2012Q3 GDP: An Upward Revision, As Expected

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We were really amused to read Ed Morrissey's lead in his take on the BEA's release of its second estimate for how much the U.S. economy grew in the third quarter of 2012:

When I wrote about the advance estimate from the Commerce Department on Q3 GDP hitting 2.0%, some commenters warned that the report — which came out just before the election — would be sharply revised after it. They were right, although the revision went in the opposite direction they suspected. The revised Q3 GDP number jumped upward to 2.7%, the best quarter of the year, although still substantially a stagnation number, especially when one sees the source of the growth

While Ed then goes on to note the role of government spending and particularly defense spending in boosting the GDP growth rate for the quarter, we really can't help wonder who the commenters who picked the wrong direction for the revision are.

Because clearly, they aren't us! Here's what we wrote nearly one month ago:

As we expected, economic growth in the United States picked up in the third quarter of 2012, increasing from the annualized growth rate of 1.3% recorded in 2012-Q2 to 2.0% in the BEA's initial GDP estimate for 2012-Q3.

We had forecast that real GDP would be recorded at $13,602.8 billion in terms of constant 2005 U.S. dollars, and the BEA's initial estimate came in at $13,616.2 billion - a difference of $13.4 billion, or within 0.01% of the BEA's recorded figure.

The BEA will revise this figure twice more before the end of the year. We anticipate that it will be adjusted upward, as the third quarter of 2012 likely recorded the U.S.' strongest economic performance for the year.

And here's what we wrote nearly a month before that:

Although we're coming off a quarter where the U.S. economy could reasonably be described as being in a "microrecession", as we had long expected, we anticipate that the GDP growth rate will be stronger in the third quarter of 2012 by comparison. Going by the dividend futures data we've had available since November 2011, the third quarter of 2012 has always looked as if it would be the strongest in 2012. Much like how the second quarter of 2008 was the strongest quarter in that year, even though the U.S. economy had already peaked and had begun falling into recession earlier in December 2007.

We'll give the next-to-final word to the Emperor:

But alas, when it came to serious analysis of data in real time, the Emperor was no Moradmin Bast. Geek out on that if you will....

LET'S DO SOMETHING RIGHT FOR A CHANGE

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Therehas been a lot of talk lately about “tax expenditures” and the 47% of Americanswho either pay absolutely no federal income tax or actually make a profit byfiling a tax return (thanks to “refundable” tax credits). 
Overthe years the idiots in Congress have created a mucking fess of the Tax Code bymaking it the method of delivery for various social welfare benefits and toencourage certain beneficial purchases, which has created the 47%.  This is certainly not the best, nor the mostefficient, way to deliver or distribute these benefits – but it is easy.  And, as we all know, the idiots in Congressare all for choosing the quickest and easiest way to do things rather thanactually having to sit down and think.
Whilethere are many “tax expenditures” that should be completely done away with,many of the social and societal benefit programs run through the Code areactually good and have merit.  But theyshould be delivered and distributed separately out of the budget of theappropriate cabinet department – and not on the 1040.
AsI have posted here before, doing this is much “more better” for many reasons -
(1)It would be easier for the government to verify that the recipient of thesubsidy or hand-out actually qualified for the money, greatly reducing fraud.And tax preparers would no longer need to take on the added responsibility ofhaving to verify if a person qualified for government funds.
(2)The qualifying individual(s) would get the money at the “point of purchase”,when it is really needed, and not have to go “out of pocket” up front and waitto be reimbursed when they file their tax return.
(3)We would be able to calculate the true income tax burden of individuals.  Many of the current 47% would still bereceiving government hand-outs, but it would not be tied into the income taxsystem so they would actually be paying federal income tax.
(4)We could measure the true cost of education, housing, health, welfare, etcprograms in the federal budget because the various subsidies would be properlyallocated to the appropriate departments and not be reported as a part of netincome collected via income tax.
(5)The Tax Code would be much less complicated, the cost to the public forpreparing a tax return would be reduced, and the IRS would have much less toprocess and to audit.   
Item(2) is a very important one.  A major problemwith using the Tax Code to distribute government benefits via tax deductionsand credits is that the benefits are provided “after-the-fact” and not at the “pointof purchase”.
Let’slook at the deductions and credits for tuition and fees.  In order to claim these tax benefits thestudent, or more likely his/her parents, must spend the money for tuition andfees and then wait until they file their tax return to get the “studentfinancial aid” from the government.
Thesestudents, and parents, need the money when the tuition and fees are due.  If they do not have it at the point ofpurchase they often turn to borrowing, placing themselves further in debt.   
Thereis currently in place a process for providing student financial aid at thepoint of purchase.  And this aid is basedon student and family income, using information from tax returns.  Instead of giving those who qualify a taxdeduction or credit on their Form 1040 a year or more later, why not give thesame benefit, based on the same income formula, as part of the existing studentfinancial aid system.  This way thestudent, or parents, gets the money upfront to pay for college expenses or, betteryet, the money is distributed directly to the college - and there is no needfor additional borrowing.
Inthe past there have been credits for purchasing energy-efficient products andimprovements, and some still exist.  Butagain, the money is provided after-the-fact – as much as a year or more afterthe purchase.  I would think moreindividuals would be encouraged to purchase these items if the money wasprovided upfront as a point of purchase discount.  Again individuals who want to take advantageof the eventual tax credit may be forced to borrow money to make the qualifyingpurchase, creating more debt.
The“Cash for Clunkers” program of a few years back proves that this can be donerelatively efficiently. 
And,as I have said over and over again, the Earned Income Tax Credit, refundableand otherwise, and refundable Child Tax Credit, which, if you call a spade ashovel, are really forms of welfare, would be better distributed via the Aid toFamilies with Dependent Children program – and with substantially less fraud.
Unfortunately,with BO re-elected and the members of Congress being the idiots they are, don’texpect any changes in the current system any time soon.
TTFN

