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DeTaxUS Newsletter CONTENTS:
INTRODUCTION Our Mission is to Abolish the Federal Income Tax
Quote: "I am only one, but I am one. I cannot do everything, but I can do something. What I can do, I should do and, with the help of God, I will do!" So far 2003 isn't looking like a winning year, with war very likely and the economy in the doldrums. The gang in Washington is likely to raise the debt ceiling above the current $6.4 trillion limit and issue more bonds so they can flood the world with more US dollars. They always do, because it is an easier decision than cutting spending. As far as I know, the bill to repeal the income tax is still sitting "in committee" and is not likely to be brought to the floor any time soon. Even the Fair Tax movement isn't making any progress. Yet I have to believe that if Massachusetts voters, with almost no publicity or news coverage, came so close to kicking out the state income tax, that it is only a matter of time, money and reaching enough people until we can do it on a national level. If you have any ideas on how we can spread the word about DeTaxUS faster, we'd love to hear from you. This issue is on year-end tax tips and thoughts on attacking those New Year's Resolutions we all make and then have trouble following through on. Warmest regards, Cory Layne Quote: "The more you seek security, the less of it you have. But the more you seek opportunity, the more likely it is that you will achieve the security that you desire." 1. TAX NEWS New IRS Resources for 2003
============== Free File Program This year some 78 million taxpayers are expected to participate in the IRS Free File program. The IRS signed an agreement with a consortium of tax software companies a couple of months ago that will allow up to 80% of individual taxpayers to be eligible for free tax preparation and electronic filing this year. The Free File program will be available on the IRS Web site. Free File [Editor: Though I followed a long trail of protests and comments by tax and consumer groups, accountants, and paid tax preparers (enrolled agents), I haven't yet found the details of this agreement with the dollar amount the IRS is paying for this "free" service, but you can bet they've handed over a pile of your tax dollars to Intuit (TurboTax), H&R Block (TaxCut) and other software venders. In the past, Intuit has offered free filing without government support for those with gross income under $25,000 (reportedly up to 47% of all taxpayers have been eligible but few have taken advantage of the program). Since you've already paid for this free lunch, you probably ought to take advantage of the free filing if you are eligible, if you don't mind having both the IRS and the software vendor having access to your personal data.] ============== The IRS announced the standard mileage rates to use effective January 1, 2003:
2. JOKE OF THE MONTH A Great Way to Invest The young bride approached her awaiting husband on their wedding night and demanded $20 for their first love-making encounter. In his highly aroused state, he readily agreed. This scenario was repeated each time they made love for the next 30 years, him thinking it was a cute way for her to buy new clothes, etc. Arriving home around noon one day, she found her husband sitting in his car in the driveway, totally distraught. Over the next few minutes he told her his business had failed and at 50 years old, he faced financial ruin and would have to start all over. Calmly, she handed him a bank book showing deposits and interest for 30 years totaling over $1 million dollars. Pointing across the street she gestured toward the local bank and informed him that he was the largest stockholder in the bank with stock worth nearly $2 million dollars. She told him that for 30 years she had charged him each time they had sex , and this was the result of her investments. Now he was even more distraught and started beating his head against the side of the car. She asked him why the disappointment at such good news and he replied, "If I had known what you were doing, I would have given you all of my business!" 