About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Sunday, April 11, 2021

Three Big Income Tax Surprises In Tax Year 2020

Most every income tax filing season has some surprises - but not many more than for those who worked remotely @ home in a different state than where their employer is located or for those who received unemployment insurance benefits caused by the government shutting down businesses under the pretense of concern for the Wuhan coronavirus.  There were also a few surprises for people scheduled to take RMDs from IRAs.

The IRS's decision to extend the filing deadline to May 17 gives affected people a few more weeks to cope with these surprises.

For states with an income tax people are usually taxed by the state where their employer's office or business is located & of course this is where they normally went to work every day before March 2020.  After working remotely from home for about ten months in 2020 a significant number of people are finding that more than one state is making income tax claims on their earnings.

Some remote workers have found they are taxed in the state where their employer is located unless the employer actually requires them to work remotely in another state.  If two or more states are involved the state income tax liability is never based on where it is convenient for the work to be performed.  Such affected workers may have to file two, or more, state income tax returns.

States like New York are very aggressive in claiming NY state income taxes are due for people working from home in another state but whose employer is located in New York.

The biggest surprises could come to people who found that working remotely was so convenient that they traveled to the homes of friends, family, or second homes in states other than where their principal residence (main home) is located to work.  Some states, such as Michigan, require someone who is not a resident to pay Michigan state income tax on the money they earned the first day the person starts working remotely in Michigan.  Some states subject all of your income to state income taxes regardless of where it was earned, leaving you to hope there is a reciprocal agreement between states (like PA & NJ) or that your state of principal residence is reasonable in recognizing taxes paid to other jurisdictions (i.e., income earned outside your principal residence state is subtracted so that such income is only taxed once @ each state level). 

This state income tax problem started when California recognized that professional athletes were easy high income targets who were good sources of extra income for the state.  A professional NBA basketball player living in Florida, a state with no state income tax, still pays state income tax in 18 other states that he plays basketball in.

There are 41 states that have state income taxes & more than 20 of them have a one day rule for owing state income taxes if someone travels there to work or works there remotely.  Technically, someone going to a trade show or one day seminar could be liable for state income tax in such a state.

There are 16 states that have agreements that make it easier for those who commute across state lines to come under the jurisdiction of the state in which they live.  

Six states tax someone working remotely based on where the employer's office is located if the remote work is not required by the employer @ a genuine work location.

Nine states have no state income tax - Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, & Wyoming.

In balancing out any dual state income tax payments you should take into account the tax rates of both states.  For instance you could get a credit for taxes paid to a state other than your principal residence state.  If your principal residence state has a lower tax rate than the state you chose to work in you could get a tax surprise if you had figured it was convenient to work in the other state for part of the pandemic scarred year.

Remote workers should be better prepared after this income tax filing season.  Being proactive in understanding your state income tax withholding & the rates of other states you choose to spend time in is a great start.

The second big surprise in tax year 2020 affected people who had never received unemployment benefits in their lives - only to find out that unemployment compensation is taxable for federal purposes including money received under the Federal Pandemic Unemployment Compensation (FPUC) program.  In brief, millions of workers had thousands of dollars per family in income tax liabilities on their unemployment benefits.

New Jersey allowed people to voluntarily have 10% of their unemployment benefit withheld & sent to the IRS so @ least there was a warning of what was to come for people in NJ.  But California did not withhold taxes on the enhanced federal $600 supplemental benefits made through the FPUC so many Californians were unsuspecting of the income tax liability on their unemployment benefits.

The IRS started accepting income tax returns on February 12 with most early filers expecting a refund, as usual, figuring it made no sense letting the government hold their money interest free any longer than the beginning of the year.  Do you see something wrong with this reasoning?  

The income taxes due on the unemployment benefits cut into that refund so on March 11, 2021 the American Rescue Plan was enacted that retroactively  included a new exclusion of up to $10,200 of unemployment compensation, per recipient, in households whose adjusted gross income was less than $150,000 in tax year 2020.  It wasn't until March 23 that the IRS released guidance for those affected who had already filed 2020 returns & for those who haven't - a combination that includes 40 million affected Americans.  By the beginning of March the IRS already had received 45 million income tax returns, many of which would be affected by the new law exempting some unemployment benefits from taxation.

