Are Teens Better Off Than They Were Four Years Ago?

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Not long ago, we featured the following chart showing the official rate of unemployment in the U.S., what the unemployment rate would be if only the same percentage of people were still counted as being part of the U.S. civilian labor force as when Barack Obama was sworn in as President, and what President Obama swore would be the U.S. unemployment rate if only his economic stimulus package were passed into law:

Today, we're going to repeat part of that exercise as we'll focus in on the teen job situation for the last decade. Our chart below reveals both the official teen unemployment rate and what the teen unemployment rate would be if the labor force participation rate for those Age 16-19 was the same as when President Obama was sworn into office back in January 2009:

What we find is that if the same 38.5% of the teen population in the U.S. were still being counted as being part of the U.S. work force, their unemployment rate since October 2009 would be 7-10% higher than the official teen unemployment rate.

That's quite remarkable because the official unemployment rate for individuals Age 16-19 has consistently fallen in a range between 23% and 28%. If a constant 38.5% of the teen population in the U.S. were counted as being part of the civilian labor force, the teen unemployment rate would have been consistently measured since October 2009 as being between 30% and 35%. Both values are up considerably from the 20% unemployment rate for teens that applied when Barack Obama became President.

Looking at the data going back to January 2002, we see that the teen labor force participation rate has been declining in stages. Here, in looking at our constant teen labor force participation unemployment rate, we find that there were significant shifts in the teen unemployment rate approximately occurring in the time from November 2002 through February 2003, and again from January 2007 through October 2009.

We note that these shifts coincide with major changes in the minimum wage, either at the federal level, or at the state level for those states with minimum wages set considerably higher than the federal minimum wage.

The late 2002 early 2003 shift, for example, coincides with state level minimum wage changes in Oregon and Alaska. Meanwhile, the larger shift beginning in January 2007 coincides with a series of significant hikes in the minimum wage in either California (and other high minimum wage states) or the United States, which occurred at approximately six month intervals from January 2007 through July 2009.

What's really remarkable though is how much lower the teen unemployment rate would be in the years from January 2002 through January 2007 if the Age 16-19 labor force participation rate were at the same level recorded in January 2009 (negative unemployment rates?!). It just goes to show how much the labor force participation rate can affect the official unemployment rate!

Enabling Disability Fraud - Part 2

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Today, we're going to demonstrate that the policies of multiple agencies of the U.S. federal government are responsible for enabling criminal disability fraud in the United States, with the cost of the fraud accelerating the pending insolvency of Social Security's Disability Insurance Trust Fund, which will put the program's legitimate beneficiaries at high risk of having their benefits cut after the fund has been exhausted.

Current projections indicate that the Social Security trust fund for disability will be fully depleted in 2016, just four years from the present. The projections from the previous year had indicated that would not happen until 2018. The large shift in the timing of the projected trust fund depletion toward the present in just a year's time indicates a strongly deteriorating fiscal situation for the government "safety net" program.

In Part 1 of our series, we discovered that the U.S. Social Security Administration has effectively established a "no-challenge" policy for disability insurance claims made by applicants over the age of 50, which allows these individuals to obtain Social Security disability benefits far more easily than individuals Age 49 or younger. This arbitrary policy is what enables these individuals to receive Social Security disability insurance payments, even though they might not otherwise be able to obtain those benefits if they were held to the same standards as those under Age 50.

We observe the likely greater incidence of disability fraud as we more closely examine the surge in the number of Social Security disability beneficiaries in the years since 2007, which coincide with the Great Recession. Here, we found that approximately 695,000 more individuals have been added to the nation's government disability rolls during this time than the level that would be consistent with those of pre-Great Recession years.

The chart above, showing the number of "surplus" or "excess" Social Security disability beneficiaries added in each year since 2007, indicates that the recession is the driving factor behind the increased number of individuals obtaining government disability payments, as the timing of the surge coincides with the expiration of government unemployment insurance benefits for individuals who were negatively impacted by the economic contraction, which officially ran from December 2007 through June 2009. The nation's sluggish economic recovery accounts for the decline in the number of surplus or excess Social Security disability program beneficiaries measured in 2011.

That connection between unemployment insurance benefits and disability insurance benefits brings us to where outright fraud is taking place today:

As many as 117,000 Americans simultaneously collect unemployment benefits and federal disability each year, a form of double-dipping that investigators say costs taxpayers $850 million annually and should be ended.

To understand why such "double-dipping" constitutes fraud, please note the following general requirements for each program:

• To receive unemployment insurance benefit payments, claimants must state that they are able to work.
• To receive disability insurance benefit payments, claimants must state that they are unable to work.

While there can be some small overlap in the detailed eligibility requirements for these programs that would legitimately allow a handful of individuals to receive benefits from both simultaneously, the vast majority of individuals currently receiving both unemployment insurance benefit payments and disability insurance payments do not fall within that narrow category and are therefore committing acts of fraud. In general, legitimate beneficiaries of these social safety net programs can draw funds from one program, or the other, but not both at the same time.

That multiple government agencies are involved in enabling this form of fraud is confirmed because the U.S. Department of Labor is responsible for administering the unemployment insurance program, while the Social Security Administration administers the Disability Insurance program. But worse than that is the reason why the fraud has been allowed to continue:

The reason for the double-spending, investigators at the Government Accountability Office reported this week, is good old-fashioned lack of communication.

Put simply, the Labor Department that funds unemployment benefits and the Social Security Administration that funds disability payments don't compare notes, leavings tens of thousands of Americans each month to collect two checks from a stretched-thin government treasury.

It would seem that the bureaucrats and politicians who are responsible for overseeing these programs learned nothing from the failure of government agencies to share information among themselves that enabled the criminal terrorist murders of 2,996 Americans on 11 September 2001 to proceed unchallenged.

This time however, the Government Accountability Office's report indicates that the annual savings that might be realized by ending this kind of fraud adds up to $850 million.