GIT 'ER DONE!

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Itis almost December.  When dealing withthe potential “fiscal cliff”, now is not the time to consider long-termissues. 
Thefirst, and most important, thing to do ASAP is to extend the AMT patch throughthe end of 2012 (or, more better, through the end of 2013) so that theprocessing of 2012 tax returns and refunds are not delayed, and middle classtaxpayers are not hit with possible tax increases of between $3,000 and $4,000.
Thesecond thing to do is to extend all of the various tax benefits that willexpire on December 31, 2012, for one more year (through the end of 2013), andperhaps also the various popular “extenders” that expired on 12/31/11 alongwith the AMT patch (except for the 2% Social Security reduction).  The reason for doing this is so that we do notbegin 2013 with uncertainty concerning proper withholding.    
Thetime for considering serious long-term tax reform is January 2013, when the newCongress (which is really not that new) convenes.  This is when legislators should beconsidering whether to do away with or limit various tax loopholes andexpenditures, and whether to raise or lower tax rates – while there is almost afull year before any tax legislation must be passed (not that they should waituntil the last minute, as has become the custom).
Congresshas wasted away 2012, and must be made aware that their actions, or ratherinactions, have consequences.  They must putaside ridiculous partisan battling and consider the American people for achange.
TTFN 

THE NATP YEAR-END TAX UPDATE SEMINAR

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As mentioned in Wednesday’s BUZZ,this week I attended the National Association of Tax Professionals’ annualyear-end tax update seminar “The Essential 1040” (it was formerly “Famous”, butis now “Essential”) in New Jersey.
While the day was basically anupdate of what is new for 2012 tax returns, with nothing really new for me,there were a few items of interest.
(1)  The draft version of the 2012 Form 1040 (and 1040A) is available for viewing. They are the same as their 2011 counterparts, with the same number oflines.  However certain Lines are marked“Reserved” – for the popular tax extenders that expired on December 31, 2011,and have not yet been extended for 2012 by the idiots in Congress, but whichthe IRS is thinking probably will be.
They include Lines 23 and 34 on Page1 of the 2012 Form 1040, and Lines 16 and 18 on the 1040A, are “reserved” forthe deductions for educator expenses and tuition and fees respectively. 
On Page 2 of the 2012 Form 1040 Line67 and item b. on Line 71 is also “Reserved”. Line 67 on the 2011 form was used for the First-Time HomebuyerCreditfrom Form 5405, and item b on Line 71 referenced Form 8839, used forQualified Adoption Expenses (which was refundable).
The draft of the 2012 Schedule A,for Itemized Deductions, is also available. Item b of Line 5 (under “Taxes You Paid”) is “Reserved” for the possibleextension of the option to deduct state and local sales taxes instead of stateand local income taxes.
(2)  The IRS has said that because of thedelay by the idiots in Congress in dealing with the extenders, including theannual AMT patch, and more detailed checking to prevent fraudulent returns,refunds from electronically filed 2012 income tax returns will no longer beissued in 2 weeks.  It will not take 4 to6 weeks to process the refunds. 
Thissounds like the processing time we had been used to with manually filedreturns.  So it looks like filingelectronically will not get your refund to you any faster than filing manually.
(3)  FYI – the “incidental only” (nomeals) per diem allowance for business travel is $5.00.  It is the same as 2011. 
Thiscovers fees and tips to airport, train station, and hotel personnel.  It is generally used by business travelerswho do not incur meal expenses while “on the road” – i.e. they stay withrelatives who feed them, or all meals are included in the price of an event oractivity. 
Andthe special Meals and Incidental Expenses per diem for transportation workers(like over-the-road truck drivers) also remains the same as 2011 - $59.00 perday for travel within CONUS (continental US) and $65.00 per day for OCONUS(outside the continental US) travel.
(4)  The IRS is getting better atmatching 1099 information returns to amounts reported on the Form 1040 (or1040A), and will continue to issue CP-2000 notices when discrepancies areidentified – so be sure to report all 1099 items somewhere on your return.
And,of course, just because you do not receive a Form 1099 in the mail does notmean that one was not issued and sent to the IRS. 
(5)  This, I will admit, was new tome.  The interest that has accrued on USSavings Bonds is taxable in the year that the individual bond matures, and notnecessarily in the year the bond is cashed in (i.e. a bond matures in 2010, butis not cashed in until 2012).
Iverified this via TREASURY DIRECT - 
“Theinterest earned on your savings bonds is subject to federal income tax, whichcan be deferred until redemption, finalmaturity, or other taxable disposition, whichever occurs first.”  
