#TaxDay2016

In honor of today's U.S. tax filing deadline, here are some interesting articles about taxes that I read in my free time while not doing taxes. I think a lot of this is inside baseball, so you may not find it interesting unless you are also a tax accountant, but I've put a "*" next to the top three articles if you don't want to read all of them.

Wondering why Tax Day is April 18th this year, when it's normally April 15th?  Click Here.

Procrastinators, rejoice - Everyone Files Their Taxes At the Last Minute

Depressing: IRS Service Dramatically Improves to Mediocre (Related: Abolishing the IRS is Stupid, so don't vote for Cruz: Cruz's Plan to Abolish the IRS Would Reward Cheaters*)

More Depressing: How The U.S. Tax System Disadvantages Racial Minorities*

Perspective: No One Ever Died From a Late Tax Return

Lighter "Tax News" from the Onion: Head of IRS Has a Personal Filing System to keep Track of Nation's Tax Returns

The Importance of Disclosure: Every Presidential Candidate Should Release Full Tax Returns (And some Good and Bad Ideas for Tax Plans from the candidates this year)

Taxes Are Important, and ARE About Fairness (and how we define fairness): A Financial Times Columnist...is Wrong*

Why Tariffs Are Bad (and Important): The Case of the Hidden Import Tax

Near and Dear to my SALT-y heart: A Closer Look At The State and Local Tax Deduction

Happy Tax Day! Go Forth and Spend your tax refund however you choose!

10 Tax Laughs for Tax Day

I've been saving up all the amusing things I read or hear about taxes, and, in honor of Tax Day today, will share them with you.

#10 - This comic.


#9 - A Ron Swanson Quote.



#8 - This Tweet on extensions.

#7 - David Letterman Tax Tips.


#6 - This Comic.


#5 - This e-card.



#4 - NPR's Marketplace investigative journalism on little known tax deductions.

#3 - The Onion's investigative journalism on the most overlooked tax credits.

#2 - John Oliver's (and Michael Bolton's) Defense of The IRS - it's a much maligned agency that's just trying to do its job.


#1 - The poem below, which captures the frustrations of tax season for tax preparers like me.

Memo Home Re: Tax Season
By Keith Mattson

I’m working late, I won’t be home;
Don’t try to reach me on the phone.
Don’t expect me home for dinner.
Don’t expect me home this winter.
Don’t even try to use your pull.
Don’t talk to me or shoot the bull.
I don’t want you to think me cruel,
But until May, my slate is full.
Just tell me what you spend and earn;
I’ll put it in a tax return.
(I hope that you will never learn
You’re just another file to churn.)
I’ve got files on my floor,
And on my chairs and desk are more.
I’ve got them coming in the door.
That’s all I do — I keep the score.
So far this year, the feds are winning,
With clients behind before beginning.
Their tax returns show “Balance due;”
Their checkbooks show a scarlet hue.
Their life is on a downward trend,
And then they ask, “Can we extend?”
I pause a bit … I say, “Absurd!
Where did you learn that awful word?”
But it’s too late for rhyme or reason;
They’ve just extended busy season!
And so, my dear, I’m warning you,
Just when we thought the season through:
I’m working late, I won’t be home;
Don’t try to reach me on the phone.
I’ll try to write or maybe call.
I hope to be home late this fall.

State of Mind

One of my nerdy habits is to make random music playlists with a theme. I have my "Manuary" list with ballads sung by and about men, "Happy Happy Joy Joy" with songs about happy things, and "Time Flies on Wings of Lightening" with tunes about the seconds, hours and minutes that fill our lives. In that spirit, I thought I would create a "Tax Return" playlist, because after all, I'm a tax accountant. I've spent a lot of time over the past few months looking at federal, state, and local income tax returns.

So, without further ado, here is a Federal and 50-state playlist for you, along with some explanations of why I choose certain songs. Admittedly, some of the connections are a little tenuous, but this is hard. If any of you have better suggestions, I'm all ears.

The Feds - "Taxman," The Beatles; "Born in the USA," Bruce Springsteen; "I am a Patriot," The Burns Sisters; and of course this gem:


"50 State Song," Animaniacs

Alabama - "Sweet Home Alabama," Lynyrd Skynyrd (If you haven't seen it, there is a most excellent documentary that will explain the lines about Muscle Shoals and Swampers!)
Alaska - "Frozen" movie soundtrack (because this is true of Alaska very often)
Arizona - "It's Too Darn Hot," from the Kiss Me Kate soundtrack (because this is true of Arizona very often!)
Arkansas - "I'm a Bad, Bad Man," from Annie Get Your Gun ("There's a girl in Arkansas/The Sheriff is her brother in law" - we're talking quality rhymes here)
California - Beach Boys (all their songs sound the same, so there's a bunch of options)
Colorado - "High Flying, Adored," Evita (because they have high mountains. And legal weed)
Connecticut - "Rain in Spain," My Fair Lady ("In Hartford, Hereford, and Hampshire"...Hartford is in CT!)
Delaware - "Long Way," Antje Duvekot (this one mentions several states but Delaware is slim pickings!)
District of Columbia - Okay, this one I don't own, but it makes me laugh: "Washington, D.C.," The Magnetic Fields. Also, AC/DC.
Florida - Disney, Disney, and more Disney
Georgia - "The Devil Went Down to Georgia," The Charlie Daniels Band (honorable mention: "Georgia on my Mind," Ray Charles)
Hawaii - Jack Johnson (he was raised in Hawaii and a lot of his songs are about surfing)
Idaho - "Hello, Little Girl," Into the Woods (Idaho has wolves, this song is sung by a wolf)
Illinois - "Chicago" soundtrack (If I track down the CD, which I have somewhere, could also use "Illinoise" by Sufjan Stevens)
Indiana - "Gary, Indiana" from The Music Man
Iowa - "Iowa Stuborn" also from The Music Man
Kansas - "Over the Rainbow" - of the many versions of this Wizard of Oz classic, I love Eva Cassidy's (even if you're not in Kansas anymore, this is a great song)
Kentucky - "Fugue for the Tinhorns," Guys and Dolls ("I got the horse right here" - Kentucky derby, anyone?)
Louisiana - The Princess and the Frog soundtrack (honorable mention: "Down at the Twist and Shout," Mary Chapin Carpenter)
Maine - "Carrying the Banner," Newsies Soundtrack ("Remember the Maine!" was the battle cry of Hearst, one of the newspaper publishers mentioned in Newsies)
Maryland - "Good Morning, Baltimore" from Hairspray
Massachusetts - "Sweet Caroline," Glee version because it's better than Neil Diamond (this is sort of a theme song for the one and only Boston Red Sox)
Michigan - Dreamgirls soundtrack, or anything Mo-town
Minnesota - When I think of Minnesota, I always think of the radio show A Prairie Home Companion.  If you don't listen to it, you should. One of my current favorite groups from the show is the Wailin Jennys, and while they're technically from Canada, I associate them with Minnesota.
Mississippi - O, Brother, Where Art Thou (honorable mention: "Mississippi," Sheryl Crow - because doesn't everyone stay in Mississippi a day too long?)
Missouri - "Kansas City," Oklahoma
Montana - "Sweet Baby James," James Taylor (somehow, this song evokes cowboys and open space, which is my stereotype of Montana)
Nebraska - "Fields of Gold," Eva Cassidy (there's a lot of corn, fields, and cornfields)
Nevada - "Luck be a Lady," Guys and Dolls soundtrack
New Hampshire - "My Girl," The Temptations (did you know that NH is the only state to have an all female congressional delegation AND a woman governor? Guess it's easier if you have only two representatives in Congress)
New Jersey - Bruce Springsteen, obviously. "Born to Run" or "Atlantic City" seem appropriate.
New Mexico - "Santa Fe," Rent soundtrack (or the Santa Fe song from Newsies)
New York - this state overflows with options - you got your "Empire State of Mind," "NYC" from Annie,  the entire soundtrack of Guys and Dolls and 42nd Street, so much more.  Unfortunately I don't have a recording of it, but Hugh Jackman sings a dreamy version of "I Happen to Like New York."
North Carolina - "Carolina On My Mind," James Taylor (the wording could be North or South, but since Mr. Taylor was raised in North Carolina, I went with North)
North Dakota - "Rocky Racoon," The Beatles (Rocky lived in the black hills of Dakota!)
Ohio - Annie Get Your Gun (did you know Annie Oakley was from Ohio?)
Oklahoma - "Oklahoma," Oklahoma (duh! this song actually inspired this whole playlist idea, because I like to sing this song to myself when I review Oklahoma tax returns)
Oregon - "Citywide Rodeo," The Weepies (For whatever reason, I had a lot of friends and roommates in college from eastern Oregon. Pendleton, OR has a big rodeo so I weirdly associate rodeos with Oregon)
Pennsylvania - 1776 soundtrack
Rhode Island - Dan in Real Life soundtrack (it takes place partially in Rhode Island)
South Carolina - "Time," Hootie and the Blowfish (a little research turned up the fact that this band was organized at the University of South Carolina!)
South Dakota - "Train Going South," Peter Breinholt (because if you're in North Dakota, why would you not want to go south? Also, speaking of the Dakotas, there's a great clip about the Dakotas from The West Wing (yes, it always comes back to that show) - watch the episode "We Killed Yamamoto" because I can't find it on Youtube)
Tennessee - "Walking in Memphis," Marc Cohen
Texas - "Wide Open Spaces," The Dixie Chicks
Utah - Mormon Tabernacle Choir and/or BYU singing groups
Vermont - Sound of Music soundtrack (Did you know the Von Trapp family settled in Vermont and established a lodge?)
Virginia - "The Lees of Old Virginia," 1776 (and of course, "Meet Virginia" by Train is a solid choice as well)
Washington - "I Love the Rain the Most," Joe Purdy (It rains in Washington, a lot apparently)
West Virginia - "Coal," Kathy Mattea
Wisconsin - "Tire Swing," Kimya Dawson (there's a fleeting reference to Madison, WI)
Wyoming - "Why Do I?" by Joe Purdy is a song about loneliness (because WY is the least populated state per square mile in the lower 48, seems legit), and I always want to say "WHY?-oming"