That's a savings of roughly 1 dollar out of each $1400 that is currently projected to be consumed in the nation's projected deficit of 1.21 trillion dollars for 2012! And it would be painless, because the people who are honestly playing by the rules would not be affected!

This is exactly the sort of thing that should be a no-brainer for a fiscally responsible politician - it's as close to low-hanging fruit as there is to be found anywhere in the U.S. federal government's budget. We wonder if any political candidate will rise to the occasion of acting to end the government's practices and policies that enable such costly fraud.

Your GPA on Facebook

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Facebook (NASDAQ: FB) CEO Mark Zuckerberg is one of Harvard University's most famous dropouts, leaving the school to launch his company on the way to becoming a billionaire. But could he be responsible for setting a number of college students infatuated with his creation on the path to unintentionally follow suit, although with much, much less success?

Although we suspect that the real answer to that question will be settled by tort lawyers in the future, what we're really looking at today is how excessive time spent by college students on Facebook affects their grades.

Your Potential GPA and Facebook Usage
Input Data	Values
Your Potential GPA (the GPA you reasonably think you can earn in this school session.)
How many minutes do you spend on average on Facebook every day?

Your GPA on Facebook
Calculated Results	Values
Your Likely GPA given your Facebook usage level

Here, researcher Reynol Junco has published a study that indicates that too much time spent on Facebook lowers the Grade Point Average (GPA) of college students. Finding that the average college students spends an average of 106 minutes (1 hour, 46 minutes) on Facebook each day, Junco documented that each additional 93 minutes per day beyond that level lowers a college student's GPA by 0.12.

That may not seem like much, but when the maximum GPA that can be earned at most universities is just 4.00, tenths of a point matter. That's especially true for students with GPAs in the margins between major letter grades, where missing the mark might mean potential employers pass over their résumés.

The reason why that would be the case is that time spent on Facebook is stolen from time available for study. Or sleep. Or physical activities. Or time that if used for other productive purposes has been noted to provide a positive effect on student grades.

But time on Facebook, not so much apparently!

That's why we've created our featured tool today, which college students can use to estimate how much their grades might be negatively affected for spending too much time on the dominant social networking site.

Just enter the average amount of time you spend on Facebook daily, along with the GPA you think you're capable of obtaining this quarter (or semester), and we'll let you know if you're liking Facebook a little too much this session.

If you're not happy with the GPA we show you, just cut back your Facebook time to more reasonable levels. Trust us, neither you nor anyone on your wall is that interesting.

And despite the movie and millions of dollars, neither is Mark Zuckerberg!...

President Obama's "Cash for Clunkers" Summer Jobs Program for Teens

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Why was the August 2012 employment situation report so bad?

In a nutshell, it is because the companies that committed to participate in President Obama's latest ham-handed intervention in the economy, the 2012 Summer Jobs+ program, met their obligation and released their teen employees from their payrolls. The vast majority of the teens who were given summer jobs as part of the program have now gone back to school, and because they have done so, are no longer considered to be part the U.S. civilian labor force.

The removal of so many individuals from the ranks of the U.S. work force accounts for much of the reduction in the official U.S. unemployment rate from 8.3% to 8.1%.

Breaking down the August 2012 jobs numbers by age, we find that 204,000 teens are no longer being counted as being employed, while 250,000 fewer young adults between the ages of 20 and 24 are also being counted as having jobs.

Meanwhile, the number of individuals Age 25 or older counted as having jobs increased by 333,000. The resulting net change from July 2012 for the number of employed Americans was a loss of 119,000 jobs.

As of August 2012, there were 4,344,000 teens, 13,114,000 young adults and 124,643,000 adults Age 25 or older counted as being employed in the U.S. work force. The sudden disappearance of 202,000 jobs for teens represents a sudden decrease of four and a half percent in their numbers from the preceding month.

The following chart shows how that change affects both the unemployment rate for teens and what Age 16-19 unemployment rate would be if teens had the same labor force participation rate that they did in January 2009, when President Obama was sworn into office:

We've been tracking the influence of President Obama's 2012 Summer Jobs+ initiative upon the nation's jobs situation since the June 2012 jobs report came out, which showed an unexpected increase in the number of employed teens, seemingly at the expense of older members of the U.S. work force. That unusual pattern where teens, who lack the experience, education and skills that all older members of the U.S. work force have, suddenly seemed to be favored so much more by employers, continued in July 2012, even though the data clearly indicates that the program's hiring at its peak fell far short of stated expectations.

And now that the teen summer jobs program for 2012 has run its course, the employment data indicates that the "success" of the program was not sustained, with employment and labor force participation rate levels for U.S. teens immediately falling back to what they were before the program occurred. As far as the U.S. economy is concerned, it might as well never have happened.

Worse, it appears from the data that teens actually displaced older individuals from the U.S. job market while the program ran. The data for August 2012 suggests that the U.S. job market is going through somewhat of a correction, which we see in the sudden increase in the number of older individuals being counted as employed as compared to both June and July 2012, as they are no longer being directly displaced by the teens who gained employment as a result of the President's summer jobs program.

In a way, what we've just observed in the summer employment numbers for teens in the U.S. work force resembles President Obama's failed efforts to stimulate the auto industry with its "Cash for Clunkers" program in 2009 or to sustainably stimulate the housing market in 2010.

Like those economic policy failures, President Obama's latest economic initiative only succeeded in the equivalent of shifting around the deck chairs of the Titanic, imposing unnecessary additional costs on the U.S. economy at a time when it can not afford them. As a result, we must find that President Obama's economic policies are hurting the American people more than they are helping them.

What's Your Income Percentile?

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Where do you rank in the U.S. income spectrum?

Now that the U.S. Census has released its total money income data it collected as part of its 2012 Annual Social and Economic Supplement survey, we can tell you almost exactly where you rank among American individuals, men (if you're a man), women (if you're a woman). Or, once you consider the combined income for your family or the members of your household, we can determine your percentile rank among each of those kinds of groupings!