(6)  Another FYI, especially for tax pros- 43 inmates on death row were issued PTINs (Preparer Tax IdentificationNumbers) - the number issued by the Internal Revenue Service to paid tax returnpreparers who have registered with the IRS.
(7)  The seminar leaders, both very good(while some are obviously more better than others -my buddy Beanna Whitlockwill have you in stitches while learning something important about tax law – Ido not recall ever coming across a bad or unsatisfactory NATP seminar leader),both discussed the “back-ended ROTH” strategy.
Ataxpayer wants to contribute to a ROTH IRA for 2012, but has too much income tobe able to do so (MAGI of more than $183,000 if married filing joint, $10,000if married filing separately, or $125,000 for all others).
Sothe taxpayer puts the maximum $5,000 or $6,000 (depending on age) in anon-deductible “traditional” IRA.  Oncethis contribution has been processed the taxpayer converts the $5,000 or $6,000in the traditional IRA account to a ROTH account.  There is no longer an income threshold forconverting a traditional IRA to a ROTH IRA. 
Asthe taxpayer’s basis in the IRA is $5,000 or $6,000, his 2012 non-deductiblecontribution, there is no taxable income to report.  If the money deposited in the non-deductibletraditional IRA account earns $5.00 in interest prior to the conversion, thenthe taxpayer reports $5.00 as taxable income.
(8)  Be sure to read my THE TAX PROFESSIONAL post for my commentary on items discussed at the seminar thatapply to taxpros. 
Ihave now completed my CPE for the year. While the IRS requires 15 hours per year, in 2012 I took 24 hours infederal taxation and 8 hours in state taxation (actually all NATP or NJ-NATPclasses).  And there were some federalcourses offered recently that I would have taken if not for cash flow issues.  First up in 2013 is the excellent NJ-NATPfamous State Tax Seminar in mid-January.
TTFN

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

To contact us Click HERE

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 Job Creation Claims

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President Obama has been claiming while out on the campaign trail that he has created over five million jobs since being sworn into office in January 2009.

Today, we're going to adapt the chart we normally feature after each monthly employment situation report to see what the real numbers are, by age group!

Our chart below reveals what we found:

Overall, we find that there are 743,000 fewer employed teens through October 2012 as compared to January 2009, while young adults between the ages of 20 and 24 saw their numbers increase by just 497,000. Adults Age 25 or older saw their numbers among the employed ranks of the U.S. workforce increase by a relatively lackluster 1,443,000.

Altogether, that brings President Obama's total jobs created for his presidency up to 1,197,000, about 76% below his claimed job creation figure of 5,000,000. Put another way, President Obama's net job creation ability is less than one-fourth as good as he claims it to be. And where teen employment is concerned, outright negative.

All of the positive net gain in jobs for President Obama have come within the last three months after having been stalled out in the first half of 2012. This outcome is consistent with our observation that the U.S. economy went through a microrecession in the second quarter of 2012, followed by a much more robust performance in the third quarter.

We continue to anticipate that growth in the U.S. economy will decelerate off its third quarter pace, which will likely be more negatively affected by the disruptive effects of Hurricane Sandy in the northeastern United States than we had originally forecast.

President Obama's Debt, Measured in Gold

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How much gold would the U.S. Treasury have to pay out from the nation's bullion depository at Fort Knox to fully pay off the national debt of $16.222 trillion (as of 1 November 2012)?

Quick side note: That figure is some $5.595 trillion higher than the $10.627 trillion it was back on 20 January 2009, when Barack Obama was sworn into office.

To answer the question, we've updated our tool for converting cash into an equivalent value in gold! Now, in addition to figuring out how big a solid gold cube would have to be to correspond to a given amount of gold at current spot market prices, it will now figure out how many standard 20-feet long by 8.5 feet wide by 8.0 feet tall intermodal shipping containers would need to used to transport the gold to all the people to whom the government owes all that government-issued debt!

What we find when we plug in the numbers as of 1 November 2012 is that the entire national debt of the United States is the equivalent of a solid gold cube that is nearly 80 feet tall by 80 feet long by 80 feet wide. Transporting all that gold would require over 431 of those standard 20-foot long intermodal shipping containers.

