Discussion:Political (chat topic re: inaccurate representations of tax law changes) Email from a client - comments?

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Discussion Forum Index --> General Chat --> Political (chat topic re: inaccurate representations of tax law changes) Email from a client - comments?

Actionbsns (talk|edits) said:

20 August 2010
One of my client's sent this to me, I think a lot of it is fear mongering, I just thought I'd put it out for comment


     In just six months, on January 1, 2011, the largest tax hikes in the history of America will take effect.
   They will hit families and small businesses in three great waves.
   On January 1, 2011, here’s what happens... (read it to the end, so you see all three waves)...
        First Wave:
   Expiration of 2001 and 2003 Tax Relief
   In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.
   These will all expire on January 1, 2011.

   Personal income tax rates will rise.
   The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).  
        The lowest rate will rise from 10 to 15 percent.  
        All the rates in between will also rise.  
   Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.  
   The full list of marginal rate hikes is below:
       * The 10% bracket rises to an expanded 15%
       * The 25% bracket rises to 28%
       * The 28% bracket rises to 31%
       * The 33% bracket rises to 36%
       * The 35% bracket rises to 39.6%

    Higher taxes on marriage and family.  
   The "marriage penalty" (narrower tax brackets for married couples) will return from the first dollar of income.  
   The child tax credit will be cut in half from $1000 to $500 per child.  
   The standard deduction will no longer be doubled for married couples relative to the single level.  
   The dependent care and adoption tax credits will be cut.
   The return of the Death Tax.
   This year only, there is no death tax.  (It’s a quirk!) For those dying on or after January 1, 2011, there is a 55 percent
   top death tax rate on estates over $1 million.  A person leaving behind two homes, a business, a retirement account, could easily pass along a death tax bill to their loved ones.  Think of the farmers who don’t make much money, but their land, which they purchased years ago with after-tax dollars, is now worth a lot of money.  Their children will have to sell the farm, which may be their livelihood, just to pay the estate tax if they don’t have the cash sitting around to pay the tax.  Think about your own family’s assets.  Maybe your family owns real estate, or a business that doesn’t make much money, but the building and equipment are worth $1 million.  Upon their death, you can inherit the $1 million business tax free, but if they own a home, stock, cash worth $500K on top of the $1 million business, then you will owe the government $275,000 cash!  That’s 55% of the value of the assets over $1 million!  Do you have that kind of cash sitting around waiting to pay the estate tax?

   Higher tax rates on savers and investors.
   The capital gains tax will rise from 15 percent this year to 20 percent in 2011.  
   The dividends tax will rise from 15 percent this year to 39.6 percent in 2011.  
   These rates will rise another 3.8 percent in 2013.

   Second Wave:
   There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011.  They include:

   The "Medicine Cabinet Tax"
   Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
   The "Special Needs Kids Tax"
   This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  
   There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.
   Tuition rates at one leading school that teaches special needs children in Washington , D.C. ( National Child Research Center ) can easily exceed $14,000 per year.
   Under tax rules, FSA dollars can not be used to pay for this type of special needs education.
   The HSA (Health Savings Account) Withdrawal Tax Hike.
   This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

   Third Wave:
   The Alternative Minimum Tax (AMT) and Employer Tax Hikes
   When Americans prepare to file their tax returns in January of 2011, they'll be in for a nasty surprise-the AMT won't be held harmless, and many tax relief provisions will have expired.
   The major items include:
   The AMT will ensnare over 28 million families, up from 4 million last year.
   According to the left-leaning Tax Policy Center, Congress' failure to index the AMT will lead to an explosion of AMT taxpaying families-rising from 4 million last year to 28.5 million.  These families will have to calculate their tax burdens twice, and pay taxes at the higher level.  The AMT was created in 1969 to ensnare a handful of taxpayers.
   Small business expensing will be slashed and 50% expensing will disappear.
   Small businesses can normally expense (rather than slowly-deduct, or "depreciate") equipment purchases up to $250,000.  
   This will be cut all the way down to $25,000.  Larger businesses can currently expense half of their purchases of equipment.  
   In January of 2011, all of it will have to be "depreciated."
   Taxes will be raised on all types of businesses.
   There are literally scores of tax hikes on business that will take place.  The biggest is the loss of the "research and experimentation tax credit," but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
   Tax Benefits for Education and Teaching Reduced.
   The deduction for tuition and fees will not be available.
   Tax credits for education will be limited.  
   Teachers will no longer be able to deduct classroom expenses.
   Coverdell Education Savings Accounts will be cut.
   Employer-provided educational assistance is curtailed.  
   The student loan interest deduction will be disallowed for hundreds of thousands of families.
   Charitable Contributions from IRAs no longer allowed.
   Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA.  
   This contribution also counts toward an annual "required minimum distribution."  This ability will no longer be there.