It all starts below! Just enter your personal income, your family's income, which includes the incomes of your spouse and any dependents you might have, regardless of whether they live with you or not, and also the combined income of just the people who live within the same four walls of the household that you do and we'll tell you where you rank (if you're accessing this article through a site that republishes our RSS feed, click here to access the tool on our site.) And if you live outside the United States, be sure to convert your income into U.S. dollars first!

Income Data
Input Data	Values
Your Personal Total Money Income
Your Family's Combined Total Money Income
Your Household's Combined Total Money Income

	Your Income Percentile
	Individuals
	- Men
	- Women
	Families
	Households

The default data we've presented in the tool above represents the average total money income of U.S. individuals, families and households in 2011.

In the tool above, your percentile ranking indicates the percentage of Americans who either share your income or earn less than you do. As such, it tells you what percentage of the population you're above in the income earning food chain.

For example, a percentile ranking of zero would indicate that you are at the very bottom end of the American income spectrum, while a percentile ranking of 100 indicates that you are effectively at the very top end. A percentile rank of 50.0 would indicate that you're within spitting range of being the middle of all Americans (our tool should be able to place most people within 0.2% of their actual percentile ranking.)

In considering your percentile ranking, here's how many income-earning people, families and households there were in 2011:

• Individuals: 214,559,000
• Men: 106,228,000
• Women: 108,332,000
• Families: 80,529,000
• Households: 121,084,000

And here are our charts showing the cumulative distribution for U.S. families (left) and households (right). Click the images for larger versions:

The U.S. Census will report the data it collects for income earned in 2012 sometime in September 2013.

WHAT TO DO?

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Becauseof the procrastination of the idiots in Congress it is very difficult to knowwhat to do tax-wise for 2012.
Asof this writing, both the House and the Senate have passed some form of extenderbill –
·     TheHouse bill extends the “Bush” tax cuts in full for one more year.  It provides an AMT patch for 2012 and 2013,but does not address other expired “extenders” tax benefits.
·     TheSenate bill extends the “Bush” tax cuts for all taxpayers with incomes below acertain threshold, which is "marriedcouples with taxable income under $250,000 less the standard deduction and twopersonal exemptions; single taxpayers with taxable income under $200,000 lessthe standard deduction and one exemption; and heads of household with taxableincome under $225,000 less the standard deduction and one exemption”.  The thresholds would be indexed for inflationafter 2009.  It also provides an AMTpatch for 2012 only and a one year extension of most of the popular “extenders”tax benefits.
What theidiots in Congress should do isextend everything that was in effect on December 31, 2011 (including thoseitems already extended through December 31, 2012), except perhaps the 2%reduction in employee Social Security withholding, through December 31, 2013,including the indexed AMT patch and the rest of the temporary “extenders”, ASAP.
What I expectwill happen is that they will waituntil after the election to do anything about anything – and extend everything,at least for taxpayers under the suggested Senate income thresholds, and exceptperhaps the 2% reduction in employee Social Security, in December. 
In eithercase what the idiots must then do in2013 is seriously address radical tax reform.
So formost taxpayers, and 90% of my 1040 clients, tax law for 2012 and 2013 will bethe same as 2011.
Butnothing is certain, and it may be a good idea to approach/consider financialtransactions under the “worst case scenario” - nothing will be extended for2013, and we will revert back to pre-Bush tax law.
Oneexceptional tax benefit that may disappear on January 1^st is the 0%tax rate on long-term capital gains (and qualified dividends) for those in the10% and 15% federal tax brackets.  If youwill be in one of these tax brackets for 2012 you may want to think aboutselling stock and/or mutual fund shares held more than one year that wouldproduce a gain before year-end. 
Considerthis.  While a loss on a “wash sale” isnot currently deductible there is nothing that stops one from recognizing again on such a sale.
A washsale is one in which you sell stock or mutual fund shares and within 30 daysbefore or after the sale you purchase(d) an identical, or substantiallyidentical, block of stock or mutual fund shares.
Forexample - On September 20th you sell 100 shares of XYZ Company. On October 1styou buy 100 shares of XYZ Company. The September sale is considered a “washsale”.
Let us saythat the September sale of the 100 shares of XYZ Company yields a long-termcapital gain of $2,000.  If your net taxableincome is such that you fall within the 15% tax bracket the $2,000 capital gainwill be taxed at 0% on the federal level. Your $2,000 gain is federally tax-free. You will, however, be subject to state income tax on the gain.
What youhave done for the future is increased your tax basis in the investment in XYZCompany for federal and state income tax purposes.  So when you do eventually sell the shares yougain will be $2,000 less, or your loss $2,000 more.
If youhave a sufficient amount available for the 0% tax rate for 2012 this may be agood idea whether or not this unique rate will expire on December 31^stor will continue either temporarily or permanently.  This 0% rate is a great tax planning opportunity that should be taken advantage of to the max each year. 
Before doinganything you should contact your tax professional and work through thetransaction on the Qualified Dividends and Capital Gains Worksheet for 2011 (inthe 1040 instructions) using $35,350 for Single, $70,700 for Married, or $47,350for Head of Household as the income threshold.  TTFN

