This note has nothing to do with income taxes. I am just reeling from an experience I had the other night.
My wife and I were taking care of my sister’s animals while she and her family were out of town. The fish aquarium filter pump had gone out, so we went to Wal-Mart at around 10 pm on a Friday night to get one.
The scene was like one out of an Arnold Schwarzneggar or Sylvester Stallone movie. I felt like I was in a freak show. Most of the people were dressed rather poorly. My tennis shoes and jogging shorts actually looked good in comparison.
There were people with multi-colored hair, pants hanging down, and on and on. This included employees at the registers. People were hanging out in the parking lot and all around the store. People were in line at the little DVD rental red box. By the way, this is one example of how one idea can totally revolutionize an industry. Those little red and blue boxes shut down countless movie rental stores and made many landlords sad.
On the way home, we encountered two different drivers who were trying to share our driving lane with us……scary. I can recall the lesson from physics class that says that two different objects cannot occupy the same space without some sort of collision…..yikes. Maybe they overslept that morning in college.
This issue goes back to the foundation of our legal system. This gets very deep, but I will stay on the surface here. There are two types of law in America: Civil and Criminal.
Criminal law is the enforcement of statute and law. There is typically an injured party. An injured party is someone who has been harmed or deprived of something. This may or may not include a physical injury.
Civil law is based on contract law. No contract means no enforcement. There are 4 items that make a contract enforceable. One of these is a signature of competent parties. Without a signature, there can be no enforcement of a contract. Your tax return and your drivers license are contracts, and thus require a signature for enforcement.
Now you know why the IRS penalizes taxpayers $50 for not signing their return. Without a signature, they cannot hold you to the terms of the contract.
A July 27 article from Tax Prof Blog:
Section 3707 of the IRS Restructuring and Reform Act of 1998 prohibits the IRS from designating taxpayers as “illegal tax protesters (or any similar designation).” I.R.C. § 7803(d)(1)(A)(v) requires the Treasury Inspector General for Tax Administration to annually audit the IRS’s compliance with § 3707. The TIGTA today released Fiscal Year 2010 Statutory Audit of Compliance With Legal Guidelines Prohibiting the Use of Illegal Tax Protester and Similar Designations (2010-30-073):
Congress was concerned that some taxpayers were being permanently labeled and stigmatized by the Illegal Tax Protester designation. The concern was that this label could bias IRS employees and result in unfair treatment of the taxpayer.
We found that, out of approximately 80.6 million records and cases, there were 196 instances in which employees had labeled taxpayers as “Tax Protester,” “Constitutionally Challenged,” or other similar designations … We believe the 196 instances we did identify in the various systems previously listed are prohibited by law.
There is quite a bit of mis-information about this issue. The latest healthcare takeover bill includes a provision that requires employers to “ include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employee’s gross income.”
Employers are required to report these amounts. The new law does not require that these benefits will now be taxable. The obvious question is why? I have not received any logical explanation why it is required to be reported, but is not taxable.
Sounds like they have future plans for your currently non-taxable health care benefits.
I have been reading a lot lately about business and our economy.
The conventional line of thinking is that there is a continuum of products and services. You can picture this in the form of a pyramid. The lower price and level of service will be provided by many providers. As price and level of service rise, the fewer providers you will find.
As our economy continues to shrink, the shape of this pyramid will change. Now picture the same pyramid and take out the middle half. You now have a large number of people offering low prices and inferior service. They have all “commoditized” themselves. It’s all about price. Think about Lowe’s and Home Depot.
You will then have a few at the top of the pyramid who will not allow themselves to be reduced to a commodity. They will provide a superior quality product and level of service. They will have the resources to market and gain market share. Think about Ace Hardware. Any time you walk into the store, you are acknowledged and offered assistance. In this economy, they are building a brand new store just down the road from my office. Price is irrelevant if you are looking for such great service.
Webster defines austerity as: The quality or state of being austere; an austere act, manner, or attitude, an ascetic practice; enforced or extreme economy.
In the context of politics, this does not mean that government will get smaller. It means that they will drastically cut the level and scope of services the public has been accustomed to receiving from government.
What does this mean for us? It most likely means a reduction in the standard of living we have become accustomed to. This will mean higher taxes and scarcity of certain service and product resources.
This is a common question. These things can be a bit confusing.
A deduction is used to offset taxable income. For example, you have $5,000 in deductible mortgage interest and you are in a 15% tax bracket. This $5,000 deduction would yield a tax savings of $750.
A credit is used to offset actual tax liability. For example, you have a child tax credit of $2,000. Disregarding any limitations, this $2,000 credit would yield a tax savings of $2,000
