As part of my (probably useless) efforts during Financial Literacy Month, here are some interesting and hopefully not completely useless financial facts. This is going to come out very much like James Joyce’s “Finnegan’s Wake”, so hold on as there will be some quick left turns.
The Secretary of the Treasury gets to sign all the paper currency. Tim Geithner currently holds the position, and just before being nominated he paid $26,000 in back taxes that he owed. And a quick Google check will verify that he is not the first (nor probably the last) person to be in charge of the cash register that has evaded taxes.
The United States actually has a $100,000 bill. It has a picture of Woodrow Wilson on it, and was used to transfer funds around the government or between banks before the days of electronic exchange. So if you stole one you might be rich, but only on paper because you couldn’t spend it.
>The total derivatives market is about an order of magnitude larger than the entire WORLD Gross Domestic Product.
Two of the highest risk groups for bankruptcy are former professional athletes and Lottery winners.
Bermuda uses the US Dollar as its currency.
The Dollar Sign ($) is older than the United States of America, and no one is sure of its origin. Some say it refers to the Pillars of Hercules on old Spanish coins. And no, the rumor propagated by Ayn Rand that it is a supposition of the U and S from “United States” is just urban legend.
The first person to collect Social Security Retirement benefits was a high school classmate of President Calvin Coolidge. She lived to be 100, thus collecting hundreds of times what she paid into the system. It didn’t matter as there were 40+ workers paying in for every one that was getting benefits. Now there are less than THREE paying in for every one receiving.
If the full Social Security Retirement Benefits starting date (originally just about life expectancy) had been indexed to stay in sync with mortality expectations, the country would be close to solvent. President Obama’s debt commission has recommended raising the age to get full benefits to 68 by 2050 and 69 by 2075. If it weren’t political suicide, the real targets would be closer to age 75 by 2025 and indexing thereafter to keep the system and the country functioning.
The US just got downgraded for its debt because the ratings agencies are concerned that the government is spending too much money irresponsibly. The debt is still Triple A Rated, but now has a negative on it (AAA-), connoting a downward inclination of the country’s abilities to meet it’s future obligations. Specifically Medicare, Medicaid, Social Security, and debt interest are causes. See factoid above.
The US Government does not have to follow Generally Accepted Accounting Principles (GAAP). Must be nice to make up your own rules and print your own money. Maybe I can be like Dean Kamen and declare an independent state with its own currency (his is in units of pi) and have my own bizarre logic apply. It would be less convoluted than the US Tax Code, and encourage investment in bacon, ninjas, and monkeys. Because everyone likes monkeys!
OK, enough monkeying around. Final financial fact for the week: the estimated cost to the US economy for tax compliance was just calculated by Laffer et al to be in the range of $430 billion, or 0.5 percent of real economic growth per year. A simpler tax code would free a chunk of that up for the actual creation of value, instead of me just harping on it on a regular basis.
OK, enough with my ADD fueled ramble. But as it is Financial Literacy Month, how many of these facts did you know? If it was less than 4 you probably should be investing a little more time in developing your financial literacy else you join the former football players mentioned above.
Joe Templin is the author of “Financial Mistakes of New College Grads”, now available on MP3 from cdbaby.com.
Guess what? Baseball season just started. Yankees Stadium looks great on opening day, even when the temperature doesn’t get north of 40 degrees. So you know what that means? That’s right boys and girls, it is about time to figure out how much gets sent to Washington (and Albany), to be wasted. It’s almost Tax Day!
Note that this year instead of the normal April 15th deadline, it has been pushed back (and yes, it IS because the government couldn’t figure out their own rules and procedures) to the 18th. Which means because of Parkinson’s Law (which states a task will always expand to fill the time allocated to it), there will still be a line down the street from the Post Office at 4:00 p.m. on the filing date. I will be over at Sunset Cafe laughing at you while having a cocktail or three. Come on over for a visit.
And before you ask, no I did not write a current version of my best selling book “Top Tax Plays” because of other projects (i.e. a baby). But my brain is still OK with being pimped out to assist you if you really want it. And yes, to quote those who have used me before, I am “that damned good!” So here are a couple quick hits for you.
If you realize you always get a big refund, and don’t use it to fund something (like a retirement plan or big debt payment or project) because you are undisciplined in your savings (not knocking you, just acknowledging human nature), then change your withholding to get more in each check and use it throughout the year to pay down debt or increase your savings. Loaning money to the government without interest is only for suckers. At least make ’em pay by using a bond!