THE AMERICAN TAX NON-PAYER

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In“Who Doesn't Pay Federal Taxes?”, a study by the Tax Policy Center, we are toldthat “46.4% of Households Paid No FederalIncome Tax for 2011”
Itthen points out - “But Nearly Two-Thirdsof Households That Paid No Income Tax Paid Payroll Taxes”.  That leaves 18.1% who pay neither income norpayroll tax. 
Ofthis 18.1% the study indicates that 10.3% represent the elderly and 6.9%represent “non-elderly” individuals with income under $20,000.
Theimplication here is that the problem of the “non-taxpayer” is not as bad as onewould think because, while almost half of all Americans either pay no federalincome tax or make a profit by filing a 1040 via refundable credits, many actuallydo pay federal tax in the form of FICA or payroll taxes (Social Security andMedicare), and only the elderly and the poor pay nothing.
ButI do not agree with this implication and do strongly feel it is a real problemthat almost half of Americans pay no federal income tax.
Inmy opinion, the FICA tax is not a tax. It is a contribution to a retirement plan (Social Security) and apayment for future health insurance (Medicare). 
Paymentsof Social Security “tax” allow the individual to collect a pension atretirement, and payments of Medicare “tax” allow the individual to receive extensivehealth care coverage at a very cheap rate (less than $100 per month) at age 65. 
Abig reason so many people do not pay any income tax, or make a profit fromtheir return, is because of the many social benefit programs and subsidies thatare run through the Tax Code, such as welfare (EIC) and tuition assistance. 
AsI continue to say -these payments and subsidies may be good, and beneficial tosociety, but they should be distributed as direct payments or subsidies via theappropriate governmental department budget, and not as tax deductions orcredits.
Doyou agree with my thinking?
TTFN

THE FAULT, DEAR READER, IS NOT IN OURSELVES, BUT IN OUR CONGRESS

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OnTuesday I "talked" about the 47% of Americans who either pay absolutely no federal income tax or actually make a profit by filing a Form 1040 (get backmore than they paid in).
Iindicated that this fact is a serious problem that should be addressed.
Onthe same day Trish McIntire posted “Stoning Glass Houses – Again” at OUR TAXINGTIMES, in which she says -
“And in order to fuel the anti-tax fire andwin elections, the anger has been shifted from the tax code to pointing fingersat classes and types of people. ‘He didn't pay any taxes!’ That's not fair! Geta rope! ‘Those People’ should be stoned!”
Asthe Tricky One was famous for saying – Let me make this perfectly clear.  I am not “throwing stones”.  I am not faulting the 47% who pay no federalincome taxes, or make a profit by filing a tax return, for doing so.  Theyhave done nothing wrong. 
It is the legal right of everyAmerican to take full advantage of the various deductions, credits andloopholes in the US Tax Code to pay as little tax as possible.
JudgeLearned Hand is famous for pointing this out in court decisions –
“Any one may so arrange his affairs that histaxes shall be as low as possible; he is not bound to choose that pattern whichwill best pay the Treasury; there is not even a patriotic duty to increaseone's taxes.”  {Gregory v. Helvering,69 F.2d 809, 810 (2d Cir. 1934)}
And-
“Over and over again courts have said thatthere is nothing sinister in so arranging one's affairs as to keep taxes as lowas possible. Everybody does so, rich or poor; and all do right, for nobody owesany public duty to pay more than the law demands: taxes are enforced exactions,not voluntary contributions. To demand more in the name of morals is mere cant.”  {Commissioner v. Newman, 159 F.2d 848, 851(2d Cir. 1947) - dissenting opinion}
I firmly believe in this concept –and as a tax professional I prepare the 1040s of my clients with this as mybottom line. 
Thanks to the Tax Code, severalof my clients over the years have either paid no federal or state income tax orgotten back more than they paid in from their “Uncles”.  To be perfectly honest, there have been yearsin the past where I have legally either paid no federal income tax or gottenback more than I paid in.
Let’sface it – if a government official came up to you and handed you a check for$1,000 because it is Thursday and you have brown eyes would you turn it down?
The fault, dear reader, is not in ourselvesbut in our Congress.  The fact that the current US Tax Code is amucking fess is because of the idiots in Congress, who write the damned thing.
AndI am not saying that certain individuals are not entitled to welfare or thatthe government should not encourage those on welfare to work (Earned IncomeCredit), or that the government should not encourage higher education or theconservation of energy or other worthy activities via partial subsidy (tuitiondeductions and credits and energy credits). 
Iam saying that the purpose of the Tax Code is to raise money to run thegovernment – period.  It is certainly notto “redistribute income or wealth” (which should not be a function of thegovernment at all). 
Ifthe government wants to provide subsidies to encourage certain actions whichwill benefit the country as a whole then it should provide these benefits as direct financial aid, grants, discounts,rebates, or subsidies, whenever possible at the “point of purchase” or beforethe subsidized expense occurs, from thebudget of the appropriate cabinet department (i.e. Department of Education,Health and Human Services, Energy, etc), where the proper safeguards can beobserved – and not wash it through the Tax Code.
FYI - Ido believe that there are some deductions, credits, and loopholes that areinappropriate regardless of how distributed, and that some “encouragements” (charitable contributions, retirement plan deductions, and reduced taxes on capital gains for example) maybe appropriate as a part of the 1040.
Ihope I have made myself clear.
TTFN