   PDF  Version  Read more: ; http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#%23ixzz0sY8waPq1
   And worse yet?
   Now, your insurance will be INCOME on your W2's!
   One of the surprises we'll find come next year, is what follows - - a little "surprise" that 99% of us had no idea was included in the "new and improved" healthcare legislation . . . the dupes, er, dopes, who backed this administration will be astonished!
   Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter if that's a private concern or governmental body of some sort.  
   If you're retired?  So what... your gross will go up by the amount of insurance you get.
   You will be required to pay taxes on a large sum of money that you have never seen.  Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt.  That's what you'll pay next year.  
   For many, it also puts you into a new higher bracket so it's even worse.

   This is how the government is going to buy insurance for the15% that don't have insurance and it's only part of the tax increases.
   Not believing this???  Here is a research of the summaries.....
   as modified by sec. 10901) Sec.9002  "requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income."

   - Joan Pryde is the senior tax editor for the Kiplinger letters.- Go to Kiplingers and read about 13 tax changes that could affect you.  Number 3 is what is above.

   Why am I sending you this?  The same reason I hope you forward this to every single person in your address book.
   People have the right to know the truth because an election is coming in November!

Marcilio (talk|edits) said:

20 August 2010
I got the same e-mail. It is full of lies and misleading commentary. I hate this type of crap.

OCNumberz (talk|edits) said:

20 August 2010
I got that EXACT one today, too. I'd gotten shorter versions of the same thing a few weeks back, stating the outrage that health benefits will be on the W2. This one even references this:

- Joan Pryde is the senior tax editor for the Kiplinger letters.- Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what is above.

If you bother to read Numnber 3, you'll see they're not taxable. But, nobody seems to be reading the details before they get themselves upset.  : (

Nightsnorkeler (talk|edits) said:

20 August 2010
How about the junk about The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress' failure to index the AMT will lead to an explosion of AMT taxpaying families-rising from 4 million last year to 28.5 million.

Hasn't this been going on every year until congress passes a fix in December? Of course we don't know if they will pass a fix again this year, but they try to pass it off as if this is something new.

Responding to hogwash like this isn't even worth any of our time. Simply inform your client that they pay YOU to give them tax advice, and if they believe everything they read in their emails, when will they be receiving their 48 million dollar check from the ex-government official's son-in-law from Nigeria?

Death&Taxes (talk|edits) said:

20 August 2010
Emails like this tell me more about my clients and friends than shed enlightenment.

In 1990 or 1991, a client had dinner with RN, a then and now prominent columnist and one who appears on TV in those shout alongs. RN told my client that the Tax Hike brokered by the Dems in Congress and then President Bush was the largest in American history.....the more things change, the more they.....

Marcilio (talk|edits) said:

20 August 2010
D&T...I like that one.

Tax Writer (talk|edits) said:

20 August 2010
Seriously, D&T-- there's an element of batsh** crazy about this stuff that has me mystified. I don't remember things ever being this... hysterical. I don't even watch the news anymore (I just Google). I can't take all the screaming.

Death&Taxes (talk|edits) said:

20 August 2010
On June 9th, I posted this in Chat: Discussion: The Ministry of Disinformation and then on July 4th posted Discussion: Chilly forecast . The latter discussion had some sense to it, as a respected seer was giving his thoughts, but the former duplicates much of Paula's received email.

I can only think that Josef Goebbels is alive and has returned from Argentina or Paraguay....did he not believe that if you say something long enough and loud enough, people believe it. I believe it is Justin Raimondo who claims that 9-11 ripped a hole in a time warp.

Smokeytax (talk|edits) said:

20 August 2010
Death&Taxes -

You're SO right, as usual.

Re Bush the first - remember the pundits criticizing him over and over and again like a broken record about Iraq/Saddam/Kuwait, saying he failed to "finish the job when he had a chance"?

As we later found "finishing the job" was just a bit harder than they thought.

Never any sort of retraction, or apology from any of the pundits who were so critical.

Natalie (talk|edits) said:

August 20, 2010
One would think that an organization such as the Americans for Tax Reform would want to provide correct information to their clients/users. Something like this reduces their credibility.

From the perspective of the naive taxpayer, I think there's just enough truth in the email to make it sound believable.

OCNumberz (talk|edits) said:

20 August 2010
The world is full of idiots, and the internet/email just shed more light on them. I'm shocked at the misinformation that gets forwarded to me by what I thought were intelligent people.

But, back to the one of the issues in the 'tax changes' email above. The health benefits will be reportable in Box 1, but deductible on the taxpayer's return. I've done quite a bit of reading on this, and it looks as if the IRS wants WITHHOLDING on this health benefits amount. Does anyone have any info to confirm if this is true? Sounds like a potential nightmare for payroll services.