The government is so anxious to send people money that the IRS has told affected tax filers, who had already filed, not to prepare amended returns but rather the IRS would calculate the amount due & send out the checks.  In any event everyone will be made whole one way or the other in this regard.  

A $10,200 unemployment tax exemption in 2020 amounts to every recipient of the $600 per week unemployment compensation, in a household that totals a cumulative income of $150,000 per year, or less, receiving the top $600 per week benefit for 17 weeks tax free.  Since many people received more income from unemployment compensation (both regular state unemployment compensation like $1,234 per week in Massachusetts plus the $600 per week federal supplement) than they did working & paying both income & payroll taxes on their incomes it is not surprising that many firms & small businesses have had trouble hiring people.  The tax exemption described above only exacerbates the problem. 

The third big surprise came on March 27, 2020 when Congress passed & Trump signed the Coronavirus Aid, Relief, & Economic Security Act (CARES Act) that temporarily waived required minimum distributions (RMDs) in 2020 for anyone with an RMD due in 2020 (the Secure Act of 2019 had already changed the starting age for RMDs to 72) including IRA beneficiaries taking single life expectancy payout distributions, & IRA holders who had turned 70 & a half in 2019 & had until April 1, 2020 to take their RMD for tax year 2019.  Talk about good timing.

Congress included this RMD waiver in the CARES Act because 2020 RMDs are based on the fair market value of an IRA on December 31, 2019 when the DJIA was 28,462 (S&P 3,221).  The Dow had dropped to 22,552 (S&P 2,630) on the date the CARES Act was signed into law meaning that without enactment of the CARES Act many IRA holders would have been taking large taxable RMDs on a market value that no longer existed.

The complication involved taxpayers who had already taken their 2020 RMD before enactment of the CARES Act or who had submitted their income tax returns figuring in a 2020 RMD (realized or merely projected) & its tax liability for tax year 2020 & included this in making the first estimated tax payment for tax year 2020 - such people would have overpaid, & some substantially overpaid. 

The IRS ultimately altered their rules allowing early 2020 RMDs to be repaid, treating the repayment as a tax-free rollover not subject to the one rollover every 12 months rule.  The estimated tax payer who overpaid was on his own to recalculate the other three estimated tax payments making sure he did not underpay for the year or any other quarter, which would have drawn an underpayment of estimated tax penalty plus interest, even though he overpaid the first estimated tax payment.

These are the three big income tax surprises for tax year 2020 that I have come across..  Please let me know of any others that you are aware of.

All of the income tax surprises described above stem from the adoption in Amendment XVI of the Constitution of the income tax "from whatever source derived."  In this case the sources are assessments of state income taxes depending on where you live or work or where your employer is located, the federal government taxing unemployment insurance benefits, & the federal government deciding what portion, & when, your retirement savings will be taxed.

There is a better way & it is the FairTax.

Sunday, March 28, 2021

No Voter Remorse

On Thursday March 11 Biden made his first presidential prime time TV address to mark the one year anniversary of the Covid-19 pandemic in America.  The address also coincided with his signing into law the same day of the $1.9 trillion stimulus bill known as the American Rescue Plan Act (ARPA), Biden's first legislative victory in office.

Almost half of this gigantic stimulus spending will go directly to the well publicized $1,400 per person direct deposits or checks ($8,400 for a family of two adults & four small children), $1,300 per child expanded child tax credits ($5,200 for this same family), bigger food-stamp payments, & $300 per week federal enhanced unemployment benefits in addition to regular state unemployment benefits.  And $350 billion payments will be made to states - the majority of which will go to Democrat states that have been financially irresponsible for decades meaning that states like Tennessee, Florida, Texas, & Georgia will bail out New York, New Jersey, Illinois, & California.  For instance, New York will receive more money from the bill than Florida despite New York having a smaller population than Florida - one of the consequences of the November election. 