TAX BLOGOSPHERE BUDDIES - DAN MEYER

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Today we meet Dan Meyer, a Professorof Accounting at Austin Peay State University in Clarksville, TN, and author ofthe blog TICK MARKS, which I love to say has nothing to do with lyme disease(you see lyme disease is transmitted by ticks, who leave a distinctive markwhen they bite you).  In this case “tickmarks” refer to the mark an accountant makes when footing and cross-footingcolumns of numbers.
While primarily an accounting blog,Dan often discusses tax issues.
Dan used to list “The Twelve Blogsof Christmas” each year, and TWTP made the list in the tax category back in2007.
Howdid you become interested/involved in preparing tax returns?
As I was settling on an accountingmajor in my sophomore year of college; I took an H&R Block self-study taxtraining class.
How were you educated/trained inpreparing tax returns?
Inaddition to the class above; I took a tax course as an undergraduate at “OleMiss” and several tax theory classes during my doctorate at the University ofMissouri.  In addition, I got“on-the-job” training in tax preparation while working for CPA firms inMemphis, TN and Corinth, MS
Whenand why did you decide to write a blog on tax issues?
In 2005, there were not a lot ofaccounting and tax blogs in existence and I believed that starting a blog wouldhelp in my academic career at Austin Peay State University.
Howhas blogging helped your business?
I do not have a business, but it hashelped me as a college teacher by helping me keep up on developments in theprofession (and at closer to “real time” than I would get simply by taking CPEcourses as a CPA), by enabling me to get a journal publication (New Accountant,2007, Issue 723?) and I have assigned students to do a simulated blog in one ofmy undergraduate courses.
Whatdo you consider the “best tax advice” you can give anyone?
Take legitimate deductions andcredits to be sure, but after that, PAY your taxes.
Doyou think the regulation of tax return preparers is a good thing?
From a purely ideological point ofview, no; the present American economy is badly overregulated and that is animportant contributor to the present high unemployment rate.  However, the tax return preparer legislationhas a saving grace—accounting students with marginal GPAs can and should takethe RTRP exam and have a saleable skill along with their diploma.
Do you think CPAs and attorneysshould be exempt from testing and required CPEs in taxation?
Ingeneral, yes since tax is tested on the CPA and bar exam. I do agree, however,that if subsequent research by the IRS shows that CPAs and attorneys have anerror rate comparable to non-EAs/CPAs/attorneys, that this exemption should bepulled (note: EAs should have an unconditional exemption).  An additional tweak that I could accept(though not support for selfish reasons) would be to pull this exemption if theCPA/attorney had prepared less than 20 returns in the past five years or if theCPA/attorney had received ethical or criminal sanction at the state or federallevel in the last five years.
Do you think experienced taxpreparers should be exempt from the initial RTRP competency test under“grandfathering”?
Mixedanswer here since I can see good arguments for both sides—thus somewhat similarto the immigration debate in Washington. At most, I could support something like a refund of competency test feeif the experienced preparer passed on the first try or a one-year deferral onthe due date for the competency exam for preparers with over 10 yearsexperience AND no ethical or criminal sanctions during the last 10 years.
How would you reform/rewrite the TaxCode?
SinceI am in my mid-50s, I doubt that I could live long enough (even if I had theinterest to do so) to read the code, regulations and court cases needed tofully understand what is in the present U. S. Internal Code of 1986,amended.  Having said that, a fewsuperficial adjustments:
[1]Raise the capital gains and dividend rate to the lower of actual marginal rateor 25% except for sales of principal residence,
[2]eliminate the 85% provision on taxation of income for Social Securityrecipients and raise the floor to 50K MFJ/ 35K single/ 20K MFS,
[3]allow the first $1000 of charitable contributions and medical insurance to bededucted toward AGI,
[4]eliminate Subchapter C taxation of corporations (making virtually all businessincome pass-through) UNLESS they directly or constructively have taxable incomein excess of $100,000,000; then a single tax rate of 25%,
[5]eliminate the estate tax on estates with net worth of less than $5 million;
[6]eliminate or drastically rework the credit for the elderly—at present, it ismore hassle than it is worth.  In my bloglast year, I have separately proposed several changes to extend the projectedlife of Social Security.
What is your favorite Broadwaymusical – and why?
Ihave never seen a musical on Broadway—I did see an off-Broadway presentation of“1776” in the Elliott Hall of Music at Purdue University in West Lafayette, INas an adolescent and was quite impressed.

WhileDan and I disagree on the basic concept of exempting CPAs from taking the RTRPexam, if we are indeed stuck with the blanket exemption I do like hissuggestion of removing the exemption of CPAs who have prepared less than 20 returnsin the past 5 years.  Although I wouldmake it at least 10 Form 1040s per year in the past 5 years.
Ifhe had to see only one Broadway musical he chose a good one.
TTFN

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!

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Most all tax preparers understand how income levels and filing requirements are contingent upon filing status, age and the type of income clients receive. What is often overlooked, however, even when clients aren't required to file with Uncle Sam, is the fact that it may indeed advantage them to do so.

Not surprisingly, the Irs provides definitive instructions on the requirements for filing Forms 1040, 1040A, or 1040Ez. With all of the new prestige tax revisions and exceptions, some tax preparers are turning to Tax Cpe procedure materials or Ea Cpe curriculum to brush up on how these new revisions stand to advantage clients. Some continuing instruction tax courses are even focused exclusively on these new tax laws, showing tax preparers how to clients who fit into this scenario to get the greatest bang out of their tax returns.

Form 1040 Instructions

Quick Tips on Non-Required Filing Benefits

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!

Homebuyer Credit

First time homebuyers are eligible for a maximum 00 or 00 if filing married status separately. To qualify, a someone must have entered into a compact on or before April 30th 2010 and have accomplished by September 30th 2010.

Tax Withheld

For taxpayers who have estimated their tax payments, had a former years overpayment, or had income tax withheld, they may be eligible for a refund.

Child Tax Credit

If a taxpayer has at least one child that qualifies and they didn't receive the full estimate of the current Child Tax prestige originally, they could get a refundable credit.

American occasion Credit

Given the newly renamed and vast Hope credit, taxpayers can claim this prestige for tuition and positive fees for undergraduate and post-secondary education. The maximum prestige per student is ,500.

Earned income Tax Credit

For those individuals who worked but earned dinky in 2010, this tax prestige may prove beneficial in considering to file because it may qualify them for a refund.

Health Coverage Tax Credit

This prestige is primarily for individuals who have received Adjustment aid (either Trade or Reemployment Trade). Further, those receiving Pbgc pension payments may also qualify and receive a credit.

Quick Tips of Non-Required Filing for Losses

Two Scenarios

When taxpayers have suffered an whole loss because of an speculation losses:

• Only if filed in 2010 can they carry that loss transmit and offset dutible capital gains in future years
• They can carry these losses as far back as 2008 and perhaps ask a reimbursement of carry forward, but, again, only if they filed in 2010.