So there you have it, the jams to listen to while you review tax returns late at night in a windowless office. Can you tell I listen to a lot of Broadway? Happy End of Busy Season to me, and to all the tax accountants who are still sober enough to read this!

Happy Tax Day!

Someday I will write an entire musical about tax accounting. It will be epic. For now, here is the opening song of my future glory, sung to the tune of "Tradition" from Fiddler on the Roof. I've even added some of the dialogue which is in italics.  First you should listen to the real thing:



A tax code that has 3.8 million words. Sounds crazy, no? But in our little country of America, everyone of us must file a tax return, (hopefully) without getting an IRS audit. You may ask, how do we keep our sanity, if it's so complicated?  That I can tell you in one word - EXTENSION!

Extension! Extension! Extension!
Extension! Extension! Extension!

Because of our extensions, we've kept our sanity
For many many tax busy seasons.
Here in the U.S., we have extensions for everything
Partnerships, Corporations, Individuals.
For instance, we always extend, if the GAAP audit isn't finished,
Or simply if we are too lazy to find our receipts.
This shows our constant devotion to patriotism.
You may ask, how did these extensions get started?
I'll tell you. I don't know.
And because of our extensions, everyone of us knows how long we have, 
But has no clue what the IRS expects us to do.

Who day and night must scramble for the info,
Forget other responsiblities, have the daily calls?
And who has the right as the payer of the bills
To have the final say on the return?
The client! The client! Extension!
The client! The client! Extension!

Who must know the way to complete the return?
A correct return, a complete return?
Who must complete the workpapers and fill the forms?
So the client's free to not read the IRC?*
CPA Firm! CPA Firm! Extension!
CPA Firm! CPA Firm! Extension!

At 8 (a.m.), I started reading cases, at 10 (p.m.) I learned the regs,
I hear they've picked a client for me, I hope it's easy!
The manager! The manager! Extension!
The manager! The manager! Extension!

And who does manager teach? To enter, add, and calculate?
Preparing me to understand even the tax rate?
The staff! The staff! Extension!
The staff! The staff! Extension!

The client! CPA Firm! Manager! Staff! Extension!

And in the circle of our little country, we've always had our special types. For instance, confused and desperate taxpayers, IRS Tax Auditors, and most importantly, our beloved taxpayer service hotline.

Taxpayer: IRS, may I ask you a question?
IRS Customer Service Representative: Certainly, my citizen.
Taxpayer: Is there a proper way to evade taxes?
IRS Customer Service Representative: A proper way to evade taxes?  Of course! Be unemployed, have no salary, and thus no taxable income!

Then there are the others in our country. They have a much bigger influence. His honor, the tax court judge. Her honor, the taxwriting committee congresswoman. Her honor, the K Street lobbyist. His honor, the 1% who contribute to vast sums to elections. His honor, many many others... We don't bother them, and so far, they don't notice us. And among ourselves, we always understand tax code perfectly well. Of course, there was that one time, we argued about who had to file the return last year, but it's all settled now, and now we don't argue about it any more.

Wife: I mailed it in, on April 14th!
Husband: I e-filed it, on April 15th!
Wife: MAIL!
Husband: E-FILE!

Extensions! Extensions! Extensions!
Extensions! Extensions! Extensions!

Extensions, Extensions - without our extensions, our lives would be as crazy confusing, as a 3.8 million word tax code!


So, who's willing to bankroll my Broadway career as the next Rogers & Hammerstein?

*Internal Revenue Code

May Your E-files Be Accepted!

Well it's that time of year again, when I actually have time for other things in my life besides work.  Which is good, because I have a 62 mile bike ride at the beginning of October that I should really, you know, try not to suck at.  More on that in later posts!