Federal Spending and Gold Price Data
Input Data	Values
Amount of National Debt [billions U.S. dollars]
Spot Price of Gold [U.S. dollars per ounce]

Equivalent Quantity of Gold
Calculated Results	Values
Equivalent Weight [pounds]
Side Dimensions of Solid Gold Cube [feet x feet x feet]
Percent of All Gold Ever Found
Number of Standard 20-Foot Shipping Containers That Gold Would Fill

The only problem with that is that all of the gold that has ever been mined on Planet Earth would only make a solid gold cube that is 66.1 feet high by 66.1 feet long by 66.1 feet wide, which would work out to fill just over 249 of those 20-foot standard shipping containers. Even if Fort Knox held all the gold in the world, the U.S. Treasury would still be more than 182 shipping containers short of being able to pay off the national debt in gold at today's spot prices.

President Obama's contribution of $5,595 billion to the U.S. national debt during his term in office through 1 November 2012 would be represented by a solid gold cube that is 55.7 feet high by 55.7 feet long by 55.7 feet wide, which would represent about 60% of all the gold that is known to exist in the world. It would take just over 149 standard shipping containers to hold all that gold if each container were completely filled with no air gaps.

Laid out end to end, those 149 standard shipping containers would be almost six-tenths of a mile in length. That's just over one-third of the length of the 431.5 shipping containers that would hold all the gold representing the United States' entire public debt outstanding.

Image Source: Juwelier Lachenmann GmbH

Public or Private Sector Workers: Who's Doing Finer After Four Years?

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First, the words of Senate Majority Leader Harry Reid (D-Nevada) from 19 October 2011, with respect to Senate Bill 1723:

"It's very clear that private-sector jobs have been doing just fine; it's the public-sector jobs where we've lost huge numbers, and that's what this legislation is all about," Reid said on the Senate floor.

The measure subsequently failed and Harry Reid's comments might have been ignored in the flood of history. But then, President Obama chose to immortalize them in a news conference at the White House on 8 June 2012:

So, who's doing finer? People who work in the private sector or people who work for the federal, state and local governments within the United States?

We pulled the numbers from the BLS' Current Employment Statistics, going back to 2000. The chart below summarizes what we found:

By and large, when a recession happens, it's mainly the private sector who gets hit the hardest. We can see that clearly in the two most recent recessions, where the numbers of people who work for the public sector in the U.S. rose despite the poor economic situation in the nation.

Looking at the most recent recession, we see that the percentage of job declines in the public sector since the official beginning of that recession in December 2007 is far less than the declines that took place in the private sector.

Digging deeper into the data, we find the reason for that is that state and local governments continued to grow in size, largely thanks to having major portions of their expenses paid for by the federal government's various economic stimulus and government program bailout packages, which helped state and local governments that failed to deal with their worsening fiscal situation by avoiding even small cuts to their budgets and employee payrolls until well into 2010.

It wasn't until those artificial stimulants ran out that state and local governments finally responded to their increasingly less-than-expected tax collections from the weaker-than-expected economic recovery by cutting people from their payrolls.

Interestingly, a lot of those job cuts at the state and local governments could have been avoided, if only public sector unions had been willing to accept pay cuts in return for keeping more of their represented members in their jobs.

Apparently, the stickiest wages of all are those of unionized government employees....

2012's Worst Paying College Degrees

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Payscale.com analyzed the data in its online salary database and has revealed the college degrees that go along with the jobs that have the lowest median pay for their respective career professionals in its 2012-13 College Salary Report. Note - these figures represent the typical annual combination of pay, bonuses, commissions and profit sharing earned by people who have been successful in working in these fields for at least 10 years and were willing to participate in Payscale.com's survey, which means the reported median incomes will likely be inflated above each field's actual median incomes....

College Degree	Median Annual Salary
Child and Family Studies	$37,700
Social Work	$45,300
Elementary Education	$46,000
Human Development	$47,800
Special Education	$48,900
Culinary Arts	$49,700
Athletic Training	$49,800

So what possesses people to take out big student loans to go into professions like these that offer such little compensation? Payscale.com offers the following insight:

"According to our research, people in these majors typically believe their work makes the world a better place," says PayScale’s lead analyst Katie Bardaro.

To translate, the people in these majors are perhaps so disconnected from reality that they do not recognize that the reason their trades provide so little return on their educational investment is because they really do not require unique ability, which is why society does not reward them with greater compensation.

These people are then exploited by the higher education establishment, which really does know better, but can't help noticing that these same people are willing to pay nearly the same amount of money for their college degrees as do people in careers that society values a lot more.

And let's not forget the role of the U.S. federal government in guaranteeing and issuing student loans, which has its own ulterior motives for pushing higher education that offers little real benefit to society.