Extensions to get your taxes done right are not necessarily a bad thing. But remember that just because you got an extension for filing doesn’t mean that you get an extension for making contributions to retirement plans (Roth IRA’s, SEP’s, etc). That hard fast deadline is still the general filing date.
One half of Americans pay no Federal Income Tax. Think about that. How long do you think that is sustainable?
The US Government does not follow GAAP, Generally Accepted Accounting Principles. Every other major employer in America is required to (and the government is by far the largest!), as is every single non-governmental organization that provides a pension to their employees. No government in the US (local, state, or Federal) is required to follow nor does follow GAAP. That means that they don’t have to account for pensions and expenditures the way a normal business does. Yet they can still borrow all the money they want, partially from taxpayers overpaying throughout the year like you. Every wonder where the money goes?
Traffic tickets are non-deductible (most of the time).
If you want to, because you pity the poor broke government, you may elect on your tax return to make a contribution to help them out. Yes, there is a line on the return near the very end that is essentially a tin can with a sign “I am not responsible enough to live within my means even though you are, so please help a bloated bureaucracy out.” Doubt me? Check for yourself!
The US Tax Code has had on average more than one change per day for my entire life time. And yes, even the IRS admits that their own agents do not understand all of it. And Einstein stated that the US Tax Code was the most difficult thing in the world to understand. And most of us are no Einstein!
These are obviously not all inclusive insights into the US Tax Code because it is longer than a dozen Bibles, argued over just as much, and the real money is made in understanding the intricacies and consulting on them. But if the whole thing makes your head spin and hurt, just remember that this year you get three extra days to enjoy the nausea. As I said, I’ll be at the Sunset having a cocktail if you need a little liquid understanding. Because someone obviously had a few before writing it!
Joe Templin is the Managing Director of the Unique Minds Consulting Group, LLC and really hopes he doesn’t get audited because of this article.
BY RICHARD HALLETT
Village of Ballston Spa Mayor John Roman outlined the village’s tentative budget for 2011-12, which for the second consecutive year, features no tax rate increase.
A wage freeze for the board members is part of the proposed plan as well.
“There will be no raise for myself or the trustees,” said Romano.
The tax rate will remain at $73.04 per $1,000 of assessed property value, if the budget passes. Romano said total expenditures are expected to increase 2.5 percent, due mainly to increased mandated costs such as employee pensions and insurance premiums.
He said employee health care costs are up 6.1 percent, comprehensive and general liability insurance is up 4 percent, while employee pensions have increased $71,000.
He said the village plans to offset those increases by not filling a full-time employee position, not making any large apparatus purchases and through other cost-saving measures.
Anticipated sales-tax revenues are expected to be about the same as last year, Romano said.
The mayor also said all hourly and salaried village employees will receive a 3-percent pay raise, while temporary and seasonal workers will earn 10 cents more per hour.
There will be a public hearing on the proposed budget Monday, April 11 at 7:15 p.m. at the village office building.
The village’s 12th Annual Easter Egg Hunt will be held Sunday, April 17 from 1:30 p.m. to 3:30 p.m. at the Milton Community Center on 310 Northline Road.
Sponsored by the Town of Milton and the Saratoga Jaycees, children pre-K to grade 5 are invited to enjoy an afternoon of fun, including games, crafts, contests, free refreshments, the Easter egg hunt and, , a visit from the Easter Bunny.
Adults are asked to bring a canned food item to be donated to local food pantries.
The next regular village board meeting is scheduled for Monday, April 11, at 7:30 p.m. at the village office building on 66 Front St.
Talk to any small business owner about paying their staff and they’ll be sure to tell you there is a lot more to it than just writing a few checks.
There are dozens of laws, both federal and state, governing employee compensation. How, when, and how much employees are paid are just a few of the topics those laws cover. Business owners need to be well organized and must stay up to date on the federal and state guidelines if they want to be in compliance.
The key to staying on top of things is setting up good systems and procedures that comply with all the applicable state and federal laws.
Some things to consider when setting up payroll for the first time:
- Obtain a Federal Id Number (Employer Identification Number or EIN). You can apply by filling out IRS Form SS-4 or visiting www.irs.gov.
The IRS will not allow you to remit payroll taxes as an employer using your Social Security Number.
- Obtain state and local identification numbers if they are required in the area when your business operates. For New York state the NYS-100 needs to be filed with the New York State Department of Taxation and Finance. The NYS-100 will assign the business entity with both their State Unemployment and Withholding identification number.
- Obtain a Workers’ Compensation Policy, if required in the state where the business operates.