In honor of today's tax deadline (in case you don't know, today is the deadline for extended returns for corporations and partnerships), I give you "Twas the Night before (Tax) Filing."

Twas the night before filing, when all through the firm,
Each CPA was typing, and beginning to squirm,
The tax returns were printed with much plaudit,
In hopes that the IRS never would audit.

The clients were nestled all snug in their beds,
While visions of refunds all danced in their heads.
The partner with his pen, and I with my pad,
Had just settled down to find out what changes he had.

When out in my cube there arose such a clatter,
I sprang from my chair to see what was the matter.
Away to my telephone I flew in a flash,
Pushed the button real hard and my teeth I did gnash.

The dim light on my desk did pour,
Gave the lustre of twilight to old drafts of yore.
When what with my wondering ears should I hear,
But a recruiter with promises of a new career.

With a little old lie, so clever and slick,
I knew in a moment I didn't believe this chick.
More good than true her stories they came,
Of better jobs calling my name.

On bonus!  On Pay Hikes!  On wonderful things!
Which couldn't possibly come without strings!
To the top of the company, she promised I might
Ascend with an effort so sleight!

And then, in a twinkling and inkling so wise,
I realized while amidst all my office supplies,
That each job its pros and cons would bring,
And now, busy season ended, life's on the upswing.


Sorry, this may sound like bragging - but I do occasionally get calls from recruiters promising me an awesome job (and let me tell you, it's tempting when you are weak during "busy season").  But generally I feel really lucky to (a) be employed, and (b) have opportunities to learn a lot from people a lot smarter than myself.  Having had quite a few co-workers leave the firm I work in, I've seen both sides and feel like I know and am able to choose better because of it.  Now that busy season is over, I'm looking forward to being more involved in church service, seeing my friends on a regular basis, and re-introducing fresh fruits, vegetables, and non-microwaveable items to my diet.

A Merry Busy Season to all, and to all a Good Night!

Tax to the Max

Today in the United States, it's tax day (or at least, it is for those individuals who choose to file on time).  It's a time when tax accountants like myself do this:

Yes, I am happy to be done with busy season, which actually hasn't been too terrible this year.  But still, happy to be done.

On a more serious note, however, I am really grateful that taxes provide the following things, among many others:
- Clean Drinkable Water
- Public Education
- Food inspections
- Roads, Public Transit systems
- Protection of my minority religion and free speech rights
- Public defense

Could government do a better job at all of these things?  Of course!  But the point is that there is always something we could do better!  I'm grateful to live in America on this tax day.  And true to form, I approve of the income tax system (as do most Democrats in a recent poll).  Of course it could be a lot better and simpler than it is, but then I would be out of a job.  So go ahead, complain about paying taxes - it's your right as Americans.

Meanwhile, I'll just be over here, dancing a jig and grateful that busy season is over (for a while, at least).

Taxman, Yeah, Yeah, He's a Taxman

I know you have all been waiting in breathless anticipation of part 2 of my evaluation of Mitt Romney's tax plan(s).  Well, wait no longer!  Pull up your beverage of choice (you know, the one that helps you stay awake) and join me for an exciting conclusion.  You can read part one here.



Today we discuss Governor Romney's plans for corporate taxes.  These are taxes paid by businesses which are organized as corporations.  I should note that this is probably most "big businesses" that are household names, but not all businesses are organized as corporations.  Your local businesses down the street may operate as partnerships or pass-through entities, and they are taxed based on the individual tax rates of those who own them.  So this tax plan would not apply to them.

[Begin tangent] Some people have a problem with taxing corporations because they view it as double taxation - the income is taxed once when it is earned by the corporation and again when it is distributed to shareholders in the form of dividends.  Suffice it to say, I do not really buy this argument, because I think corporations (while not people, ahem, Governor Romney) do need to contribute to society, and the benefits they enjoy (an educated workforce, enforcement of contracts by law, a highway system, among others) are all things that they should pay for.  But we will assume for purposes of this post, that corporate taxation is likely to continue to exist [End Tangent].

Governor Romney's corporate tax plan has four parts, let's examine each of them.

Part One: "Cut the corporate rate to 25%."  My question: why?  The top statutory rate is currently 35%, but VERY few corporations actually pay tax at this rate.  There are so many ways around this that corporate taxes paid are actually significantly lower than the relatively high rate would suggest.  Why make a low rate even lower?  What loopholes are you going to close to make this possible?  Lowering the rate will lower the amount of tax collected, so you've got to offset that by stopping some of the tax breaks to industries that are favored in the current tax system.  Governor Romney's website doesn't elaborate on this, but he needs to find a way to pay for this.