Elsewhere on the Web

Say what you will about the careers that go with the degrees above, but at least many of the people who pursue these degrees might actually get jobs in their fields of study, if only low paying ones. Kiplinger's Caitlin Dewey takes things several steps further and identifies the college degrees in Payscale.com's database that combine low pay with high rates of unemployment for their graduates!

Also, this isn't just an American phenomenon. Don't miss this perspective by a recent PhD graduate in Britain who complains that the "real world" doesn't understand or appreciate their skills.

Image Source: Global Elites.

Transforming Student Loans from Taxes Back into Debt

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James Pethoukoukis notes the skyrocketing ratio of student loan debt to household income, the currently spiking default rate on student loans, and wonders if a new federal government bailout is in the works:

See where this is heading? When you take into account America’s burgeoning bailout culture and the rising political power of younger voters, it’s no surprise that Citigroup thinks taxpayers might end up riding to the rescue:

Taxpayers already (or will) indirectly subsidize both the housing and healthcare sectors by covering GSE losses and paying for a healthcare system that pays out more than it receives in revenues. If the continued misalignment of educational resources ultimately leads to government “forgiveness” of student loan debt, it will simply be one more example of fiscal subsidies for a narrow demographic.

Citigroup estimates that writing off defaulted student loans would cost $74 billion, though such a move might nudge other borrowers to strategically default in hopes of a bailout of their own.

We have a very easy solution for this scenario, which enterprising politicians might use to both ride to the rescue of distressed student loan borrowers while avoiding the moral hazard issue of encouraging other borrowers to strategically default on their student loans: restore the ability of distressed borrowers to have their student loan debt discharged in bankruptcy!

In one fell swoop, it would be possible to both relieve the genuine distress of the excessive debt held by these individuals in such a way that would stop other less-distressed but really opportunistic people from considering strategic defaults on their student loans, thanks to the restrictions and higher costs of future borrowing activity that would be placed upon them in bankruptcy proceedings.

Plus, this reform would have the unique benefit of forcing the undoing of one of the biggest political power grabs of recent years: the federal government's takeover of the student loan industry.

Here, the unspoken goal of President Obama's policy has been to fully exploit the restriction of borrowers from being able to discharge their student loan debts in bankruptcy court as a backdoor means by which he could increase the amount of money that the federal government collects from low and middle income earners. All, we might add, without having to go through the hassle of fighting the political battle that would come from attempting to directly increase their income tax rates.

Just in case you wondered why President Obama has always been so keen to push "cheap" student loans....

That's also why President Obama has been so focused on increasing the tax rates of just those with high incomes, while pushing to keep the Bush-era tax cuts in place for low and middle income earners, even though such a strategy will do very little to reduce the federal government's annual budget deficits or the national debt. Since most income in the United States is actually generated by people who earn much less than $200,000 (or $250,000 per household), the President is simply using the old deceptive magician's trick of distraction in an attempt to keep low and middle class earners from recognizing how much of their income they're really paying in total to the federal government.

It doesn't matter that it's called "debt". If you cannot discharge it in bankruptcy and you owe it to the federal government, which sets the size of your payments according to the amount of your annual income, then the money that you're paying to the government should more properly be called "taxes".

At the very least, the federal government should require student loan borrowers to write that number somewhere in the "taxes you paid" section of their tax returns....

Image Source: ZeroHedge.

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

To contact us Click HERE

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 Job Creation Claims

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President Obama has been claiming while out on the campaign trail that he has created over five million jobs since being sworn into office in January 2009.

Today, we're going to adapt the chart we normally feature after each monthly employment situation report to see what the real numbers are, by age group!

Our chart below reveals what we found:

Overall, we find that there are 743,000 fewer employed teens through October 2012 as compared to January 2009, while young adults between the ages of 20 and 24 saw their numbers increase by just 497,000. Adults Age 25 or older saw their numbers among the employed ranks of the U.S. workforce increase by a relatively lackluster 1,443,000.

Altogether, that brings President Obama's total jobs created for his presidency up to 1,197,000, about 76% below his claimed job creation figure of 5,000,000. Put another way, President Obama's net job creation ability is less than one-fourth as good as he claims it to be. And where teen employment is concerned, outright negative.

All of the positive net gain in jobs for President Obama have come within the last three months after having been stalled out in the first half of 2012. This outcome is consistent with our observation that the U.S. economy went through a microrecession in the second quarter of 2012, followed by a much more robust performance in the third quarter.

We continue to anticipate that growth in the U.S. economy will decelerate off its third quarter pace, which will likely be more negatively affected by the disruptive effects of Hurricane Sandy in the northeastern United States than we had originally forecast.

President Obama's Debt, Measured in Gold

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How much gold would the U.S. Treasury have to pay out from the nation's bullion depository at Fort Knox to fully pay off the national debt of $16.222 trillion (as of 1 November 2012)?

Quick side note: That figure is some $5.595 trillion higher than the $10.627 trillion it was back on 20 January 2009, when Barack Obama was sworn into office.