The ARPA will also provide 14 weeks of paid sick, family, & medical leave through September, while reimbursing local governments for the cost of this leave, provide an additional $25 billion for rental relief & $5 billion to cover home energy & water costs for low income people, extend the federal eviction moratorium through September & allow people with federally guaranteed mortgages to apply for forbearance until September, provide $40 billion to ensure childcare providers can remain open & expand the childcare tax credit, provide an additional $15 billion to the Paycheck Protection Program in flexible, equitably distributed grants to small businesses to help them reopen & rebuild, & provide $20 billion to support public transit agencies to ensure that workers keep their jobs & routes are not cut from service.

All of this federal deficit spending - just when the economy is growing on its own.   Mitch McConnell said: "Our country is already set for a roaring recovery.  We are already on track to bounce back from this crisis.  That's not because of this bill.  It's because of our work last year."  

The graphic below shows the initial claims for unemployment benefits fell below the pre-pandemic record last week without this government stimulus - this will convert to GDP growth.  The ARPA stimulus bill contains measures that are less targeted than the two previous stimulus bills the past year & to make matters worse comes when the economy is already recovering.  In short, it is just a blanket giveaway to buy votes.  And of course the entire plan is unconstitutional. 

Biden & Harris went on a cross country victory tour marking the passing of the ARPA, billed as the "Help Is Here" campaign to proclaim the merits of the stimulus plan & to make sure that voters know who made this bailout money possible - the bill passed without one Republican vote in either the House or Senate & I fully expected this point would be driven home by Biden & Harris during the tour - & it was regardless of Biden's claims to be a unifier.  See Senate vote below.

The initial eight state tour started with Biden's visit to Pennsylvania on Tuesday March 16, while Harris & her husband visited California, Nevada & Colorado & Jill Biden visited New Jersey & New Hampshire.  The second gentlemen moved the message to New Mexico.  Biden & Harris wrapped up the week in Georgia.

Biden expects, & incidentally so do I, that the massive giveaway will be largely more popular with Republican voters around the country than it is with Republican elected officials.  The nation is already coming out of the economic pandemic doldrums strongly on its own capitalistic free enterprise merits but Biden is there to falsely tell people that it is his stimulus package that did the trick.  As the economy strengthens Biden will both take credit for it & count on watching his popularity grow thereby helping congressional Democrats win in the 2022 midterm elections.  A perfect setup for an unsuspecting poorly educated citizenry.   

Many people who have received the relief funds clearly recognized that they would one day run out of money but did not think that the government could face the same fate never realizing that the government gets its money from people & no matter how rich these people are they too will also sooner or later run out of money.   

Now the $1.9 trillion stimulus plan is just the start of the Democrats plans.  There is a $3 trillion infrastructure plan being developed that includes climate change initiatives, extending the newly created child tax credit, providing for universal pre kindergarten & tuition free community college, raising the minimum wage to @ least $15 per hour, & providing for universal child care & rental assistance.

These plans are pretty much set up because during the campaign Biden had proposed more than $3 trillion in tax increases over the next decade & there is evidence from polls, such as from Gallup, showing that people think businesses & wealthy people do not pay enough in taxes.  These polls do not indicate where these people think their employers get the money to hire them or if they would be willing to take a pay cut or be discharged if their employer took the money saved from their salaries to pay more in taxes.

To put Biden's spending binge into perspective:  in less than Biden's first hundred days in office he will have proposed $4.9 trillion in deficit spending.  The national debt from the start of the Republic to 2000 was $5.6 trillion.  Is anyone thinking about the significance of the national debt?  Or what the government's maximum claim on earned income should be?

But as long as people are receiving the Biden stimulus money they do not have any remorse about voting for Biden, even considering the following seemingly significant items during the campaign that have blindsided Biden voters:

1.  On the eve of the annual March for Life event (this year virtual) Biden signed a presidential memorandum that reversed restrictions on abortion access both foreign & domestic.  The new Biden policy rescinds the so-called Mexico City Policy (also known as the global gag rule) thereby allowing American tax dollars to be used for abortion businesses & promoters overseas.  Biden claims to be a practicing Catholic who until recently followed the Hyde Amendment, a legislative provision that barred the use of federal funds to pay for abortions with rare exceptions.  Many religious people were surprised by Biden's religious contradictions but really are fine with Biden's pro-abortion position as long as the stimulus money keeps flowing.

