security wages' on Form W-2.

I must have been thinking of Medicare, since Medicare switched to "no opt-out" in the 1980s. From page 5-16:

Prior to April 1, 1986, the only way for state and local government employees to be covered for Medicare was by voluntary Section 218 Agreements between the states and the Federal government. This changed with the enactment of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985, which mandated that almost all state and local employees hired or rehired after March 31, 1986 must be covered for Medicare, and pay Medicare taxes regardless of their membership in a retirement system.

I still think opt-out is impossible for private sector workers at least for now. There are, however, a few specific types of income which are exempt; gory details in a table starting on page 30 of http://www.irs.gov/pub/irs-pdf/p15.pdf.

1. I am for the new tax on people with incomes over $1 million. The long-term trend in incomes supports the notion that the wealthy are profiting disproportionately from increased productivity gains in the last few decades.

2. I even buy that they deserve to be taxed at a higher rate. That said, 60 seconds looking at the IRS tax statistics will tell you that they are already taxed at a higher rate:

The effective average federal income tax rate for people making $1 million or more ranges from 22.6% to 25.8%.
The effective average federal income tax rate for people making $500k-$1M is 24.4%.
The effective average federal income tax rate for people making $200k-$500k is 19.6%.
The effective average federal income tax rate for everyone else ranges from 0.1% to 11.9%

Maybe Warren Buffet pays a smaller percentage of his income than his secretary, but he's an outlier. You don't justify policy based on outliers.

3. If you play around with the tax statistics, you'll see that even if you taxed everyone making $1 million or more at 100% their income, it would only increase revenue by about $550 billion. That's right - you could've confiscated every dollar made by "evil rich people" in 2009 and it only would've reduced the 2010 deficit by half. If you taxed them at 50%, you'd increase revenue by only about $200 billion, which compared to our current deficits and debt is peanuts.

I don't begrudge you your right to hate rich people. But check it at the door when you come to discuss policy. The simple fact is that despite increasing income disparity, the U.S.still has pretty good income dispersion. The bulk of the U.S. income base sits between $50k-$500k per year (68.6% of all income). The bulk of the U.S. tax base sits between $50k-$1M per year (72.5% of all income tax revenue). That's where you need to raise taxes if you want a significant increase in income tax revenue. Going after people who make over $1 million (10.6% of all income, 20.4% of all income tax revenue) makes for good headlines and may make you feel better, but it's pretty ineffective at increasing tax revenue when your deficit is 8% of GDP.

How many Pizza delivery guys do you think pay taxes on their tips?

Spoken like someone who has never worked a job where they get tips.
The IRS assumes that employees in certain service jobs get tipped.

If you, as a pizza delivery guy, don't report your tips to your employer (who then reports them to the IRS)
The IRS just tacks on a certain % of your salary in taxes + penalties + more penalties.

Here's the IRS "Tips on Tips" fact sheet

Once the wealth accumulates to the top only, how will the economy survive without spending by the middle and lower classes? Won't a lot of business just shutdown because people don't have money to spend?

That won't happen. What's been going on is that the upper class has been grabbing a bigger share of the economic pie, but not so big as to upset middle class voters. They've been letting just enough of the economic growth trickle down to the middle class to keep them content enough not to revolt. The gini coefficient for the U.S. shows the same thing happening.

Essentially, the upper class has applied market principles to voting patterns, and come up with a fairly optimal solution to "how do I keep more money, without getting poorer people upset enough that they vote to take it away from me?" That solution requires the middle class continue to be well-paid, just not as well as it could be.

For that reason I'm in general agreement with Mr. Buffet and support raising the upper bracket tax rate. The ideal solution IMHO would be overhauling our tax code and simplifying it - get rid of the gazillion exemptions and special case tax breaks which have been bought by special interest lobbies over the years and inflate it to over a thousand pages. That will help put small businesses (the group I most identify with) on a level playing field with big businesses. But absent such an overhaul, beefing up the alternative minimum tax to a higher rate and having it apply to all income over $1 million regardless of source, as this legislation does, is a good second.

That said, if you pour over the IRS tax statistics, you'll realize pretty quickly that:

(1) There isn't as big a difference between the effective tax rate as Obama is making it sound like. The effective tax rate goes from 6% at $30-$40k, to 11.9% at $100k-$200k, to 24.4% at $500k-$1M, to $25.3% at $1M-$1.5M. From there it climbs slowly to 25.8% at $2M-$5m, before dropping to 22.6% at $10M or more. These people are already paying a higher overall effective tax rate than anyone under $500k. While they can certainly afford to pay more, the argument that they're paying less than you and I just isn't supported by IRS statistics. Maybe Mr. Buffet is paying less since his income is investment-heavy. But on average they already pay more.

