White House Says No To Death Star

Have you been or seen the White House website? Did you know that you can post a petition there? Here is the website:

The right to petition your government is guaranteed by the First Amendment of the United States Constitution. We the People provides a new way to petition the Obama Administration to take action on a range of important issues facing our country. We created We the People because we want to hear from you. If a petition gets enough support, White House staff will review it, ensure it’s sent to the appropriate policy experts, and issue an official response.

The following was actually posted:

We petition the Obama administration to:

Secure resources and funding, and begin construction of a Death Star by 2016.

Those who sign here petition the United States government to secure funding and resources, and begin construction on a Death Star by 2016.

By focusing our defense resources into a space-superiority platform and weapon system such as a Death Star, the government can spur job creation in the fields of construction, engineering, space exploration, and more, and strengthen our national defense.

The petition received over 34,000 signatures, prompting the White House to post the following:

The Administration shares your desire for job creation and a strong national defense, but a Death Star isn't on the horizon. Here are a few reasons:

• The construction of the Death Star has been estimated to cost more than $850,000,000,000,000,000. We're working hard to reduce the deficit, not expand it.
• The Administration does not support blowing up planets.
• Why would we spend countless taxpayer dollars on a Death Star with a fundamental flaw that can be exploited by a one-man starship?

Even though the United States doesn't have anything that can do the Kessel Run in less than 12 parsecs, we've got two spacecraft leaving the Solar System and we're building a probe that will fly to the exterior layers of the Sun. We are discovering hundreds of new planets in other star systems and building a much more powerful successor to the Hubble Space Telescope that will see back to the early days of the universe. 

If you do pursue a career in a science, technology, engineering or math-related field, the Force will be with us! Remember, the Death Star's power to destroy a planet, or even a whole star system, is insignificant next to the power of the Force.

COMMENT: OK, technically this is not tax - but it is funny.

New York Times and Your 2012 Form W-2

There is an interesting tax article in today’s The New York Times. It discusses the new reporting of employer-provided health insurance on your 2012 W-2. It shows up in Box 12 of the W-2 with code “DD,” and the amount includes both the portion you paid and the portion your employer paid. The article discusses the surprise for some people upon realizing the cost of this benefit.

Being The New York Times, the article had to include some mind-numbing pro-statist comment, and here it is:

The tax-free treatment of employer-provided health benefits is the largest tax break in the tax code, costing the government roughly $180 billion a year in lost revenue, or 80 percent more than the home mortgage interest deduction, according to the administration.”

COMMENT: Where I live, the government costs us. We do not cost the government anything. 

New York Times article January 31, 2013
  

The Washington Post On Income Taxes In 1914

"Congress went well toward the limits of its constitutional functions, in the estimation of many good lawyers, in the enactment of this law which grants inquisitorial powers that in the hands of careless officials could prove a menace to the country."

COMMENT: They were right.

You Can Start Filing Tax Returns Today

Today the IRS finally starts accepting 2012 individual tax return filings.  It is January 30, 2013.

Why so late? You recall that Congress passed, and the President signed, a tax bill on January 1, 2013. This tax bill was retroactive to 2012. While the IRS tried to anticipate what would be in the bill, to do so exactly is nearly impossible. The IRS in turn separated the tax changes into two categories: those affecting the most people and the balance of the changes. It has programmed those changes with the widest effect, and this first category of taxpayers can begin filing today.

So if you claim state sales tax (because your state does not have an income tax), claim an education deduction or claim schoolteacher expenses, you can begin filing today.

What if you claim depreciation, own and rent a duplex or have a kid in college and claim an education tax credit (rather than a deduction)? You are in the second group and have to wait until late February or March. Your tax preparer can prepare your tax return, but he/she cannot send it to the IRS until then.

