Broken Promises

I always receive a lot of flack when I dare show any skepticism regarding the government’s veracity when it comes to honoring its promises.  This attitude isn’t based on any kind of hatred for the government; but rather an honest assessment of the past record.  Our rulers have no qualms whatsoever about breaking promises.  I am referring mainly to tax issues here; but there is no shortage of about-faces by our rulers.

When Social Security was first established, the promise was that the benefits would always be completely tax free.  What we have now is quite different, with 85% of the benefits subject to income tax for many of our seasoned citizens.

A few years ago, I was one of the lone voices warning against a popular move to convert ordinary IRA accounts into Roth IRAs.  This required people to pay real taxes based on the promise of tax free benefits several years down the road.  My concern then, as it still is now, is that by the time those people start withdrawing from their Roth IRAs, our rulers will establish a means test along the same vein as with Social Security recipients, requiring them to pay taxes on the Roth IRA pay-outs. 

States also break tax promises.  As shown in this article about the Section 529 college savings plans, many states that promised to waive income taxes on the accounts for people who go out of state are going back on their word and starting to tax them.

It just shows that tax planning is a never ending process, with constantly changing rules and moving targets.

KMK

Tax Cut Plans Proceed in Congress

Senate GOP Supports a Temporary End to Taxes on Dividends

Grassley Proposes Tax Plan
$415 Billion Package Is Open to Revision, Senator Says

GOP tax-cut bill clears House panel

The need for tax cuts � then and now

A Stubborn White House
The economic landscape has changed. So should the tax cut.

In special session: Wham, bam, tax ’em
Arkansas’ legislators are going through tax increases as fast as a chainsmoker puffing away on Death Row.

On the economic front – While the proposed tax breaks for the “evil rich” are getting all the publicity, the real battle is whether the economy is going to be given any help or will it continue to be stymied by high punitive and unfair taxes.  All the talk about the deficit is a load of typical donkey droppings.  The DemonRats are as desperate as they have ever been to prolong and even worsen the economy so they can blame Bush and supposedly increase their hold on the reins of power in 2004.  If things improve between now and November 2004, the JackAss Party is looking at a record number of losses. 

Grover Norquist to Warren Buffett:
Don’t Like Tax Relief? Then Give it Back.
Multibillionaire investor Warren Buffett repeatedly slams President Bush for “injustice” of tax relief. Taxpayer advocate reminds Buffett that if he doesn’t like tax cuts, he shouldn’t take them.

WebSite Update

I’ve made a few more changes to my main website.

I added a Quick Reference page to include some of the rates and info that people ask about quite often.  If you have any ideas for other things to include, please let me know.  

Clarified that a QuickBooks class should not be set up on corporate books for “Personal.”  This is an issue that I have been coming across a lot lately, as people send me their QuickBooks data files to work with.  

Time to worry. Most people needlessly freak out just by receiving a letter from IRS in the mail. Most of those are no big deal. However, if you consistently ignore those letters, you may see something like this. If you don’t file a tax return or otherwise put up a defense for your true tax liability, IRS is allowed to fabricate its own numbers and do whatever it wants to take that money from you.

To be more accurate, the batboy should be a rhino.

To make this picture more realistic, Tom Dashole and the RINO Senators would be peeing on the matches as Bush tries to light up the economy.

For those who may not understand this comic, it goes back to last year’s revelations about creative accounting that was done by some large companies by reporting phony income. Most of the companies that did this only used the fake numbers on the financial statements that they presented to the SEC and investors, while they reported their true income to IRS in order to avoid paying taxes on fictitious income. This practice of keeping multiple sets of books is what prompted many of us to call for the release of corporate tax returns to investors so they can better see the discrepancies.

For some reason, some of the corporations using creative accounting tricks opted to pay income taxes on income that didn’t exist. Now that they have been busted for the phony numbers by the SEC and investor lawsuits, they are trying to recover the overpaid taxes. Because of the statute of limitations with IRS, those companies will find that they will only be able to recover the overpaid taxes from the past three years. Anything from before that is lost forever.

The fact that this kind of phony income was allowed to be reported on corporate books for so long is why the CPA profession is under such scrutiny right now and the largest firm, Arthur Andersen, is no longer in existence.