Part Two: "Strengthen and make permanent the R&D credit."  The R&D credit is a tax credit that reduces the tax bill of companies that invest in Research and Development in the U.S. by building labs and employing engineers and scientists here.  This makes sense to me, and I agree with this - having an research & development credit encourages businesses to build labs and employ people in this country, and encourages innovation.  If companies are going to make a multi-million dollar investment, they want the certainty that this tax credit will be available to them over the long term.  Right now the R&D credit is haphazardly renewed whenever Congress can find the time to do it on a year-by-year basis.  A long-term R&D credit would, I think, be a good idea.  President Obama has also signed on to this - so they actually do agree on something!

Part Three: "Switch to a territorial tax system."  I'm conflicted about this.  Currently the U.S. is one of the few countries which employs a worldwide tax system.  That is, if you are incorporated (organized) in the U.S., you eventually pay tax on your worldwide income.  You can keep profits offshore, but when they are repatriated (i.e. brought back to the U.S.) you pay tax.  People argue that the U.S. is unfairly burdening corporations with U.S. taxes on their worldwide income.  However, through tax accounting magic (stupid tax accountants!), many companies can hide income that really relates to the U.S. offshore, so it's argued that it should all be taxed in its "home" country.  This one I'm holding out as undecided, but until we can come up with a system that better allocates income between countries, I'm going to be skeptical of any "tax holiday" that lets companies bring back money to the U.S. and skip the taxes due.

Part Four: "Repeal the Corporate Alternative Minimum Tax."  The AMT, as its known, is levied at a lower rate than regular taxes but requires companies to addback certain items - so if a company isn't paying regular tax in a year, it may very well have to pay a little bit of AMT.  This is a disagree from me, which is surprising because I am all for getting rid of the individual minimum tax.  However, I think that the corporate AMT requires corporations to pay at least a little bit of tax in most years.  As I noted above, I think corporations get a lot of advantages in our society, and they should pay the price for these benefits.  Corporate AMT provides a carryforward benefit - so if you pay AMT, and in the future your tax bill rises above the AMT threshold, you get to reduce tax in future years.  What can I say, I'm a Democrat who has an inherent anti-corporate bias, so I'm okay with the corporate AMT.  Let the hypocrite allegations begin.

So overall, somewhat of a mixed bag on taxes for Romney.  Both candidates, however, need to do a better job of explaining the costs and benefits of their tax policies - for every tax "goodie" we receive (or someone else receives) there is a cost - usually higher rates overall.  Obama and Romney need to have a frank discussion of trade-offs.  Sigh.  Why do I feel like an intelligent conversation is the LAST thing that's going to happen this election cycle?

Into the Belly of the Beast

It’s the time of year when tax accountants bear only a passing resemblance to sane people.  They have minor breakdowns over lack of paper clips, and major psychiatric episodes ensue if the tax software crashes.  But, tomorrow is the tax deadline, so Wednesday will be a day of delight!

Even though the last thing I want to do right now is think about taxes, I have gone into the belly of the beast, and read Governor Mitt Romney’s tax plan.  You can read the plan for yourself here.  I’m going to split this post into two parts, one part about Romney’s plans for individual taxes, and another about his plans for corporate taxes.  This first post deals with several provisions Romney has proposed for individuals.  I should state the obvious here, and note that these are my personal opinions and not those of the firm I work for.

#1: Romney proposes to cut individual tax rates by 20% across the board.  This would return the top tax rate to 28%, which was the top rate in 1986.  This is a clear contrast with President Obama, who proposes to repeal the Bush tax cuts for top earners and return the top tax rate to 39.6%, which is what the tax rate was under Clinton.  The tax policy center estimates that the top 0.1% of earners would pay more than $1 million more under Obama’s plan versus Romney’s.

Ok, let’s make clear that I have no problem with tax cuts per se.  I just think that you have to be honest about how you’re going to pay for them – there is no free lunch (Likewise, raising taxes is not a panacea that solves our problems).  I think the biggest problem I have with this proposition of Romney’s plan is that he says that’s pro-growth.  This is linked to the failed supposition that all you have to do is lower taxes and jobs will magically be created.  It didn’t work for President Bush in 2001.  Romney’s plan also promises to “limit deductions, exemptions, and credits” for upper income earners.  Which ones?  The very popular mortgage deduction?  The charitable contributions deduction?  The exemptions for dependents?  (those  will be all popular with house-owning, tithe-paying, large Mormon families!)  I’ve blogged before about how it is very hard to take away so-called “tax expenditures” – tax breaks that are popular but cost the government a lot.  My fear is that Romney will cut taxes without being able to have corresponding cuts to these tax breaks.  The lack of specificity is troubling, to say the least.