- Obtain a Disability Policy, if required, in the state where the business operates.
New York state requires all employers have a valid New York State Workers’ Compensation and Disability Policy. Any lack or lapse in coverage can result in hefty fines!
- Identify the types of workers you’ll employ. Separate your independent contractors and full-time employees.
You don’t have to withhold taxes from an independent contractor’s pay. However, don’t think you can save time or money by classifying all your employees as independent contractors. There are specific rules and guidelines that must be followed in order for someone to be deemed as an independent contractor. For details, see the IRS Publication 15 Circular E, The Employer’s Tax Guide. http://www.irs.gov/pub/irs-pdf/p15.pdf
Violations for misclassifying employees can potentially result in significant penalties from both the IRS and the State in which the business operates.
- Once you’ve identified who your employees are, each employee will need to complete and sign IRS Form W-4. The form provides two critical pieces of information:
1. The Employee’s Social Security Number
2. The number of allowances the employee is claiming for income tax withholding purposes.
New workers should fill out a W-4 as soon as possible.
NYS department of labor has specific rules regarding the pay frequency for employees. Reference: www.labor.ny.gov
- Establish a rate of pay. The New York state minimum wage is $7.25 per hour. Employers must display a Minimum Wage information poster in their establishment.
Employers must give newly-hired workers written notice of:
- their pay rate(s)
- their overtime pay rate (if they qualify for overtime pay) and
- their regular payday
- Finally, identify and understand the difference between exempt and nonexempt employees. Employees who qualify as “exempt” are exempt from overtime regulations (and minimum wage laws), whereas “nonexempt” employees must be paid for every hour of overtime they work.
For information, visit
www.priorityonepayroll.com or contact Jeannine Dubiac, President of Priority One Payroll, LLC at 518-363-0600.
OK, I guess I now need to jump in on the BSNB/Manna’s/EOC. But I am going to take a completely different tack on this. And not as you would think “Manna Manna and the Sloeths” from the Muppet Show (do-do-da-do-da. Manna Manna! Do-do-de-do.)
The Internal Revenue Service (The IRS, my favorite organization on the planet) has a standard for assets referred to as “highest and best” (or HBU) that comes into play here. I am going to go out on a limb and say that there is no 2032a exclusion in in this instance since the land obviously does not look like a farm. This HBU standard basically says that a land based asset will be valued not at what it is currently used for (say a mini golf range in the middle of Manhattan) , but for tax purposes at the highest value that could be reasonably be ascribed to it (a 20 story building filled with offices and apartments generating eight figures a month in our previous example). So in the opinion of the IRS, Manna’s should be a restaurant or some other productive property. Taking it off the tax rolls totally would be out of alignment with this HBU concept. Yes, mark the calendar. I am agreeing with the IRS. Once you recover from your heart attack I will go into the logic.
Now, I am not sure who owns Ballston Spa National Bank. If I was a stockholder I’d be upset because the action of the bank is not in alignment with highest and best use because it negatively affects the surrounding community. And it is buying significant negative publicity. Their competitors are probably sitting back and rubbing their hands while going “Bwah-ha-ha!” like Snidely Whiplash. But I am a business owner, my kids are in the public school system, and a I live here and as such I am a stakeholder of the community, so I can spout off on this. Putting a non-productive asset in a productive spot is at best short sighted, at worse a violation of trust of the community. It is bad business, and negatively affects landowners and business owners in the community. It will also negatively affect the taxpayers as those dollars must be replaced by the rest of us. And it will hurt our kids educations (yes, I am playing the kid card). So BSNB is consciously making a decision (as they supposedly have had other offers for the property) that harms everyone around them. Maybe their leaders don’t read the Harvard Business Review and missed the article on corporate citizenship and circles of impact. Or maybe they just don’t live here and are focused on getting a deal done by the end of the quarter so they can hit a bonus. I would say that their decision falls on the same list as New Coke and Charlie Sheen’s recent career moves.
So what can I do to try to get BSNB to change their mind for the public good? I don’t have a vote on their Board of Trustees, I can’t use my awesome political power to stop it via fiat. And I don’t have accounts there that I can threaten to pull. Maybe if I offered a hug, or a carrot, it would make them feel better and make a choice that is better for all of us. So here is my plea and my offer to Ballston Spa National Bank: If you change your collective mind and put a for-profit company in the Manna’s space, I will not only move my corporate accounts over to your firm. I will also donate five hours of my professional time for you to use as you see fit. Hopefully you appreciate the value of this and apply highest and best use to this gift, because I would hate to see you make another mistake and chose to destroy value instead of create it.