2.  Biden placed a 100 day halt on deporting illegal aliens including felons with final orders of removal in a direct violation of his oath to enforce the immigration laws of the U.S.  Shortly after his 12 noon inauguration on January 20 Biden sent a memo to Congress outlining a proposed comprehensive immigration bill (a form of amnesty) that includes an eight year path to citizenship for the 11 million immigrants in the U.S. who don't have legal status - thereby putting many of these people on a faster path to citizenship than those standing in line legally today.  Comprehensive immigration reform is of course the source of new Democrat voters that will keep the statists in power until everyone realizes what they have been throwing away.  

In the meantime, while we wait for many on the eight year citizenship path to come of voting age, Biden's policies have incentivized & attracted tens of thousands of people from Central America to come to our southwest border to pursue admission to the U.S. to take advantage of any or as many as possible of the 126 welfare programs identified by the Cato Institute.  Although the general procedure is to let the migrants in & bus or fly them to northern states like New Jersey & New York there has been a significant number of positive cases of Covid-19 discovered among the illegal border crossers.  So after a year of the government restricting American citizens from going to church, weddings, funerals, or visiting family members the Biden administration has allowed possibly Covid diseased people who are the poorest, least educated, lowest skilled people in the world into America in what Biden perceives as a permanent Democrat voting block - all of which will sooner or later be financed by taking away your life's savings through paying for one welfare program after another.

See photo below of Hondurans clashing with Guatemalan soldiers as a migrant caravan tries to cross into Vado Hondo, Guatemala on January 17,  three days before Biden's inauguration, on their way to the U.S. in what is the biggest surge of illegal migrants in twenty years, including a record number of unaccompanied minors.  Biden does not consider the type of scenes depicted in the below photo to be a crisis although the Federal Emergency Management Agency was sent to our southwest border.  Biden's election in & of itself incentivized these people to come to America, many of whom did not even know Biden's name, & most of whom were men in search of work such as picking lettuce & washing dishes.  Now ask yourself: do we really need more dishwashers?

3.  And of course there were the usual Democrat abuses & insults to the intelligence to the American people such as A) the $1,400 checks going to pedophiles & felons such as Boston Marathon bomber Dzhokhar Tsarnaev in his jail cell; B) $5 billion going to "Farmers of Color" to compensate for the alleged discrimination of the USDA & "to support activities @ the USDA that will supposedly root out systemic racism, provide technical & legal assistance to agriculture communities of color, & fund under resourced programs that will shape the future for farmers & communities of color" - source:  The Emergency Relief for Farmers of Color Act introduced by Reverend Raphael Warnock (D-GA), Cory Booker (D-NJ), Ben Ray Lujan (D-NM), & Debbie Stabenow (D-MI); C) millions of dollars going to lawless sanctuary cities; D) the welcoming back to America of people legally deported by Trump; & E) in the biggest abuse & insult of all - portraying the American Rescue Plan stimulus bill as a plan to combat the Covid-19 pandemic when so little of the proceeds go toward Covid relief as you can tell by reading the above.

From his first news conference last Thursday, painfully slow, protective, & well scripted, Biden feels he is on a winning path with American voters even saying @ one point he did not know whether there would even be a Republican Party in 2024 - & neither do I.

The GOP must do more than have their elected representatives or paid pundits come on TV to talk about radical socialism or what has escalated recently to talking about fascism citing Biden's large number of executive orders.  This won't & hasn't cut it.  We are long past this.  Long before Trump said in the 2020 State Of The Union address that "America will never be a socialist country" we were well more than halfway there already.  This is what the citizenry has become accustomed to & voted for more of in 2020 with no remorse.

It is very disheartening to see conservative commentators miss the point entirely as to what happened last November when they list the offenses Biden has committed on America & act like Biden's election was a mistake - laughing as if Trump is a shoo in in 2024 when in reality he has no chance @ all of being reelected after the way he conducted himself after losing a close election in which he offended virtually every voting group imaginable.  This attitude will play well to die hard Trump supporters but will not help @ all in returning America to excellence.