#2: Romney proposes to cut capital gains taxes on Americans making less than $200,000 per year and keep the rates at 15% for everyone else.  My problem with this is simple: the financial crisis.  This rewards people who make risky financial decisions that may destabilize the whole system.  It values one type of work (financial intrigue) over the steel worker.  In other words, a Morgan Stanley investment banker would pay a lower tax rate than I do on my salary.  I don’t think that’s right.

#3: Abolish the “death tax.”  This is another example of the Republican penchant for ridiculous names.  This tax hits only those estates worth more than $5 million.  The tax also provides a step up in basis, which means that when you sell those assets you inherit you don’t pay tax again.  It’s a question of taxing the gain now or later, so I guess this one is just a matter of policy.  I am okay with the death tax.

#4: Abolish the Alternative Minimum Tax (AMT) for individuals.  This point I actually agree with.  The AMT is a complex tax on top of a tax, and it’s not indexed for inflation so it hits more Americans every year.    Given the rest of Romney’s individual tax plan, I feel like it’s not specific enough, or in line with my views on tax policy. I feel like it is doing nothing to help with the growing income inequality gap.  You can read some more in-depth analysis of Romney's and Obama's plans here and here.

Don’t forget, your taxes are due tomorrow!  A little tax humor: 

I Shall Not Pass

There's a book of poetry (very old) that my parents have two copies of.  It's called "The Best Loved Poems of the American People," and I'll admit, some of the poems are corny and sappy and full to the brim with groan-inducing rhymes.  Nonetheless, I love to read it and re-read it.  I was having a terrible, long day yesterday, and towards the end of it, a co-worker showed me great kindness when she didn't have to.  It was just a small and simple act of kindness, but it made a work day of 12 hours seem less terrible.  We have so many opportunities to NOT do kind things, but we should take as many opportunities to do kind things as we can find!

I Shall Not Pass This Way Again
Through this toilsome world, alas!
Once and only once I pass;
If a kindness I may show,
If a good deed I may do
To a suffering fellow man,
Let me do it while I can.
No delay, for it is plain
I shall not pass this way again.
                   - Anonymous

Navigating Charity

As your friendly neighborhood tax accountant, let me inform you that you have only six days left to donate to charity and deduct it on your 2011 tax return!  In honor of that, I'm going to feature some of my favorite charities over the next few days.  Even if you don't itemize deductions (and therefore don't get a tax benefit from charitable donations), you can still donate to awesome charities and help save the world.

Before we begin, here are some tips from the IRS about gift giving.  Also, I generally like to make sure that my charity dollars are effective.  I like to donate to charities that spend a small percentage of their money on administrative tasks like fundraising, etc.  I personally don't like to donate to charities that pay a bloated salary to their CEO.  Sites like Charity Navigator, GiveWell, and GuideStar provide information about charities and ratings to help you donate to the most effective charity for your dollar.  Over the next couple of days I'll feature charities I like and provide links to their sites.

I Don't Think You're Evil, I Just Think You're Wrong

I agree with the Occupy Wall Street Movement's goals.  I do think that wealth and influence in our country are becoming concentrated in the hands of a few at the expense of the many.  Democracy depends on a diffusion of power, and everyone should have an equal say.  An increase in inequality also suffering and poverty, which reduces opportunities for our fellow Americans.  However, I realize that different people have different views.  I don't necessarily think that someone automatically becomes "the devil" because they don't have a problem with income inequality (this seems to be the default mode of any protest: demonize your opponents).

Similarly, I don't think that anyone who proposes flat taxes, national sales taxes, or reduction/elimination of corporate taxes is intentionally TRYING to increase income inequality or has an intentional agenda to screw the poor.  Maybe I tend to over-simplify people's motives, but I like to assume, as a starting point for rational debate, that the other side is NOT evil.  They simply have a different view of the world.  However, in the case of the ideas mentioned above, I do believe they are the wrong policy choices, and will end up increasing poverty among the 99%.  

I also want to point out that conservatives often rail high tax rates.  They seem to get riled up about the top corporate tax rate, which currently stands at 35%.  This is a red herring, because while 35% may be the "statutory rate," or the rate on the books, let me be the first to tell you, if you don't already know, that very few companies actually pay tax at that rate.  This graph shows that in terms of "effective rate" or the rate at which corporate taxes are paid compared to income, the U.S. actually has an incredibly LOW tax rate.  And let's face it, corporations should pay taxes - these companies use the roads, courts, and educated citizenry paid for with our public money.  They inure incredible benefits as a result of our government's actions, and they should be a part of paying for those benefits.   The same deal goes for the richest Americans, whose income is taxed at a statutory rate of 35% but whose effective rate is a much lower 25.8% (see here).  Again, I think that because the rich disproportionately benefit from our capitalist society, they should bear a disproportionate share of the costs.  They'll still be plenty rich, trust me.