To answer the question, we've updated our tool for converting cash into an equivalent value in gold! Now, in addition to figuring out how big a solid gold cube would have to be to correspond to a given amount of gold at current spot market prices, it will now figure out how many standard 20-feet long by 8.5 feet wide by 8.0 feet tall intermodal shipping containers would need to used to transport the gold to all the people to whom the government owes all that government-issued debt!

What we find when we plug in the numbers as of 1 November 2012 is that the entire national debt of the United States is the equivalent of a solid gold cube that is nearly 80 feet tall by 80 feet long by 80 feet wide. Transporting all that gold would require over 431 of those standard 20-foot long intermodal shipping containers.

Federal Spending and Gold Price Data
Input Data	Values
Amount of National Debt [billions U.S. dollars]
Spot Price of Gold [U.S. dollars per ounce]

Equivalent Quantity of Gold
Calculated Results	Values
Equivalent Weight [pounds]
Side Dimensions of Solid Gold Cube [feet x feet x feet]
Percent of All Gold Ever Found
Number of Standard 20-Foot Shipping Containers That Gold Would Fill

The only problem with that is that all of the gold that has ever been mined on Planet Earth would only make a solid gold cube that is 66.1 feet high by 66.1 feet long by 66.1 feet wide, which would work out to fill just over 249 of those 20-foot standard shipping containers. Even if Fort Knox held all the gold in the world, the U.S. Treasury would still be more than 182 shipping containers short of being able to pay off the national debt in gold at today's spot prices.

President Obama's contribution of $5,595 billion to the U.S. national debt during his term in office through 1 November 2012 would be represented by a solid gold cube that is 55.7 feet high by 55.7 feet long by 55.7 feet wide, which would represent about 60% of all the gold that is known to exist in the world. It would take just over 149 standard shipping containers to hold all that gold if each container were completely filled with no air gaps.

Laid out end to end, those 149 standard shipping containers would be almost six-tenths of a mile in length. That's just over one-third of the length of the 431.5 shipping containers that would hold all the gold representing the United States' entire public debt outstanding.

Image Source: Juwelier Lachenmann GmbH

Public or Private Sector Workers: Who's Doing Finer After Four Years?

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First, the words of Senate Majority Leader Harry Reid (D-Nevada) from 19 October 2011, with respect to Senate Bill 1723:

"It's very clear that private-sector jobs have been doing just fine; it's the public-sector jobs where we've lost huge numbers, and that's what this legislation is all about," Reid said on the Senate floor.

The measure subsequently failed and Harry Reid's comments might have been ignored in the flood of history. But then, President Obama chose to immortalize them in a news conference at the White House on 8 June 2012:

So, who's doing finer? People who work in the private sector or people who work for the federal, state and local governments within the United States?

We pulled the numbers from the BLS' Current Employment Statistics, going back to 2000. The chart below summarizes what we found:

By and large, when a recession happens, it's mainly the private sector who gets hit the hardest. We can see that clearly in the two most recent recessions, where the numbers of people who work for the public sector in the U.S. rose despite the poor economic situation in the nation.

Looking at the most recent recession, we see that the percentage of job declines in the public sector since the official beginning of that recession in December 2007 is far less than the declines that took place in the private sector.

Digging deeper into the data, we find the reason for that is that state and local governments continued to grow in size, largely thanks to having major portions of their expenses paid for by the federal government's various economic stimulus and government program bailout packages, which helped state and local governments that failed to deal with their worsening fiscal situation by avoiding even small cuts to their budgets and employee payrolls until well into 2010.

It wasn't until those artificial stimulants ran out that state and local governments finally responded to their increasingly less-than-expected tax collections from the weaker-than-expected economic recovery by cutting people from their payrolls.

Interestingly, a lot of those job cuts at the state and local governments could have been avoided, if only public sector unions had been willing to accept pay cuts in return for keeping more of their represented members in their jobs.

Apparently, the stickiest wages of all are those of unionized government employees....

2012's Worst Paying College Degrees

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Payscale.com analyzed the data in its online salary database and has revealed the college degrees that go along with the jobs that have the lowest median pay for their respective career professionals in its 2012-13 College Salary Report. Note - these figures represent the typical annual combination of pay, bonuses, commissions and profit sharing earned by people who have been successful in working in these fields for at least 10 years and were willing to participate in Payscale.com's survey, which means the reported median incomes will likely be inflated above each field's actual median incomes....

College Degree	Median Annual Salary
Child and Family Studies	$37,700
Social Work	$45,300
Elementary Education	$46,000
Human Development	$47,800
Special Education	$48,900
Culinary Arts	$49,700
Athletic Training	$49,800

So what possesses people to take out big student loans to go into professions like these that offer such little compensation? Payscale.com offers the following insight:

"According to our research, people in these majors typically believe their work makes the world a better place," says PayScale’s lead analyst Katie Bardaro.