Joe Templin is the Head Geek of the Unique Minds Consulting Group, LLC located right here in Ballston Spa.
Since I have been fifteen I have never been without a job, when looking, for more than a week. Not because I am the perfect employee or have life long membership in the Big Nosed Smart Alec Union, but because I was raised that you work. Even if it involves doing highly unpleasant tasks or things below your training level. It is just the way it is. I am also programmed to be an entrepreneur, so I can always make my own opportunities, something not all Americans are mentally made up for.
If you are someone dependent on others for your employment, and were not fully employed this past year, here are a few tax tips to ease the burden for you. Remember, though, unemployment payments are taxable on the federal level from “dollar one” now, as opposed to having the first $2,400 be tax exempt as was the case previously. This is a pretty big change, so you definitely need to apply some of these other ideas to offset the cost.
If you are looking for a new job in your field, then all resume related expenses are deductible. This includes mailing them (who mails stuff?), as well as the cost of production. This could be hiring an expert to re-write it, even if you only pay me in Guinness, as well as the paper it is printed on. And since most places do not accept resumes written in crayon, you probably need a printer and ink and maybe even a computer with something a bit more advanced than Word 1993. All are necessary tools and expenses in your employment search, so get government underwriting through a deduction.
If you are looking outside your normal geographic area for a new position, then transportation and lodging while in search mode are deductible. The government is going to look at time spent on non-employment related activities, so you may not be able to deduct your entire travel cost (and does Hawaii sound good after this winter!), but you can still take the directly related expenses like transportation, lodging for a day or two and food into consideration. And if you get the job and move, that is probably deductible also. The 50-mile rule is in play on this, so you can’t claim meals at Sunset Cafe under this part. Those go under other sections (see resume review above or next section).
Fees paid to another to assist in job placement are 100 percent deductible. This could be a payment to a head hunter, placement agency, or search expert, as well as coaching, but it must be for your current profession. I don’t care how much you pay someone, becoming the new bat boy at Yankees Stadium is non-deductible. But the perks would be worth it!
All of these items are for people who have already been in the job market and previously employed. That should cover essentially everyone, as even those who got out of school and got their first “real job” in 2010 probably still have an earnings history so as to be covered by these rules. Also remember that things like hair-cuts and clothes are non-deductible unless mandated by the job. Too often people lump these in with their job search expenses and get their hand slapped for taking too many cookies.
Not having work is on the list of crappy things, but at least the IRS has endorsed job search related deductions in an attempt to ease the burdens. So keep your chin up and keep moving forward!
Joe Templin is the author of “Financial Mistakes of New College Grads,” follow him on Twitter @MillenialMoney.
BY JOE TEMPLIN
Danger Will Robinson! Danger! Danger! The IRS has found mistakes on your tax return and is coming for you! Danger! Danger!
OK, so Robbie the Robot isn’t going to warn you before you do something stupid and call down an audit on your head. Luckily I will, because I’m such a good guy. You can buy me a beer later for it. Or better yet five, because I’ll give you five red flags the IRS loves about as much as the bull in the Bugs Bunny cartoons.
Wrong Form. It happens more often than you would think. People use the wrong Schedule (as of last year they went up to L, for “Lots of Paperwork”) and the alarm bells go off. IRS loves this one because it means you did it on your own and don’t know what you’re doing. Thus they can squeeze a few extra drops of blood from the stone. At least double-check www.irs.gov to get the right form of torture before you spend hours doing the wrong form. Reserve that self flagellation for the DMV. If you have anything other than the most boring return in the world you should consider a professional preparer, as the tax code is changed on average as often as a three-year-old.
Mis-claiming Dependents. Yes, we all love our kids. But you can’t get a deduction for them when they are 32, unless they live with you for a reason more than they don’t want to move their Boba Fett collection from your basement. Quick rule of thumb, if you don’t want to have to go through the IRS’s flow chart you can deduct them if you pay for everything because they are a student not in graduate school, or have a medical reason that they must be in your car, for a reason other than addiction to Freetos and lack of social skills. Dependents that sometimes get overlooked are parents living with you or adult sons and daughters with special-needs, and you can, and should, take these deductions.
Failure to Report ALL Income. The Department of the Treasury has the right to tax all income, from whatever source, unless specifically excluded. This means you have to list all income so they get their piece. This includes rents, gambling winnings, and tips to name a few areas that often get overlooked. This one can get you into a LOT of trouble.