Actionbsns (talk|edits) said:

20 August 2010
OC I don't believe you are right in your comment regarding health insurance benefits. There is to be a box where the premiums are to be reported, but it is not to be included in gross wages, taxes will not be paid on it and it is not a deductible item. It's merely a piece of information. Even the citation provided from Joan Pryde states "requires employers to include in the W2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is EXCLUDABLE FROM THE EMPLOYEES GROSS INCOME" which she cites as Sec 9002.

I just read through the e-mail more carefully and have to admit some of the information caused me to take a look, which is generally a good thing. Much of the information is unsubstantiated or inflated to create fear and promote a particular political agenda in the upcoming elections. I e-mailed my client that using the 2010 US Master Tax Guide, I found that to be true and she shouldn't lose sleep over it. It's the first time I've ever had anyone e-mail such a lengthy diatribe.

Taocpa (talk|edits) said:

20 August 2010

I see these all the time from clients. You know I live near the crackpot capitol of the US and the world. Heck, we used to get letters and e-mails from these people all the time at my last job. I stopped paying attention.

One client e-mailed me and asked for my opinion. I skipped most of the crap and focused on the part you did. you point out, what they forgot to include was what Joan Pryor said. When I pointed that out, my client sent an e-mail around stating the information he got from his "tax guy" was the e-mail was "somewhat inaccurate." Too funny.

So the next time you get one, do what I do: hit the "DELETE" key.


CathysTaxes (talk|edits) said:

21 August 2010
It's an election year. Many, otherwise, normal and intelligent people, send emails that are based on half truths because they want you to vote for the candidate of their choice. I always delete them. If the same person keeps sending them to me, I ask them to stop.

Actionbsns (talk|edits) said:

21 August 2010
Aw Tom, I thought the crackpot capital of the US was generally thought to be California. At least that's what I keep hearing people say. You're somewhere on the East Coast right? Isn't that the bed of the establishment?

Belle (talk|edits) said:

August 21, 2010
H E Y - I resent resemble that remark, Paula !  :-)

And do you think it's NoCal (San Francisco) or SoCal (LA) ?!?

Actionbsns (talk|edits) said:

21 August 2010
I was born and raised in LA area, Belle but we moved here from the North Bay (60 miles north of SF)were we lived for over 20 years. Mostly I think people are referring to the LA area when they say that, because they often add "..... La La Land". I like to think we are more enlightened than the rest of the world and therefore not crackpots at all, but what do I know, I moved to Hawaii.

OCNumberz (talk|edits) said:

21 August 2010
Action, from what I understand, it should be in Box 1, NOT Boxes 3 and 5. AND..it will be in Box 14 for informational purposes. I've read that several places. The concept is similar to how pre-tax health benefits are currently reported....REDUCING Box 1 and showing in one of the other boxes (12 or 14 ??) for informational purposes.

Are you on the same island with Dog, Bounty Hunter? I'm just an hour south of L.A. in Orange County but have never heard the term 'La La Land' with generalized reference to Los Angeles. I think that's where the [L.A. County] Bell's City Manager was when he took that $800k salary and thought no one would notice.  ;)

Natalie (talk|edits) said:

August 21, 2010
OC, where did you read this? My understanding is as Action said -- that the reporting is only for information purposes. Here's an article you might want to take a look at [1]. I guess that could just as easily be one of those sites that is not trusted, so here's another one from the Journal of Accountancy

Here's another one. (I figure these people are in the business of providing payroll information, so it should be correct.) HRbits.com

If you like Kiplinger, this is what they have to say about the matter Health Care Reform Tax Hikes on the Way

Taocpa (talk|edits) said:

21 August 2010

DC is the establishment and I am 20 miles east of it toward Annapolis. However, we have our share of crackpots, i.e., the black helicopter crowd, the conspiracy nuts and on and on and on. You should see some of the stuff we got when I worked for a foundation near Capitol Hill.

I have family and friends who work or worked at the various intelligence agencies. They wouldn't have worked there if they suspected any shenanigans by our own government. Some of these people were operatives. I don't like to mention it as I don't want to seem like I am boasting. It is just a fact of life living in my community I live near FBI, IRS, Secret Service and CIA agents as well as NSA employees and so on. However, employees for the whole alphabet soup of government agencies live in my area.

Anyway, the e-mails don't always fly around election time. They always fly after a huge piece of controversial legislation has passed and depending on which side you believe, you are more likely to react. Now, many people claim Obama was sticking it to the "rich." However, some of these changes don't take place until 2013.

Here is a summary for most of the dates when the provisions go into effect:

The premium assistance credit will be available for years ending after Dec. 31, 2013.

The Small business tax credit is available for tax years beginning after Dec. 31, 2009.