To translate, the people in these majors are perhaps so disconnected from reality that they do not recognize that the reason their trades provide so little return on their educational investment is because they really do not require unique ability, which is why society does not reward them with greater compensation.

These people are then exploited by the higher education establishment, which really does know better, but can't help noticing that these same people are willing to pay nearly the same amount of money for their college degrees as do people in careers that society values a lot more.

And let's not forget the role of the U.S. federal government in guaranteeing and issuing student loans, which has its own ulterior motives for pushing higher education that offers little real benefit to society.

Elsewhere on the Web

Say what you will about the careers that go with the degrees above, but at least many of the people who pursue these degrees might actually get jobs in their fields of study, if only low paying ones. Kiplinger's Caitlin Dewey takes things several steps further and identifies the college degrees in Payscale.com's database that combine low pay with high rates of unemployment for their graduates!

Also, this isn't just an American phenomenon. Don't miss this perspective by a recent PhD graduate in Britain who complains that the "real world" doesn't understand or appreciate their skills.

Image Source: Global Elites.

Public or Private Sector Workers: Who's Doing Finer After Four Years?

To contact us Click HERE

First, the words of Senate Majority Leader Harry Reid (D-Nevada) from 19 October 2011, with respect to Senate Bill 1723:

"It's very clear that private-sector jobs have been doing just fine; it's the public-sector jobs where we've lost huge numbers, and that's what this legislation is all about," Reid said on the Senate floor.

The measure subsequently failed and Harry Reid's comments might have been ignored in the flood of history. But then, President Obama chose to immortalize them in a news conference at the White House on 8 June 2012:

So, who's doing finer? People who work in the private sector or people who work for the federal, state and local governments within the United States?

We pulled the numbers from the BLS' Current Employment Statistics, going back to 2000. The chart below summarizes what we found:

By and large, when a recession happens, it's mainly the private sector who gets hit the hardest. We can see that clearly in the two most recent recessions, where the numbers of people who work for the public sector in the U.S. rose despite the poor economic situation in the nation.

Looking at the most recent recession, we see that the percentage of job declines in the public sector since the official beginning of that recession in December 2007 is far less than the declines that took place in the private sector.

Digging deeper into the data, we find the reason for that is that state and local governments continued to grow in size, largely thanks to having major portions of their expenses paid for by the federal government's various economic stimulus and government program bailout packages, which helped state and local governments that failed to deal with their worsening fiscal situation by avoiding even small cuts to their budgets and employee payrolls until well into 2010.

It wasn't until those artificial stimulants ran out that state and local governments finally responded to their increasingly less-than-expected tax collections from the weaker-than-expected economic recovery by cutting people from their payrolls.

Interestingly, a lot of those job cuts at the state and local governments could have been avoided, if only public sector unions had been willing to accept pay cuts in return for keeping more of their represented members in their jobs.

Apparently, the stickiest wages of all are those of unionized government employees....

Factoring in the Falling Dollar for US-China Trade

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In a article, we indicated that the U.S. Census' data on the value of U.S.-China international trade was overstating the growth in the value of that trade because of the falling value of the U.S. dollar with respect to China's currency, the renminbi (or as its often referred to in foreign exchange, the yuan):

Here, we see that the growth of China's exports to the United States is continuing its trend of slow growth, while following its typical seasonal pattern. Typically, China's exports to the U.S. peak each year in the period from August to October, in advance of the U.S.' holiday shopping season.

In reality, because the value of the U.S. dollar has been falling with respect to the value of China's currency since early 2010, the value of trade shown in the chart above represents a lower quantity of actual goods and services traded today than what similar values in 2010 would indicate.

Today we're going to show that's exactly the case. In our first chart, we're showing the value of goods and services imported by the United States from China priced in both U.S. dollars, as reported by the U.S. Census, and priced in Chinese yuan, going by the official exchange rate recorded by the U.S. Federal Reserve.

In the chart, we've tweaked the vertical scale for the Chinese yuan so that it corresponds to that currency's minimum value with respect to the U.S. dollar from January 1994, when the value of the yuan was set to be worth just 11.46 cents (or 0.1146 U.S. dollars). As of October 2012, the relative value of the dollar has fallen so that one yuan is now worth 15.96 cents (or 0.1596 U.S. dollars).

With that visual adjustment made, we discover that from the Chinese perspective, there has been almost no increase in the value of China's exports to the United States since 2010, and very little growth since 2007.

Our second chart shows how U.S. exports to China have fared in terms of both U.S. dollars and Chinese yuan:

Measured in terms of China's currency, we find that the value of U.S. exports to China has actually been declining since they peaked in January 2010, which coincides with the peak of that nation's economic stimulus spending, which it had earlier specified on 6 March 2009. (The announcement of how the Chinese government would implement its massive stimulus program is the economic event that finally arrested and reversed the steep decline of the U.S. stock market at the time following the U.S. fiscal crisis of 2008.)