When taxpayers have company losses that experienced a net operating loss (Nol) for 2010:
There are a plethora of resources ready that cover these details and the types of taxpayers that fall into this unique category. The key for enrolled agents, certified collective accounts and other tax professionals is to do the research, sign up for an enrolled agent class or look on the tax Cpe sites that showcase this information.

Irs Circular 230 Disclosure

Pursuant to the requirements of the Internal income aid Circular 230, we forewarn you that, to the extent any guidance relating to a Federal tax issue is contained in this communication, together with in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax connected penalties that may be imposed on you or any other someone under the Internal income Code, or (b) promoting, marketing or recommending to another someone any transaction or matter addressed in this communication.

Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!Is the IRS lying and defrauding the American people? Hear from the man who beat Video Clips. Duration : 45.58 Mins.

Robert Lawrence challenged the IRS claim that he is required to file a 1040 Income Tax Confession Form and pay a Federal Income Tax. The US Government charged him with committing “tax crimes”, but later dismissed these charges! The IRS dropped the case when they found out that Robert relied on the instructions within the IRS' 1040 booklet and the law. Robert had proof from these sources that he was not required to file. Hear how this living “David” won his victory over the paper-tiger “Goliath” (the IRS). Freedom Law School Speaker: Robert Lawrence Host: Peymon Mottahedeh
Keywords: googlevideo

President Obama's "Cash for Clunkers" Summer Jobs Program for Teens

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Why was the August 2012 employment situation report so bad?

In a nutshell, it is because the companies that committed to participate in President Obama's latest ham-handed intervention in the economy, the 2012 Summer Jobs+ program, met their obligation and released their teen employees from their payrolls. The vast majority of the teens who were given summer jobs as part of the program have now gone back to school, and because they have done so, are no longer considered to be part the U.S. civilian labor force.

The removal of so many individuals from the ranks of the U.S. work force accounts for much of the reduction in the official U.S. unemployment rate from 8.3% to 8.1%.

Breaking down the August 2012 jobs numbers by age, we find that 204,000 teens are no longer being counted as being employed, while 250,000 fewer young adults between the ages of 20 and 24 are also being counted as having jobs.

Meanwhile, the number of individuals Age 25 or older counted as having jobs increased by 333,000. The resulting net change from July 2012 for the number of employed Americans was a loss of 119,000 jobs.

As of August 2012, there were 4,344,000 teens, 13,114,000 young adults and 124,643,000 adults Age 25 or older counted as being employed in the U.S. work force. The sudden disappearance of 202,000 jobs for teens represents a sudden decrease of four and a half percent in their numbers from the preceding month.

The following chart shows how that change affects both the unemployment rate for teens and what Age 16-19 unemployment rate would be if teens had the same labor force participation rate that they did in January 2009, when President Obama was sworn into office:

We've been tracking the influence of President Obama's 2012 Summer Jobs+ initiative upon the nation's jobs situation since the June 2012 jobs report came out, which showed an unexpected increase in the number of employed teens, seemingly at the expense of older members of the U.S. work force. That unusual pattern where teens, who lack the experience, education and skills that all older members of the U.S. work force have, suddenly seemed to be favored so much more by employers, continued in July 2012, even though the data clearly indicates that the program's hiring at its peak fell far short of stated expectations.

And now that the teen summer jobs program for 2012 has run its course, the employment data indicates that the "success" of the program was not sustained, with employment and labor force participation rate levels for U.S. teens immediately falling back to what they were before the program occurred. As far as the U.S. economy is concerned, it might as well never have happened.

Worse, it appears from the data that teens actually displaced older individuals from the U.S. job market while the program ran. The data for August 2012 suggests that the U.S. job market is going through somewhat of a correction, which we see in the sudden increase in the number of older individuals being counted as employed as compared to both June and July 2012, as they are no longer being directly displaced by the teens who gained employment as a result of the President's summer jobs program.

In a way, what we've just observed in the summer employment numbers for teens in the U.S. work force resembles President Obama's failed efforts to stimulate the auto industry with its "Cash for Clunkers" program in 2009 or to sustainably stimulate the housing market in 2010.

Like those economic policy failures, President Obama's latest economic initiative only succeeded in the equivalent of shifting around the deck chairs of the Titanic, imposing unnecessary additional costs on the U.S. economy at a time when it can not afford them. As a result, we must find that President Obama's economic policies are hurting the American people more than they are helping them.

The S&P 500: Through the Loop!

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Back on 5 June 2012, we featured the following chart showing that the S&P 500 was, with respect to its dividends per share, about to "complete the loop" it began after December 2007:

Today, we're updating our chart to reveal that the S&P 500 has made it through the loop!

As you can see, aside from tweaking the horizontal axis to show the S&P 500's trailing year dividends per share from $12 to $32 (instead of the range from $10 to $30), the biggest change we've made on our chart was to adjust the purple "trajectory zone" to extend further outward to accommodate the market's higher stock prices and dividend per share values.

Now that the Fed seems to be committing to a new round of quantitative easing, aka "QE 3.0", one thing we would look for based on the prior two rounds is for stock prices to shift upward with respect to their current trajectory, by about 10-15%.

That would put the trajectory of stock prices with respect to their underlying dividends per share roughly in line with their trajectory from June 2003 through December 2007, just as it did during QE 1.0 and QE 2.0.

However, that may be harder for the Fed to achieve this time around, given the ongoing fiscal crisis in Europe, which has sent government bond investors to U.S. Treasury auctions for their relative safety, and which in turn, has depressed the yields of U.S. treasuries. Those reduced yields leave less room for the Fed to lower long term interest rates, which would then limit the Fed's ability to boost stock prices by the same percentages it was able to achieve in its earlier rounds of quantitative easing, given the relationship between long term interest rates and stock prices.

We would then expect that stock prices will be boosted in QE 3.0, but by less than the 10-15% increases achieved during QE 1.0 and QE 2.0.