(2) People making over $1 million/year represent only about 0.3% of the population, and less than 11% of total income. You could tax them at 100% and you'd only collect about $550 billion/yr in additional taxes. They simply don't have enough aggregate income to offset the huge deficits we're running. To pay for the deficits, you realistically will have to increase the tax rates all the way down to $50k-$75k (upper middle class). Either that, or cut spending. Obama's promise not to raise taxes on anyone making less than $200k is simply unrealistic if you also want a budget close to balancedt (I pointed this out during the election too).

So while I'm for the idea, I'm under no illusions that it'll have a significant impact on our deficit. Even if he raised their tax rate to 50%, it'd only generate about $200 billion in additional revenue. Far short of what's needed to balance the budget.

Why do you think you don't? Legitimate business expenses are generally subtracted from revenues to get taxable profits, the instructions for IRS form 1040 schedule C goes into more detail. Things like home offices get touchy with the IRS and it usually cheaper to take the standard millage rate on vehicles than to account for every penny, so talk to your tax advisor. While I haven't played with the numbers lately, in the past rich people would be paying more taxes if corporation were not taxed , than the lost of tax revenues from the corporations would be.

If you live in Thailand for an entire year and pay the same US taxes you would have payed if you had lived in the U.S. - you are an idiot.
 
  Foreign Earned Income Exclusion
 
I moved to Hungary in July. I'll file an extension in April. When I do file my taxes I'll qualify for the foreign earned income exclusion, which means excluding over $90,000 of my income. Which for me, means all of it. My budget for living here counts on the fact that I don't pay any US income tax. (I still pay social security, etc.)

I assume that was the article about him paying less taxes than his employees (paywall and all). And if you look at last year's income tax brackets/worksheets (pdf warning), it backs up what I'm saying about abusing loopholes to pay less than lower/middle class taxpayers. In terms of percentages, he's *supposed* to be paying more than us. However, through the tricks and loopholes, he's paying less.

As far as I know, you are free to barter or use your own private (i.e., intrinsically worthless) currency, with anyone you want.

Actually that's not true: IRS

Define "boot up".

In the organization from which I just retired, we had a standard metric for basic laptop health. Assuming the user quickly and without errors types in two logins and two passwords, the time from power-on to a "settled down and usable" desktop was 8 minutes. Once in a blue moon, we'd see someone achieve 7 minutes on a new machine, but 8 was the standard. If boot times stretched past 15 minutes, users generally knew to open and ticket and get a tune-up.

I know of about 120,000 users who would jump for joy at boot times measured in seconds instead of minutes.

Thanks, I'll take a look at the census data. I was working from the IRS data at: SOI Tax Stats - Individual Time Series Statistical Tables, but some data for more recent years is also available in more difficult to use form at: SOI Tax Stats - Individual Statistical Tables by Size of Adjusted Gross Income. The IRS data has categories on higher levels of income than the census data, and this allows seeing just how concentrated income really is at the top. For instance, nearly 1/6 of all income in 2007 went tho the 0.28% making over $1M per year.

Here is the 2007 IRS data, with "share" defined as "Share of total income divided by percentage of population". An equal share = 1. Also shown is the percentage of households falling into each category.

Income - % of Population - Share
$5,000 under $7,000 . . 3.38% . 0.1
$7,000 under $9,000 . . 3.47% . 0.13
$9,000 under $11,000 . .3.25% . 0.16
$11,000 under $13,000 . 3.37% . 0.2
$13,000 under $15,000 . 3.33% . 0.23
$15,000 under $17,000 . 3.18% . 0.26
$17,000 under $19,000 . 3.04% . 0.3
$19,000 under $22,000 . 4.42% . 0.34
$22,000 under $25,000 . 4.06% . 0.39
$25,000 under $30,000 . 6.30% . 0.45
$30,000 under $40,000 . 10.31%. 0.57
$40,000 under $50,000 . 7.80% . 0.74
$50,000 under $75,000 . 13.60%. 1.01
$75,000 under $100K . . 8.21% . 1.42
$100K under $200K . . . 9.41% . 2.19
$200K under $500K . .. .2.44% . 4.73
$500K under $1M . .. .. 0.46% . 11.16
$1M under $1.5M . .. .. 0.12% . 19.86
$1.5M under $2M . .. .. 0.05% . 28.33
$2M under $5M . .. .. . 0.076% . 49.17
$5M under $10M . .. . . 0.02% . 112.68
$10M or more . .. .. .. 0.013% . 502.49
(The % of all income earned by each category can be found by multiplying the two numbers together.)