3. TAX TIPS Top Ten Errors Found On Tax Returns By The IRS ============== #1 Error: Spouse's Social Security Number (SSN) was either missing or didn't match Social Security Administration (SSA) records. Result: Spouse's personal exemption wasn't allowed. #2 Error: Taxpayer identification numbers or names for dependent didn't match IRS or SSA records. Result: Exemptions were not allowed. #3 Error: Taxpayer identification numbers or names for dependents didn't match IRS or SSA records. Result: All or part of the child tax credit was disallowed. #4 Error: Primary SSN was incorrect or illegible. Result: Tax return not processed. #5 Error: Child's age exceeds the limit. Result: Child tax credit was reduced or disallowed. #6 Error: Dependent's last name was omitted or incorrect. Result: Processing delayed. #7 Error: Earned income credit was figured or entered incorrectly. Result: Delayed for correction. #8 Error: Spouse's SSN was incorrect or illegible. Result: Delayed for correction. #9 Error: SSN for children who qualify taxpayer for earned income credit didn't match SSA records. Result: Earned income credit was changed. #10 Error: Refund amount or the amount of tax owed was figured incorrectly. Result: Delayed for correctioin. ============== Quote: "A free lunch is only found in mousetraps." - John Capuzz 4. PLANNING for 2003 Summary of 2002/2003 Tax Law Changes For Businesses
5. FEEDBACK Have a problem paying for expensive drugs or have a parent with high prescription bills? This website lists the various drug companies which offer assistance programs for drugs they produce. Rx Assistance Programs Question: Answer: ============== Question: Answer: Another case of "Who's Money IS It Anyway?" ============== Response on last month's question on Key Man Insurance. I had stated: "Key Man (or Woman) insurance, on the other hand, if owned by a partnership, LLC, or corporation and paid to the business on the death of a key employee, partner, or officer of the corporation is deductible to the business." According to Guy Strang, who's been in the insurance business for about 25 years: "Most insurance companies sell business insurance with the proviso that the insured in a keyman policy can be switched to a new insured person should the need arise. Of course, the new insured must be insurable at a risk similar to the person vacating the policy and adjustments are made for age, sex and smoking status, but that proviso takes some of the pressure off the corporation in the event things (and people) change. The tax rules remain the same UNLESS the policy is being sold for value. Then the ball game changes. "Most accountants don't know the "miracle" of tax free death benefits. We see P & L and Annual Statements frequently that have life insurance premiums in tax deductible account numbers. If you add up the premiums paid and compare the tax saved with the tax paid on the death benefit, you will easily discover that it doesn't pay to deduct premiums and pay taxes on the death benefit. On average, the premium is less than 3% of the death benefit annually and even at 37% tax bracket, the corp is way behind to allow the death benefit to be taxable. And most good mutual insurance policies have vanishing premiums, which drop the net cost below zero by life expectancy. Deducting premiums and paying taxes on the death benefit is always a loser. "My first experience having my taxes done by a "professional" (CPA) lead to my giving him his first lesson in life insurance. He declared my life insurance dividends as taxable income, which they are not. He didn't know the difference between life insurance dividends (which are construed by the IRS as a "return of premiums") and stock dividends, which are taxable under the IRC." 6. EDITORIALS and ARTICLES
Quote: "If we attend continually and promptly to the little that we can do, we shall long be surprised to find out how little remains that we cannot do." "No man made a greater mistake than he who did nothing because he could only do a little."