Previously on Political Calculations

• Completing the Loop
• Completing the Loop, Take 2?
• Completing the Loop, Take 2, Part 2
• Completing the Loop, Take 3
• The S&P 500: Through the Loop!

Programming and Other Notes

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Today, at 7:00 AM PDT (10:00 AM EDT), the U.S. Census will be releasing its income data for the U.S. population in 2011. While we were on top of that data release last year, releasing our tool modeling the distribution of income for individuals within minutes of that event, this year, we're going to do something a little different, which is going to take a bit more time to develop. We expect to have something interesting posted on that count soon!...

In the meantime, as long as we're on the subject of the income distribution of Americans, we'd like to also note that we still have never been contacted by the incredibly incurious "journalist" Jonathan Chait to discuss our findings that there has been effectively no change in the income inequality for individuals in the U.S. since at least 1994, as he apparently prefers to discuss our work with his uninformed readers and at least one lightweight "academic expert".

Perhaps that's not so surprising after the last go-round, which didn't go so well for Chait, as we raised a number of questions that he has never answered. Or even bothered to ask!

As it happens, a real expert on the topic, Richard Burkhauser, came out with a paper that not only reinforces our findings, but answers many of the questions we raised that could have been asked by Chait, if only he were not such an incredibly incurious journalist! But don't take our word for it - that paper is the subject of this Econtalk podcast from 9 April 2012.

Highly recommended - and not just for the vindication of our findings and the quality of our data sources!

What's Your Income Percentile?

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Where do you rank in the U.S. income spectrum?

Now that the U.S. Census has released its total money income data it collected as part of its 2012 Annual Social and Economic Supplement survey, we can tell you almost exactly where you rank among American individuals, men (if you're a man), women (if you're a woman). Or, once you consider the combined income for your family or the members of your household, we can determine your percentile rank among each of those kinds of groupings!

It all starts below! Just enter your personal income, your family's income, which includes the incomes of your spouse and any dependents you might have, regardless of whether they live with you or not, and also the combined income of just the people who live within the same four walls of the household that you do and we'll tell you where you rank (if you're accessing this article through a site that republishes our RSS feed, click here to access the tool on our site.) And if you live outside the United States, be sure to convert your income into U.S. dollars first!

Income Data
Input Data	Values
Your Personal Total Money Income
Your Family's Combined Total Money Income
Your Household's Combined Total Money Income

	Your Income Percentile
	Individuals
	- Men
	- Women
	Families
	Households

The default data we've presented in the tool above represents the average total money income of U.S. individuals, families and households in 2011.

In the tool above, your percentile ranking indicates the percentage of Americans who either share your income or earn less than you do. As such, it tells you what percentage of the population you're above in the income earning food chain.

For example, a percentile ranking of zero would indicate that you are at the very bottom end of the American income spectrum, while a percentile ranking of 100 indicates that you are effectively at the very top end. A percentile rank of 50.0 would indicate that you're within spitting range of being the middle of all Americans (our tool should be able to place most people within 0.2% of their actual percentile ranking.)

In considering your percentile ranking, here's how many income-earning people, families and households there were in 2011:

• Individuals: 214,559,000
• Men: 106,228,000
• Women: 108,332,000
• Families: 80,529,000
• Households: 121,084,000

And here are our charts showing the cumulative distribution for U.S. families (left) and households (right). Click the images for larger versions:

The U.S. Census will report the data it collects for income earned in 2012 sometime in September 2013.

Applying Technical Analysis to Employment Data

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How might a stock market technical analyst see the U.S. employment situation?

For us, that's a fun question because while we don't put much stock in technical analysis, we do consider it to be a very weak form of statistical analysis, so it's not as completely useless as astrology in divining data.

In practice, there's really not much more to technical analysis other than arbitrarily connecting the dots between the peaks and troughs of data points within a trend, combined with trying to divine patterns from the data, like the infamous "head and shoulders" pattern or the equally fun "dead cat bounce".

So to make it interesting, we've opted to apply it to the month-over-month change in the number of employed Americans counted by the Bureau of Labor Statistics in each month since the total employment level in the United States peaked in November 2007, just one month before the economy peaked before heading into recession, and specifically, we'll use it to try to answer the question: "how much of the jobs recovery can be attributed to policies implemented during President Bush's administration, and how much can be attributed to policies implemented during President Obama's reign in office?"

Here's what we find:

In the chart, we're applying Mark Thoma's effectiveness lag for determining when a particular policy to take effect after being put into place. According to Professor Thoma, once a fiscal or monetary policy has been put into place by the U.S. government or the Federal Reserve, it takes anywhere from 6 to 18 months for its effect to impact the U.S. economy.

What we find is that the recovery from the bottom of the recession in January 2009 through June 2009, the official end of the U.S. recession, can only be attributed to policies implemented during the Bush administration, as no policy implemented by the Obama administration could have had any meaningful effect upon the economy during these six months.

That trend of improvement then continued during much of the period of overlap between the times when policies implemented during either President Bush's or President Obama's tenures in office could have affected the monthly employment data. In fact, if this were a trend in a stock price, a technical analyst would have been screaming to go "all in" at the time because of its upward momentum!

However, we see that the trend of improvement established during President Bush's administration dies out toward the end of that overlap period, as the trend in the employment situation in the U.S. during the period where only policies implemented during President Obama's time in office would have a stronger and stronger effect.

Here, those policies had at first a negative impact, as they killed off the trend of improvement that had already taken root when President Obama came into office (here we note that the bottom for job loss during the recession had been postponed by a month by actions taken by President Bush, who sought to delay the largest layoffs in the automotive industry's history until after the Christmas holiday in 2008.) Since ending the trend of improvement for jobs however, they've had what might be described as a neutral effect, as the policies adopted by President Obama and the Federal Reserve since January 2009 have had little effect on the change in month-over-month employment other than to see it drift sideways in a very weak recovery - one incapable of restoring the jobs lost during the recession.