Another interesting statistic is that those making over $1M make nearly as much as everybody earning under $40K combined. (That's 57% of the population making about the same as 0.28% of the population).

While inflation supposedly has been low (I'd say it has been understated at least 1-2% during this period to make GDP growth appear positive and keep government cost-of-living-adjustment expenses down), even using the official numbers that's compounded so that a 2002 dollar is worth over $1.25 today. If the inflation figures are too low by 1.5%, its more like $1.43. Inflation for the rich has likely been higher than for other segments of the population - for instance, boarding schools have quadrupled tuition over a period when the CPI only doubled (since the late '80s).

So using the official figures, $100K today is $79.7K in 2002. That is a big enough difference that eyeballing the figures is not going to work. The problem is that the categories themselves are what needs to be adjusted for inflation, while the available figures are categorized by nominal dollar earnings, so it's hard to compare across years. The Census data also shows the cutoff earnings for each quintile over time, and these can be inflation-adjusted. Here's a graph of that. In inflation adjusted terms, essentially all the real increase in earnings over the past 40 years has gone to the top 20%, virtually all of it to the top 5%. (That's in dollars. In percents things look more even, but that's an illusion.) The bottom 20% have seen shrinking / flat real earnings for several decades. Many people will rise over time in the distribution, but on average the lower you start, the lower you end up, and the more quickly income gains will tend to stop. With

Thanks, I'll take a look at the census data. I was working from the IRS data at: SOI Tax Stats - Individual Time Series Statistical Tables, but some data for more recent years is also available in more difficult to use form at: SOI Tax Stats - Individual Statistical Tables by Size of Adjusted Gross Income. The IRS data has categories on higher levels of income than the census data, and this allows seeing just how concentrated income really is at the top. For instance, nearly 1/6 of all income in 2007 went tho the 0.28% making over $1M per year.

Here is the 2007 IRS data, with "share" defined as "Share of total income divided by percentage of population". An equal share = 1. Also shown is the percentage of households falling into each category.

Income - % of Population - Share
$5,000 under $7,000 . . 3.38% . 0.1
$7,000 under $9,000 . . 3.47% . 0.13
$9,000 under $11,000 . .3.25% . 0.16
$11,000 under $13,000 . 3.37% . 0.2
$13,000 under $15,000 . 3.33% . 0.23
$15,000 under $17,000 . 3.18% . 0.26
$17,000 under $19,000 . 3.04% . 0.3
$19,000 under $22,000 . 4.42% . 0.34
$22,000 under $25,000 . 4.06% . 0.39
$25,000 under $30,000 . 6.30% . 0.45
$30,000 under $40,000 . 10.31%. 0.57
$40,000 under $50,000 . 7.80% . 0.74
$50,000 under $75,000 . 13.60%. 1.01
$75,000 under $100K . . 8.21% . 1.42
$100K under $200K . . . 9.41% . 2.19
$200K under $500K . .. .2.44% . 4.73
$500K under $1M . .. .. 0.46% . 11.16
$1M under $1.5M . .. .. 0.12% . 19.86
$1.5M under $2M . .. .. 0.05% . 28.33
$2M under $5M . .. .. . 0.076% . 49.17
$5M under $10M . .. . . 0.02% . 112.68
$10M or more . .. .. .. 0.013% . 502.49
(The % of all income earned by each category can be found by multiplying the two numbers together.)

Another interesting statistic is that those making over $1M make nearly as much as everybody earning under $40K combined. (That's 57% of the population making about the same as 0.28% of the population).

While inflation supposedly has been low (I'd say it has been understated at least 1-2% during this period to make GDP growth appear positive and keep government cost-of-living-adjustment expenses down), even using the official numbers that's compounded so that a 2002 dollar is worth over $1.25 today. If the inflation figures are too low by 1.5%, its more like $1.43. Inflation for the rich has likely been higher than for other segments of the population - for instance, boarding schools have quadrupled tuition over a period when the CPI only doubled (since the late '80s).