The majority of American voters want, & have signaled that they want by electing Biden, the government programs described hereinbefore & have no remorse whatsoever regarding the 2020 presidential election.  People who have not been affected by one iota by Covid 19 are lapping up the $1,400 stimulus checks, & the previous two, as if they deserved them.

In our lifetimes we have seen the descendancy of the Death Of Democracy stages (that every democracy in history has gone through before becoming a dictatorship): from learning in elementary school & junior high about the Founders' great courage & successful fight for liberty, to the resultant liberty to abundance stage of our heritage, & then more recently to our direct witnessing of the abundance to complacency stage & the complacency to apathy stage, & now the apathy to dependence stage as described in this post above.  

It could not be clearer.  The most powerful influence of any election is the destructive message that your vote can be bought by promising government programs that seemingly offer security & plenty of leisure time & freedom.

This destructive process of the majority always voting for the candidates who promise the most benefits from the public treasury will continue until it collapses of its own financial deadweight or enough citizens, who know better, spend themselves in the worthy cause of helping our country fight off the socialist onslaught that is on course to fully take over America.

The genesis of our problem is the socialist education system presented by government schools & human nature that is always looking for something free.  

Professor Friedman wrote in the Cato Policy Report, March/April 1999 - "Any institution will tend to express its own values & its own ideas.  Our public education system is a socialsit institution.  A socialist institution will teach socialist values, not principles of private enterprise."

Reversing the socialist bent in American education will take a dedicated effort from virtually all of us.  Otherwise the socialist slide will continue as sure & as natural as the entropy of the universe increases.

If you have children, grandchildren, nieces, hephews, or friends & neighbors who have bought into the socialist destruction of America through the "I deserve" or the "I am entitled" mentality ask to see their textbooks - I do with every person I meet who tells me they are a student.

Do not send children to schools that do not teach American values.  

A charter subscriber to this blog told me she has tutored her neighbors' children in American values while she supervises them, @ their parents request, after school.

This blog is written @ the suggestion of former South Carolina Senator Jim Demint & this month the posts will reach over 10,000 readers.  If you can't write your own blog for whatever reason pass these messages on if you see value in them.  Or comment - all comments are posted whether they agree or not with my points of view unless they use profanity.  Commenting is a good way to add to the discussion so that everyone learns starting with me.

But don't rely on me - I always leave one thing out of every post hoping someone will find it.

Before the first presidential debate last fall I suggested fourteen questions that should be answered by every citizen before being presented to our incumbent politicians or new candidates for office.  Once you are sure of the answers you are armed to make a positive contribution so that the electoral result of 2020 is a one off proposition.

Understanding the answers to these questions is the way to return America to the excellence of the liberty to abundance stage of our history that has the potential to benefit everyone in the world.  If we don't teach these principles to others the electoral margins of 2020 will not change.

I don't know of another way to turn this Biden/Harris electoral nightmare around.  But if you do, please do not hold back.  If you don't, I hope this post gave you some ideas of what to do to help.

Sunday, March 14, 2021

Bridge Crossing Quiz

Thanks to one of our A+ quiz takers for sending along the subject quiz.  I always hold my breath until the A+ originator lets me know if I got it right.

"Yes, exactly. . .well done" was his reply to my solution to his quiz.

Below is the subject quiz.  Please let me know how you work the problem.

I will post all correct answers or alternatively will send the solution privately to anyone who requests it.

Bridge Crossing Quiz

It is given that a bridge, like the one shown above, will collapse in 17 minutes.

Four people want to cross the bridge before it collapses.  It is night & there is only one flashlight that is necessary to guide them on any crossing.  Only two people can cross @ a time & the pair must walk @ the rate of the slower person's pace.

A takes 1 minute to cross.

B takes 2 minutes

C takes 5 minutes

D takes 10 minutes

How do these four people organize their crossing so that all cross the bridge in 17 minutes before it collapses?