Perhaps the strong recovery they inherited explains why President Obama's economics team predicted that the U.S. unemployment rate would never exceed 8% in the four years from 2009 through 2012 - they were counting on that positive momentum to continue. Little did they know that the economic policies they adopted in the early days of President Obama's administration would prove to be so impotent, acting instead to kill off the recovery they actually inherited and leaving the nation's economy adrift in the economic doldrums in all the years since....

TAX BLOGOSPHERE BUDDY - JAMAAL SOLOMON, EA

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(1)                                                                                                                                               Ihave decided to revive my series of interviews with TAX BLOGOSPHERE BUDDIES asa regular Friday feature for the next several weeks.
Firstup in this new series is Enrolled Agent Jamaal Soloman, owner and CEO of theBrooklyn NY based J.S. Tax Corporation, and author of THE TAX FACTOR blog.
Ifirst learned of Jamaal in a post by Trish McIntire of OUR TAXING TIMES, who wasinterviewed in the first TBB series (click here).
Eachpost at THE TAX FACTOR begins with a music video appropriate to the topic ofdiscussion.
Iwas especially interested in Jamaal’s comments about his classes at “a taxfranchise”. (2)                                                                                                                   (3)                                                                                                                                                    How did you becomeinterested/involved in preparing tax returns?
Igraduated from college with BS in Business Management, a semester after 9/11,so the job market was horrible for new graduates. My original plan was gettinga job to become a store manager. Doing taxes was the last thing on my mind.However, two years after graduation I found myself taking classes at a taxfranchise about how to prepare taxes. I felt that the company was only teachingus how to type our clients’ response in their program. You didn’t need to knowabout taxes because the computer program told you everything. I felt that thecomputer program was a disservice to their clients. I never worked for thecompany but I became fascinated with taxes. Half way through the lessons, I gota job with a small accounting firm. The firm allowed me to continue the class.
How were youeducated/trained in preparing tax returns?
Istarted my tax career with a small accounting firm with only oneowner/accountant. The owner taught me everything he knew about taxes. I learnedhow to complete Forms 1040, 1120, 1065, 990, 1041, 1023, 990 and payroll taxes.Plus, I learned how to communicate with clients and the IRS. I would have neverreceived this direct experience with a large corporation. This experience encouragedme to obtain a Master’s degree in Taxation from CUNY Baruch College and getlicensed as an Enrolled Agent.
Currently,I own an accounting company called J.S. Tax Corporation. I’m small now butwatch out for my company in five years!
When and why did youdecide to write a blog on tax issues? 
Theidea popped in my head after I obtained my Master’s in 2009. The only thing Ilearned from my Master’s program was how to save millionaires and billionairesmoney on their taxes. I wanted to write posts for the average Americantaxpayer. However after about four posts, I became bored with the blog anddecided to stop.
Fastforward three years later; I felt the need to write tax blog posts again. Toomuch people in my community are scared to talk about taxes. However, this timearound to keep myself motivated I decided to make it a different tax blog. Idecided to make it unique by adding music to most of my posts. I absolutelylove music and can’t write creatively without it. On my posts, you could find songsfrom artists like Johnny Cash, the Beatles, Jay-Z, James Brown, etc.
How has blogginghelped your business?
My blog is still new so I haven’tseen any benefits to my business. However, a lot of people have told me thatthey enjoy reading my posts.
What do you considerthe “best tax advice” you can give anyone?
"Don'tLet The Joneses Get You Down" by The Temptations
 “Ow,people gather round me, it's whom it may concern.
 I'm not trying to run your life.
 But you're never too old to learn, huh.
 Stop worrying about your neighbors and thefancy things they got.
 'Cause if you do you'll find it sure, you'regonna wind up on the spot.
Don't let the Jones
Don't let the Jones
Don't let the Joneses
Get you down, oh down.”
Inother words, don’t worry about what tax refund other people received. Everybodysituation is unique when it comes to tax returns.  Seeking huge tax refunds tend to get peoplein trouble.
Do you think theregulation of tax return preparers is a good thing?
Yes,because I believe there are too many fraudulent tax preparers taking advantageof their clients. I tell my clients all the time that “I’m too skinny to go tojail.” Some of these clients are used to tax preparers making magical numbersso they can get a refund.
Do you think CPAs and attorneysshould be exempt from testing and required CPEs in taxation?
Just because someone is a CPA orattorney doesn’t mean that they know about taxes. People need to respect howdifficult it is to be a good tax return preparer. It is not all about enteringa W-2. A lot of people think all CPAs are tax experts. However, some CPAs onlydealt with taxes when they studied for their CPA exam. At minimum, CPAs andattorneys should be required to take annual CPEs in taxation.
Do you think experienced taxpreparers should be exempt from the initial RTRP competency test under“grandfathering”?
No,because if you are an experienced tax preparer then the exam should be a pieceof cake. Some so-called experienced tax preparers don’t know what they aredoing. It is time to prove that you can correctly prepare a tax return. I don’twant to hear about the “new technology” excuse. Paper tax returns will beextinct in about five years. I don’t want to seem harsh but I have seen maypeople get hurt by corrupt or incapable tax preparers. This is one of thereasons why every week I create a “Tax Preparers’ Hall of Shame” post on myblog.
How would you reform/rewrite the TaxCode?
Lifeis too short for me to think about ways to improve the Tax Code. The Tax Codeis so complex, long, corrupt and unfair. Politicians and lobbyists make the TaxCode unbearable for the little guys. Most people direct their angry towards theIRS. However, it is Congress that makes the tax laws. To change the Tax Code,voters must stand up to their elected officials. If voters don’t stand up thenthinking about how to improve the code is useless.
What is your favorite Broadwaymusical – and why?
Itis crazy that I love all types of music expect musical movies and plays. Broadwaymusicals are too long for me. My mind starts wandering and next thing you knowI’m thinking about taxes in the middle of the play.
TTFN