So using the official figures, $100K today is $79.7K in 2002. That is a big enough difference that eyeballing the figures is not going to work. The problem is that the categories themselves are what needs to be adjusted for inflation, while the available figures are categorized by nominal dollar earnings, so it's hard to compare across years. The Census data also shows the cutoff earnings for each quintile over time, and these can be inflation-adjusted. Here's a graph of that. In inflation adjusted terms, essentially all the real increase in earnings over the past 40 years has gone to the top 20%, virtually all of it to the top 5%. (That's in dollars. In percents things look more even, but that's an illusion.) The bottom 20% have seen shrinking / flat real earnings for several decades. Many people will rise over time in the distribution, but on average the lower you start, the lower you end up, and the more quickly income gains will tend to stop. With

It only makes sense that if you are taxed for winnings that you should should be allowed to deduct losses. Imagine if you were playing poker in a casino. Would you require taxes on every winning hand, but not every losing hand?

http://www.irs.gov/taxtopics/tc419.html

"The following rules apply to casual gamblers. [..] You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return."

Well, if I'm reading the IRS website correctly you could deduct a significant fraction of your losses.

You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. Claim your gambling losses on Form 1040, Schedule A, as a miscellaneous itemized deduction that is not subject to the 2% limit.

Taking your numbers let's say that 3/4 of the invested money was invested into losing tickets. In reality it's probably more like 90% of the money was invested into losing tickets. Assuming a lose of 3/4 of the original $200,000 could you then deduct $150,000 from your income? If that works then only $130,000 is taxable resulting in a net gain of $34,500, a 17% gain on investment.

The top 10% of earners, above 114,000, pay 70% of all income taxes.

And 400 people control more than half of the wealth in the country. You don't see an inherent problem here?

So, no, the middle class pays less than the rich.

If you define "the rich" as people who make above $114,000 per year. Which still doesn't account for your lousy math and inability to calculate the crucial percentage of individual income number from what you claim above.

Meanwhile, Democrats have defined "the rich" as people making above $200k/year individually or $250k total household income. Republicans insist that these people are "not making all that much." What was your point about who the "rich" are again? Please do define your terms so that we can have an actual discussion here.

The lower 50%, below $33,000, pays almost nothing.

Funny thing about that: if you are making below $33,000 per year at today's prices, you have almost no disposable income to start with: you are making the equivalent of $6000 in 1970 money (feel free to run some other calculations yourself. This is especially true if you are a single parent or have someone else (aging family member) to support. The phrase you are looking for is "blood from a stone."

Short-term capital gains taxes go up with your tax bracket, and the rate is the same. Even if you bought something at $10,000 and a few laters it grew with inflation to $10,500, you still have to pay tax on the $500 even though you technically didn't make any money. Long-term rates are less in order to offset inflation losses and encourage long-term investment that helps the economy over quick flipping.

Please get an education and learn to stop lying. All you have to do is hold an "investment" for slightly longer than a year to get it taxed at a mere 15% instead of your actual income-tax rate. The more money people have, the more money they simply funnel through "cycling" schemes that contribute NOTHING to the economy, in order to take advantage of this loophole.

Capital gains taxes need to be eliminated, pure and simple, and any money gained that way treated as what it is, INCOME and taxed accordingly.

"Just remember, this is the United States of America. We write 80 million checks a month. There are millions and millions of Americans that depend on those checks coming on time," Treasury Secretary Tim Geithner

Well, THERE's your problem.

I have no idea what your point actually was, if you even had one, but assuming it was intended to be related to the post you responded to here goes...
80 million checks a month has little to do with the poor and suggesting otherwise reeks of ignorance and/or intentional deceit. That number includes active duty, reserves, VA, federal employees, student loans, as well tens of thousands of federal contractors and other service providers (doctors who are paid by medicare/medicaid) who otherwise would not have the ability to meet private payrolls.
Social security (which is a large part of the 80) isn't strictly related to poverty. I'm comfortably above the median household income and I qualify to get one of those checks when I retire. So I may be among the few who don't strictly "depend" on a check per the Geithner quote. Then, if the 80 million figure is based on a yearly average including tax refunds, those would account for over ten million checks a month (111M individual refunds a year, which is before counting businesses & non-profits), which again is not related to poverty. Again, many of these aren't included in the "depending on" category but many are, including small private businesses.
Rhetoric-debunking aside, shutting down government, which the Republicans nearly did on the budget, and are so casually playing around with again now is a serious short-term issue to millions of citizens even before the longer-term implications of default. If those millions properly attributed their hardship to the Tea Party and its blind faith in a ridiculous economic anti-theory and acted on it, election results would be obvious, as Lumpy pointed out.

