Missing the PRC – Not!

Higher taxes and fees? Fewer services? It sounds an awfully lot like the Post Office’s strategy for success out there on the Left Coast. It’s not that things are that much different here in the Ozarks; but they are nowhere close to the huge scale of problems with the PRC.

KMK

More Bickering

Split in Ranks of Business and G.O.P. on Tax Cuts

Big Brother

With all of the talk about the new level of government snooping and data accumulation on everyone, it’s a good time to remind you that this is nothing new for the Federal government. IRS has long been maintaining top secret files on every person and business in the country. They are called Individual Master Files (IMF) and Business Master Files (BMF) respectively.

Just as with credit records, these files often contain erroneous information that can lead to serious problems. Since our rulers have always considered tax revenues more important than anything else, IRS has always been allowed to ignore the normal constitutional protections that are available for every other aspect of life in this country. It is no exaggeration to say that the two snipers who were murdering people in the DC area have more rights and protections before they are sent to prison or executed than do people in matters with IRS. There is no presumption of innocence in tax matters and IRS is allowed to do its worst to people without any due process.

That’s why it’s not a bad idea to file a Freedom of Information request to obtain a copy of your file. There are some other sites on the web that have the forms and instructions for doing this, and will file the requests and decode the reports, for a fee.

IMF Help

IRS Decoder

KMK

The human brain cannot process too many choices.

Too Many Tax Reform Ideas

Here are a number of recent discussions on how to reform the tax system in the USA. While at first blush it is good to see so many people acknowledging the need for some substantial change, we’ve been down this road before, several times. When so many different options for change are proposed, the public’s brain locks up and we almost always end up with no change. Analysis paralysis.

It’s exactly like what good sales people are taught when working with customers. Show them just a few selections from which to choose. If you show them too many at one time, their brain starts to smoke and they will back away and refuse to make any decision. That is what always happens any time there are several different tax change ideas bandied about. People say that it’s just too confusing and they would rather just leave everything as is. The devil you know vs the devil you don’t know cliche; which is very apropos for taxes.

However, just to stay on top of what ideas are being discussed, I have some current examples to look at.

Replacing the income tax with a national sales tax is an idea I have long supported; but it’s too radical a change to expect to actually happen. The only way to make it effective would be to partner this change with an official repeal of the 16th Amendment. Otherwise, the income tax will be resurrected in a few years.

Here is a perfect example of an unpleasant reform. This Yale professor wants to remove the income tax for everyone except the evil rich (anyone earning more than $100,000 per year) and then jack up income and estate taxes on the evil ones. He wants to also add a national sales tax for everyone.

Tinkering with certain details of the current tax system is what generally makes it into reality.

Whichever kind of tax system we have, from now until the end of time, there will be a need for those of us who can advise clients on how to minimize their taxes. Even with inexpensive tax computer programs and free electronic filing, it is still a matter of GIGO (garbage in, garbage out).

KMK

Grasshopper States

The story of the grasshopper and the ant is an excellent illustration of why so many states are having budget deficits. Spending like a drunk sailor while revenues were up, and pretending that there would never be a down cycle, was nothing less than sheer incompetence by the State Rulers.

KMK

Social Security reform�s moment is now

Electronic IRS Payments

As I have explained on several occasions, I am not an advocate of electronic filing of Federal or State income tax returns because the format still does not allow us to add the additional documentation necessary to avoid audits. However, I am interested in learning about the IRS’s system for receiving tax payments electronically. IRS just issued a press release touting its success, piquing my interest.

One of the most frustrating matters in dealing with IRS is the application of tax payments. I always advise clients to write their SSNs and the tax year on the face of their checks to try to ensure that IRS posts it to the correct year. Even when a check is being sent in to IRS along with a payment coupon or voucher, you need to assume that the check will go in one direction and the voucher in another. The check itself has to tell the complete story as to where it should be applied. Even with this information written on the front of checks, there are at least a dozen clients each year who have their payments posted incorrectly by IRS, normally to a different year than what was intended. This results in nasty-grams from IRS for the supposedly unpaid tax. While common sense would motivate most people to automatically look into other years for an equal overpayment, IRS has never been known to have any such intuition. It normally requires a lot of time working with IRS to track down missing payments.

What is critical in this kind of investigation is the back of the cancelled checks. IRS imprints some very tiny numbers on the back that usually identify where the check was applied. Without those checks, it’s a guessing game. That is why it is important to use a bank that returns your actual checks rather than send you a photo-copy of the check’s front, as more and more banks are doing.

I am researching this service myself. I have gone to their website and will sign up both as an individual and for one of our corporations. I am also very interested in hearing from anyone who has been actually making payments through this means, especially for an older year, where most misapplications happen. I will report on my findings.

KMK