Here is the list of tax changes and forms included in the second category, if you wish to labor through them:

• Form 3800 General Business Credit
• Form 4136 Credit for Federal Tax Paid on Fuels
• Form 4562 Depreciation and Amortization (Including Information on Listed Property)
• Form 5074 Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands
• Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations
• Form 5695 Residential Energy Credits
• Form 5735 American Samoa Economic Development Credit 
• Form 5884 Work Opportunity Credit
• Form 6478 Credit for Alcohol Used as Fuel
• Form 6765 Credit for Increasing Research Activities
• Form 8396 Mortgage Interest Credit
• Form 8582 Passive Activity Loss Limitations
• Form 8820 Orphan Drug Credit
• Form 8834 Qualified Plug-in Electric and Electric Vehicle Credit
• Form 8839 Qualified Adoption Expenses
• Form 8844 Empowerment Zone and Renewal Community Employment Credit
• Form 8845 Indian Employment Credit
• Form 8859 District of Columbia First-Time Homebuyer Credit
• Form 8864 Biodiesel and Renewable Diesel Fuels Credit
• Form 8874 New Markets Credits
• Form 8900 Qualified Railroad Track Maintenance Credit
• Form 8903 Domestic Production Activities Deduction
• Form 8908 Energy Efficient Home Credit
• Form 8909 Energy Efficient Appliance Credit
• Form 8910 Alternative Motor Vehicle Credit
• Form 8911 Alternative Fuel Vehicle Refueling Property Credit
• Form 8912 Credit to Holders of Tax Credit Bonds
• Form 8923 Mine Rescue Team Training Credit
• Form 8932 Credit for Employer Differential Wage Payments
• Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit

There is some rhyme or reason to what the IRS is doing. Category two changes require more extensive programming. In addition, those tax attributes tend to appear on more complicated returns. These returns – as a rule of thumb – are prepared later in the filing season or are extended.

Expatriates And The New ObamaCare Taxes

What is our government going to do next to U.S. expats?

An expat is an American who lives – and possibly works – overseas. An expat has domiciled in a foreign country. How does this happen? One easy way is the military or foreign service. One has reason to be overseas, enjoys the lifestyle and develops roots in another country. I have family, for example, that are unlikely to return to the United States. Why would they? They have lived overseas for decades.

Remember the 3.8% ObamaCare tax on net investment income? This one applies if you are single and have over $200,000 of income or are married and have over $250,000. It is an additional tax on your “investment income”, a term that is still being defined. For our purposes, let us just say that it includes interest and dividends.

A quick example. You are American, single, live and work in Canada, make $200,000 and have $40,000 in dividends. First, congratulations, even though you are a bad person for being successful. Second, the additional ObamaCare tax on your dividends will be $40,000 times 3.8% or $1,520.

You say to me: Steve, my taxes in Canada are higher than in the United States. I know that the U.S. allows a foreign tax credit. Since I paid Canadian tax, I should get a dollar-for-dollar credit. I won’t owe anything, right?”

For many years that would have been right. It appears that it is no longer right, however.

The reason is that the ObamaCare 3.8% tax may not be a “creditable” tax. That means that the foreign tax credit cannot reduce it. It appears that you will be writing a check to Uncle Sam for $1,520, no matter what taxes you paid Canada.

What a mess for American expats.

Since we have waded into these waters, let us also mention the additional 0.9% Medicare tax. That tax also applies at $200,000/$250,000, but it applies to your earned income. Think salary and bonus.

Here is the problem: the United States has a totalization agreement with 24 countries (I believe) to sidestep expats paying into two national retirement programs. There is a totalization agreement between the U.S. and U.K., for example. You will pay U.S. social security or U.K. national insurance, but not both. If the 0.9% were actually a “Medicare” tax, then it would (likely) be picked up under the totalization agreement. An American expat subject to U.K. national insurance would then not be subject to the ObamaCare 0.9% tax.

But then ... who knows for sure? There is no coherence to this rave, other than Washington’s ongoing obsession with taking more of your money. This is not a healthy system.