So, I don't think the rich are evil.  I bet most of us (for varying reasons) would like to be rich some day - some of us would like to buy the biggest yacht while some of us would like to be able to give it all away to worthy causes.  Let's not demonize those who disagree with us, let's just listen to each other.  I believe progressive taxation is the right way to make sure the disadvantaged and poor don't live a life of grinding poverty simply because they're unlucky.  If you don't agree, then I think you're wrong, but you're not Hitler.

Addictions

Having spent little over 15 minutes on Goodreads.com, a book rating website, I discovered about 20 books I want to read.  I am slightly addicted to reading.  Is addiction always a bad thing?

Here are my addictions, in no particular order:
- Chocolate
- Reading
- Law & Order Re-runs
- Solitude
- Broadway Musicals
- Wheat Thins (and Peanut butter)
- Quiz bowl trivia
- The Black Hole Known as the Internet
- Tax Reform (a bit wonkish, but true)
- Seasonal earrings

Remember Remember the 15th of September!

For most of you, September 15th is just another day. However, if you are a tax accountant who works on corporate and/or partnership returns, September 15th is D-Day (only slightly less bloody). The 15th is the due date set by the magnanimous IRS for corporations and partnerships to file their annual returns. So in the days leading up to the Big Day, I had a countdown going on in my g-chat status, set to the tune of "12 Days of Christmas." Consider it my one burst of creativity during accounting busy season. I thought I would explain the various phrases, and hopefully put you all to sleep so you can have a nice nap.

12 Deductions drumming (deductions = expenses in tax-speak)
11 Pro-rata allocations piping (allocations are how income is assigned to partners in a partnership)
10 LLCs a-leaping (Limited Liability Companies, aka LLCs, are a way to organize a business)
9 Tax credits dancing (tax credits are applied against a corporation's tax liability to reduce it)
8 Exceptions a milking (All rules, especially tax rules, have exceptions. Then there are the exceptions to the exceptions! That's a tax accountant's bread and butter)
7 Sections skimming (Each part of the internal revenue code is called a "section" - for giggles, there is a part of each section described as "flush language.")
6 Returns e-filing (Many large corporations are required to file their tax returns electronically, thus saving the planet - see #1)
5 Golden refunds (Corporations are required to pay estimated tax throughout the year - most choose to overpay because you're never sure what you tax liability will work out to, thus leaving you with a refund at the end of the year)
4 Calling conferences (Conference calls, the bane of my existence)
3 Faulty pens (Somehow, whenever I reach for a pen, it is dead)
2 Snail mails (Returns do not actually have to arrive at the IRS office by the 15th, they just have to be postmarked by the 15th)
And 1 ream of paper from a tree (this is how much paper it takes to print returns. I was working on a "simple" Federal return, which ended up weighing in at 75 pages including statements. Not to mention state returns!)

After the countdown, it's time for the end of busy season party and post-deadline lull, in which little work occurs!

Government Thanksgiving

Corporate taxes are due on March 15th and partnership tax filings are due April 15th, but both can be extended to September 15^th. As a tax accountant, September 15^th was a big work deadline for me, and I’m glad it’s passed! I even got to have a bit of drama to celebrate the end of “busy season” – I had to hand deliver a tax return to a client in order to meet the filing deadline. Since that meant battling area traffic, I got to jam out on the radio in my car. I lucked out and heard some really good songs – “Lean on Me” and “Here comes the Sun” (which, I’ve decided, is my favorite Beatles song). The point is, all that good music got me thinking and so I sort of composed this post in my head.

I’m grateful for government.

I’m grateful for the tax system (even if it’s complex) and the fact that the vast majority of American citizens and corporations pay taxes, thus contributing to building our society. I’m grateful to live in a relatively corruption free society, where businesses can thrive without having to pay bribes to government officials. I’m grateful for a car that’s safe because government mandates certain safety features. I’m grateful for a government that restricts monopolies from crushing ordinary people. I’m grateful for a government that allows us to protest against it, and even provides police officers to protect such rights. I’m grateful to work in a building that won’t collapse, due to building codes. I’m grateful for workplace safety regulations and government protection from discrimination. I’m grateful for all 12 years of my public school education, paid for by our government. I’m grateful to eat safe food that’s inspected by the government. I’m grateful to be able to vote for my representatives, governor, senators, and president (and grateful for the confidence that the votes will be fairly counted). I’m grateful for a government that stays out of my religion and guarantees my right to worship as I please. In fact, I’m grateful for the whole bill of rights and all constitutional amendments (especially the 19^th!). I’m grateful for a government that provides a social safety net to the poor, the elderly, and the unlucky. I’m grateful for the sacrifice of brave men and women in serving in our armed forces, protecting me from horrors I will probably never fully comprehend. And yes, I’m grateful for the bureaucrats – those who work in public service jobs in government.