Our final chart shows the year-over-year growth rates for the U.S. imports from China calculated in terms of the U.S. dollar-based data and for U.S. exports to China calculated in terms of Chinese yuan-based figures, since these units are how each nation's economy would actually see the value of trade imported from the other nation:

Through September 2012, we find the year-over-year growth rate of trade between the two nations is at near-zero levels of growth, indicating near recessionary conditions if we take this measure as an indication of the relative health of the economies of both nations. But perhaps the real news is what factoring in the falling dollar does for our impression of the health of China's economy.

Previously, using just the U.S. dollar-based growth rate of U.S. exports to China, we found that China's economy had entered into recession in December 2011.

But after factoring in the falling value of the dollar over time, which results in the growth rate of trade between the two nations being overstated on the Chinese side of the trade balance, we find that China's economy really slipped into recession some two months earlier, in October 2011. This month coincides with the beginning of a period of contraction for China's manufacturing industries.

Going forward, we'll be using this improved version of our trade growth rate chart in our analysis of the relative economic health of both the United States and China.

LET'S DO SOMETHING RIGHT FOR A CHANGE

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Therehas been a lot of talk lately about “tax expenditures” and the 47% of Americanswho either pay absolutely no federal income tax or actually make a profit byfiling a tax return (thanks to “refundable” tax credits). 
Overthe years the idiots in Congress have created a mucking fess of the Tax Code bymaking it the method of delivery for various social welfare benefits and toencourage certain beneficial purchases, which has created the 47%.  This is certainly not the best, nor the mostefficient, way to deliver or distribute these benefits – but it is easy.  And, as we all know, the idiots in Congressare all for choosing the quickest and easiest way to do things rather thanactually having to sit down and think.
Whilethere are many “tax expenditures” that should be completely done away with,many of the social and societal benefit programs run through the Code areactually good and have merit.  But theyshould be delivered and distributed separately out of the budget of theappropriate cabinet department – and not on the 1040.
AsI have posted here before, doing this is much “more better” for many reasons -
(1)It would be easier for the government to verify that the recipient of thesubsidy or hand-out actually qualified for the money, greatly reducing fraud.And tax preparers would no longer need to take on the added responsibility ofhaving to verify if a person qualified for government funds.
(2)The qualifying individual(s) would get the money at the “point of purchase”,when it is really needed, and not have to go “out of pocket” up front and waitto be reimbursed when they file their tax return.
(3)We would be able to calculate the true income tax burden of individuals.  Many of the current 47% would still bereceiving government hand-outs, but it would not be tied into the income taxsystem so they would actually be paying federal income tax.
(4)We could measure the true cost of education, housing, health, welfare, etcprograms in the federal budget because the various subsidies would be properlyallocated to the appropriate departments and not be reported as a part of netincome collected via income tax.
(5)The Tax Code would be much less complicated, the cost to the public forpreparing a tax return would be reduced, and the IRS would have much less toprocess and to audit.   
Item(2) is a very important one.  A major problemwith using the Tax Code to distribute government benefits via tax deductionsand credits is that the benefits are provided “after-the-fact” and not at the “pointof purchase”.
Let’slook at the deductions and credits for tuition and fees.  In order to claim these tax benefits thestudent, or more likely his/her parents, must spend the money for tuition andfees and then wait until they file their tax return to get the “studentfinancial aid” from the government.
Thesestudents, and parents, need the money when the tuition and fees are due.  If they do not have it at the point ofpurchase they often turn to borrowing, placing themselves further in debt.   
Thereis currently in place a process for providing student financial aid at thepoint of purchase.  And this aid is basedon student and family income, using information from tax returns.  Instead of giving those who qualify a taxdeduction or credit on their Form 1040 a year or more later, why not give thesame benefit, based on the same income formula, as part of the existing studentfinancial aid system.  This way thestudent, or parents, gets the money upfront to pay for college expenses or, betteryet, the money is distributed directly to the college - and there is no needfor additional borrowing.
Inthe past there have been credits for purchasing energy-efficient products andimprovements, and some still exist.  Butagain, the money is provided after-the-fact – as much as a year or more afterthe purchase.  I would think moreindividuals would be encouraged to purchase these items if the money wasprovided upfront as a point of purchase discount.  Again individuals who want to take advantageof the eventual tax credit may be forced to borrow money to make the qualifyingpurchase, creating more debt.
The“Cash for Clunkers” program of a few years back proves that this can be donerelatively efficiently. 
And,as I have said over and over again, the Earned Income Tax Credit, refundableand otherwise, and refundable Child Tax Credit, which, if you call a spade ashovel, are really forms of welfare, would be better distributed via the Aid toFamilies with Dependent Children program – and with substantially less fraud.
Unfortunately,with BO re-elected and the members of Congress being the idiots they are, don’texpect any changes in the current system any time soon.
TTFN