THE DAFFODIL PRINCIPLE I hate to start any year off as a pessimist, but.... I think we are in for a long depression, not just a recession. America is not likely to see another boom like the 90's for some time to come. This is not an investment newsletter, it's an income tax education newsletter. One of the things we try to do at DeTaxUS is keep our readers advised of ways to reduce the burden of taxes while fighting for repeal of our government-imposed-by-consent-of-the-people "slave tax." I personally read a large number of daily, weekly and monthly newsletters on a variety of topics: tax issues, current legislation, financial management, investments, international and national politics, including several published by folks in Europe and the Far East. Our Wall Street "gurus" keep insisting that we've seen the bottom and the Dow and NASDAQ are going to come charging back in 2003. But their optimism just doesn't hold water. Experts in London, Paris, Tokyo, Singapore and Sidney say otherwise. They are saying that things are bad all over, and the only thing that's been holding up the world's economy is the free-spending American consumer. Americans buy $1.5 billion a day more in foreign goods than they buy from us. And the American consumer is about tapped out. We've run our credit cards up to trillions of US dollars and now we're cutting back to just the essentials. We spent less this Christmas than past Christmases, not because there's less stuff to buy, but because our credit cards are maxed-out and even balance transfers at zero percent interest won't help any more. In 2000 Americans took $44 billion out of the equity in their homes through cash-out refinancing. The cash-out amount in 2001 was $172 billion. The numbers aren't in yet, but with the lowest interest rates in 50 years, I'm sure even more refies took place in 2002. These people didn't refinance to get a lower monthly payment on the same mortgage balance or even to consolidate debts to pay off credit cards and car loans. No, they added that much to their mortgage balances in order to get the cash out. At the moment they closed the transaction there was no change in their net worth - they added X dollars to their mortgages (liability) and added an equal amount to their checking account (asset) - net change zero. However, most of this money wasn't put into new homes or other assets, it was used to supplement incomes in order to pay bills, taxes, tuition or to buy "stuff." They quickly depleted the asset (cash) to expenses but the liability (mortgage) is still there and real estate values haven't been going up much in most parts of the country, so results have been negative to their net worth. As the economy falls further and salaries are reduced or jobs disappear altogether, those mortgages and other debts get shakier. Banks are holding far too much uncollectable debt from consumers, businesses and governments that overspent during the boom years and now are having trouble coming up with enough revenue to repay. They also have not yet written down international loans to countries that have already defaulted on those loans. All this credit was created out of thin air. Due to the fractional banking system, banks "lend" six to seven times the amount they have in deposits from their customers. The banks carry all this debt as assets on their balance sheets (versus deposits which are liabilities), but when they have to start writing off all the bad loans and unpaid credit card accounts, those balance sheets aren't going to look so good. It's time to quit spending and start saving. For many folks, it's already too late. The monthly debt service on those credit cards, car loans, and even low-rate mortgages is eating up most of our disposable income after taxes. There's nothing left over to save. The 1 or 2 percent tax cuts and additional child credits President Bush is asking Congress to approve won't help much either. For the average taxpayer it'll mean only a few hundred extra dollars a year when he'll need thousands to get out of the hole. And that's if he doesn't lose his job or see his business decline even further. Meanwhile nearly every state and local government is crying poverty, insisting that they've cut their spending to the bone and demanding that taxpayers contribute more to offset mounting deficits. It's time to call a halt. Start writing and calling your representatives and telling them that they need to cut THROUGH the bone; they need to amputate some programs altogether. Government serves one function, and one function only: to protect the life, liberty and property of its citizens. Anything beyond that function is best left to the free enterprise system and the people themselves. For example, the National Science Foundation (read: US Government) recently granted Loyola University one million tax dollars to develop an accounting system for nonprofit organizations. Talk about a waste of tax money! Such software is already available and widely used by thousands of nonprofit organizations already. Not to mention that accounting has little to do with "science" -- even computer science. In the meanwhile, do whatever it takes to get out of debt, save for your future (gold and gold stocks have been going up), and take control of your own life in your own business. Cory Layne P.S. Call, write or email your congressman and senators today. You can look up contact information for your Congressman and Senators at: P.P.S. Your comments and suggestions are welcome. We will try to respond to all of them personally and will include a selection of them in future newsletters and on the DeTaxUS website. Send email to: Editor P.P.P.S. Let us know how you feel about the income tax. Your opinion is always welcome. You can join our online forum to discuss tax issues by going to: DeTaxUS Forum P.P.P.P.S. You can help by sharing our vision with other over-taxed Americans. DISCLAIMERS: The information contained herein is general in nature and is not intended as legal, accounting or tax advice by DeTaxUS, Inc. The reader should seek professional guidance prior to taking any action based upon this information. DeTaxUS, Inc. shall have no obligation to inform the reader of any changes in tax laws or other which may affect the information provided. Portions of this newsletter may have been extracted from articles received for republication. Credit is given where the author is known. Unsigned articles and information gathered from government publications and websites are accepted as public domain. Copyright© 2002 by DeTaxUS, Inc. Copyright
© 2001 DeTaxUS |
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