There are notable exceptions and limits to government’s abilities. Sometimes government doesn’t work. Government is imperfect, but I believe it reflects our own imperfections. When failures of government come to light, they should be exposed, rooted out, and reformed. After all, in America we believe in government “by the people, for the people, and of the people.”

Ronald Reagan once famously said that “Government is not the solution, government is the problem.” That simplistic statement overlooks the vast good that government can and does do in our society. Sure, it’s annoying to wait in line at the DMV, it’s frustrating to pay taxes, and we may not like our current representative, governor, senator and/or president. But on the whole, government is a good thing, and I’m grateful it protects my rights, provides so many services, and regulates things that should be regulated.

Tax Simplification = Tax Reform?

simplification: to make less complex or complicated; make plainer or easier
reform: the improvement or amendment of what is wrong, corrupt, unsatisfactory, etc

It's been awhile since I actually wrote something about politics. And let's face it, taxes are a political issue. Recent TEA parties have argued that taxes are too high, but the truth is that tax rates have stayed relatively constant over the years. In fact, for all the talk about how "progressive" the tax system is (oh, those poor, poor rich people!), recent data show that tax rates are a lot less progressive than you'd think. People talk about tax simplification and tax reform. In reality, any simplification of the internal revenue code is going to be reform.

According to Time magazine, it takes an average of 37 hours to complete a basic 1040 individual tax return. So, many Americans turn to tax professionals, often paying them way too much money to complete what should be a simple task. The tax code has gone from 31 pages in 1913 to more than 3 million words as of 2004.

So, especially at this time of the year, a lot of people are saying we should simplify the tax system. One good example of this is family credits. Say you have kids - you could then be eligible for the dependent care credit, child tax credit, additional child tax credit, and a larger earned income tax credit - in addition to the exemptions you get. Each of these credits is calculated differently. One idea I read about wants to simplify all these into one "family credit" - one amount to streamline things! The problem is this creates winners and losers. If you only have one kid, you would get a bigger credit under this proposal, but if you have lots of kids, you pay less tax under the current "complicated" system.

This leads me to the dirty secret of the Internal Revenue Code: every complication is in there because of us. Someone has either advocated for a tax break, or someone has done something stupid so that the Treasury Department has to issue a regulation or litigate to prevent it. U.S. taxpayers are responsible for every deduction, credit, exemption, and secret rule. Some decisions about taxation are essentially arbitrary - there's no right or wrong (unless one answer benefits you more, apparently). One example of arbitrariness is "depreciation" - how you expense business equipment. Tax laws arbitrarily give items like furniture a "life" over which you expense the cost of a desk, even if the desk sticks around for 50 years.

Our tax code is a reflection of what behaviors we want to encourage or discourage. So, should teachers have a tax break to buy school supplies? Sure! Should we give people tax breaks to improve energy efficiency? Why not! Should corporations be rewarded for hiring people from economically disadvantaged areas? You betcha! Each of these items may be good things, but they add a layer of complexity to the tax code. This benefits people with enough money and political influence to change the tax laws. One recent article described a 2200% return for companies investing in lobbyists because of a sweet tax break they got in 2004.

Some say that we should get rid of all the special tax breaks and lower the rates - that way the tax system would be simpler, and would bring in the same amount of revenue. The problem with that is human nature - politicians are always going to be meddling with deductions (and we'll ask for them). If we lower the rates and abolish special rules, eventually the rules will be added back in and the system will end up bringing in less revenue, further undermining our fiscal health. Essentially, any effort to streamline the tax system is going to be reform, because it's going to have to take away tax breaks and perks for some people - for example, people with kids, homeowners, or those who give a lot to charity. Some proposals take reform to a whole new level, by wanting to abolish the income tax and replace it with a national sales tax. I think this is highly unlikely. However, I am against it mainly because I feel like it hurts the poor the most. If you click here, there's a good description of the pros and cons (obviously, as an accountant, con reason #5 is very important to me).

P.S. I tried to keep this to five paragraphs, but went over. Sorry, I tend to get nerdily excited when I talk about taxes. I think my next political post will be about the other half of my Democratic "tax and spend" mentality.