As for your quip about people not liking Obama because of his speeches, the WaPo article doesn't state that. Rather, it's that people are eating up his opponents' rhetoric about a supposed lack of job increases and an "obsession with tax hikes" as well as the usual misattributed economic conditions (e.g. the $80 gasoline bit, which isn't under presidential control, yet they always get blamed for it). If anything reflects on the president himself it's his lack of ability to act (the expectation built during his campaign) which is distressing those who voted for him. There's no evidence that people are turned off by what he has to say- that's just you pushing the right-wing agenda in portraying Obama as the extreme leftist he most certainly is not.

2% of their gross? Really?? FICA being more than the Income Tax?

Here's the 2010 1040 Tax Tables

Please look at the first slots of the tax table. Note that the minimum tax for where you've earned any money is $1. Note that this is owed for $5-15. Now, look at the $1300 starting point on the next column is $130. The reality is that you're dead wrong on things. The minimum is 10% of gross income.

FICA Tax Rate Table

Please look at the line for 1990 and later. W2 employees will pay 7.65% of their gross earnings. Self-employed people will pay in 15.3%. Unless you're self-employed, you will never exceed your Income Tax liability in FICA. You will exceed your liability for FICA taxes, if self employed, when you earn approximately 60k/yr.

I suggest you do a bit of research before spouting off figures. You're gravely wrong on this subject. And it's appeals to emotion without proper facts behind them that has brought all of us to the situations we now face these days.

On doing a little research, it looks like you can basically only bow out for religious reasons. According to the IRS form (PDF warning: here ) you must be a member of a religious organization that objects conscientiously to public or private insurance or welfare. There also a few exemptions for students working on dissertations or nonresident aliens working in a few select jobs (according to this). But, no, not just anyone can back out, unless they hid the method for doing so really well.

And no, Pastafarianism wouldn't suffice: the form specifically states that the religious organization must have existed continuously since 1950.

That's a fairly recent development though--in 2005, Texas only got back 94 cents for each dollar it paid out to the feds. And all states are getting more funds from the fed now (e.g., stimulus funds); in 2009, 47 states received more than they gave (the exceptions being Delaware, Minnesota, and New Jersey). Info on how much taxes were paid by residents of each state are at http://www.irs.gov/taxstats/article/0,,id=102174,00.html and info on how much federal money went to each state is at http://www.census.gov/prod/2010pubs/cffr-09.pdf

In my opinion, BTC would most likely be considered a mediation tool for bartering, and you are *supposed* to pay taxes on bartered income: http://www.irs.gov/taxtopics/tc420.html (You could consider that another barter mediation tool is a legal contract which describes and commits two parties to the exchange of services rendered to each other with no currency being exchanged -- this is also a very taxable instrument). Valuing the latter would be harder than valuing the former, so from IRS perspective seems like BTC isn't a big deal.

I think the IRS (in the US) would be just fine if you got paid in BTC's and calculated the exchange rate properly to US dollars when you are paid. So long as you pay your Sched C taxes on your actual BTC income as it would have been in USD according to the appropriate barter valuation.

Assuming you're actually asking those questions in seriousness..

Form 637:

5. List the address where your books and records are kept (if different from the address in Part I)

Just the first hit I got off Google.

Here's what looks to be the latest W-4 form from the IRS: http://www.irs.gov/pub/irs-pdf/fw4.pdf

There's a spot for my SSN/TIN, but nothing for my dependents. My understanding from talking with HR the last time I filed one, more than 9 exemptions requires documentation.

Either he or the employer can ask for a determination by filing this form with the IRS.

Depending on his jurisdiction, he may not be a contractor, but an employee, and both him and his boss are looking at substantial tax penalties and fines.

From your current situation, it sounds like the IRS will want a word with you

And no, having a written contract saying you're an independent contractor means next to nothing when compared to the rest of the evidence.

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial: Are the business aspects of the worker's job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If they set your hours, your workplace, your work environment, pay you weekly instead of by deliverables, there's no specific "the contract is now complete" condition, and it's a key part of the business (and you have indicated yes several of these), you're an employee, not a contractor.