Forgetting to sign and date forms. This one is just plain dumb. If you get strip searched because of this there is no one to blame but yourself. It’s like the two guys in the movie “Snatch” who rob a place and can’t push the door open because it opens inward, then take off their masks and are seen by the security cameras before their buddy opens the door and lets them out. OK, Not really. But I love that scene for what it embodies: the best laid plans of mice and men and all that. So sign and date the blankety blank forms. If not, you deserve what you get as a fee for foolishness.
Wrong Social Security Number. Unless you are a criminal attempting to steal from the government while in prison already, or are not supposed to be in the country (Mr. Articheeko from Hobart College?) then you have your very own Social Security number to use. Don’t call out the Spanish Inquisition because you transposed two digits. Seriously. this is one of the more common red flags and just makes me go “Huhh?”
So there you have it boys and girls, five of the most common red flags that are easily addressed when it comes to taxes. Since this year the deadline is the April 18, instead of the April 15, why not take an extra few minutes to double check your return before you too end up lost in space.
Joe Templin is on Twitter as @MillenialMoney and the author of “Financial Mistakes of New College Grads.”
It is time to turn the page on 2010, and I for one can not wait. Other than my new little tax deduction Colin it has not exactly been a great year for me with lots of family illnesses, amazing business disruptions, and lost deals exceeding the Gross Domestic Product of small countries.
But by the time you are reading this I will be well into my New Year’s cocktails, even if you get the e-edition on Thursday. So as I get ready for a new and better year, let’s take a look back one last time and review some tax related stuff.
Any and all job search expenditures are tax deductible, as long as you are not currently employed when doing so. This includes costs for printing resumes, travel for interviews or coaching, including food and lodging, and essentially anything else you can think of for your job search outside of appearance, like clothing and grooming, etc. Hopefully Santa brought you some good job leads for Christmas if you are in this situation.
You still have time to make contributions to “Personal Retirement Accounts” for your self. These are Roth IRA’s, if below the limit, SEP’s, and IRA’s.
The last day for putting money into these is the tax filing deadline on April 15. Assuming they are deductible they will reduce your taxable income dollar for dollar, essentially reducing your tax bill. Not a bad deal, other than being 100 percent taxable as income in the future, though probably at a higher rate.
Many companies offer flexible spending accounts for health related expenditures and have extended deadlines at the end of the first quarter before the “Lose IT” part of “Use It or Lose It” kicks in. And the extension of some of the tax provisions mean charities aren’t going to see quite the same rush with people transferring money from IRA’s to them before the end of the year. However, the added life to the provisions should be very good for charities in general. Nor does great aunt Edna have to die before the end of the year to avoid estate taxes, as those benefits have been extended.
As we get ready to sing Auld Lang Syne, the last thing we should be doing is getting ready to truly close up the books on the past year. That means consolidating all the “stuff” from the past one to get ready to pay the pound of flesh that is due to Washington and Albany. I would recommend a couple of things if you are not using one of the fancy-schmancy computer programs like Microsoft Money or using one of the online providers like mint.com.
These couple of moves are things I actually do to reduce the stress from consolidating all my data before turning it over to the CPA to work her magic. Yes, I use a CPA to do my taxes as opposed to doing my own even though I have written best selling tax books for one reason: I hate doing my taxes, and if I have to go through the unpleasantness known as an IRS Audit, I want someone with the right letters there to be my primary shield. So here they are:
-Buy my tax book. OK, enough schilling. But, it works, it has been fully vetted, and it is as entertaining as taxes can be.
-Buy an accordion folder and use it to separate receipts into the twelve months. This will make things easier. Trust me on this one.
-Find all interest statements, bank statements, and any other receipt/ financial data that might be important.
-Download a tax form from IRS.gov and take a quick look so you get an idea of what to do. Preferably while having a cocktail so that you don’t go all Oedipus and poke your eyes out at the horror. Better and less bloody: ask your tax preparer for a checklist to make sure you are ok.
-Go to the Unique Minds Web site, www.unique-minds.com, and download our tax input spreadsheet to assist you in getting everything to your tax preparer.
-Put everything in a big banker’s box. I then put mine away until February and go drink. I highly recommend this.
So there is what you need to do to be ready to move forward on finishing your taxes for this year. If you have questions feel free to reach out to me, or you can try to decipher the IRS Web site. This I would not recommend unless your New Year’s resolution is to be a masochist. Have a happy and safe New Year’s!
Joe Templin is the author of “Financial Mistakes of New College Grads” and you can follow him on Twitter @MillenialMoney.