The excise tax on uninsured individuals provision is effective for tax years beginning after Dec. 31, 2013.

The medical care itemized deduction threshold is effective after Dec. 31, 2012.

The small business qualified health plan offered through an exchange under a cafeteria plan is effective for tax years beginning after Dec. 31, 2013.

The additional hospital insurance tax on high-income taxpayers applies to remuneration received and tax years beginning after Dec. 31, 2012.

An employer with over 50 employees must offer minimal coverage or face a fine (tax) begins after Dec. 31, 2013.

The fee on health insurance plans is effective beginning on or after October 1, 2012.

The excise tax on high cost employer plans is effective for tax years beginning after Dec. 31, 2017.

The increase in tax on distributions from HSA or Archer MSA accounts (from 10% to 20%) begins after Dec. 31, 2010.

The tax on indoor tanning services is already in effect as of July 1, 2010 (thanks, Snookie for the heads up).

The FSA cap at $2,500 takes effect after Dec. 31, 2012.

The SIMPLE Cafeteria plan for small businesses is effective after Dec 31, 2010.

The expansion of the adoption credit/adoption assistance program begins after Dec. 31, 2010 and 2011 (There are a couple of dates in here to look out for, so pay attention).

The information reporting requirement on health insurance coverage is effective after Dec. 31, 2010.

The (silly) $600 reporting requirement begins after Dec. 31, 2011.

I left out a couple because there wasn't a deadline attached to them. I noticed that most provisions are after 2012. Obama 1st term expires January 20, 2013. Technically, most don't kick in until his first term expires so if he counts on only one term, he leaves a new administration to clean up the mess. It is much like what Bush did with the tax cuts back in the early 2000's. Most of them expire this year and now Democrats are looking at whether or not they should expire.

Point is, the Congress and each administration seems to leave it to the next bunch of suckers to figure out how to clean up their mess. I suspect the way Obama is headed, he seems headed home, at least in his mind.


CrowJD (talk|edits) said:

23 August 2010
When one of these firebreathers sends this stuff to me these days, I just tell them it's to pay for the Wall Street bailout. In a way, it's true. Do Americans really think that taxes can go down?

We spent 4 Trillion dollars to bail out bankers who were already rich. Obama and Bush both participated in this. Wall Street lobbyists cover the waterfront from Left to Right. This is the biggest theft in American history, it dwarfs anything Madoff did exponentially, and you the TP funded it, and your grandchildren will continue to pay for it, and your great-grandchildren.

None of these Wally Wallstreeters lost their houses, however, thousands of ordinary Americans continue to lose their houses, destroying the local tax base in the process. Crime goes up, expenses mount.

Biggest news I tell everyone is that the problems of states and cities will dwarf federal problems. We are in the early stages of a long drawn out process.

Snowbird (talk|edits) said:

23 August 2010
Crow, your 4 Trillion is about as accurate as the email on taxes that started all of this ...

TARP less costly, but not less controversial

"It has been largely expected that the any losses from TARP would mostly come from the bailouts of insurer AIG and the automakers, not necessarily from banks, many of which have already repaid taxpayer money."

Roughly, 250 banks have failed since 2008. Don't know if any bankers lost homes, but they sure lost investments.

CrowJD (talk|edits) said:

23 August 2010
TARP? I'm not talking about just TARP. I am talking about all the free money activity of the Frederal Reserve, "0%" loans from the Fed. that the average American can't get, Fannie and Freddie bailout (and more to come). I really don't think I'm too far off when I say 4 Trillion.

EDIT: I have to also say that this TARP was a red herring to begin with. That was a small slice of the theft. Now you are hearing that the banks and insurance companies are paying back the TARP. BULL.

How many lenders were willing to make loans to save these mega-banks? Only Buffet who pulled GE out of the fire. He's the only one who comes to mind.

There were no private lenders who offered to bailout Wall Street. There is no "paying back" to it.

The taxpayers should own these institutions outright since we were the ONLY lender to come forward to save them. There is really not an interest rate high enough you could compute for these banks to be paying the taxpayer....any rate was a gift, and a fraud on the public.

Snowbird (talk|edits) said:

23 August 2010
Crow, So you would nationalize all the banks. The only modern example I can think of nationalizing banks was France and it was an absolute disaster. Of course, you have the communist countries with national banks. Freddie and Fannie are good examples of government or quasi government financial institutions.

Yes, there are several ways that the Fed expands and decreases the money supply. At the moment, it is expanding the money supply and the Fed rate and discount rates are low ... so are mortgage rates at an all time low. You ought to read about the banking panics there were before the Fed and FDIC, I don't think you want to return to those days.

Death&Taxes (talk|edits) said:

23 August 2010
Clap if you believe.

OCNumberz (talk|edits) said:

23 August 2010
Natalie, unfortunately I can't find the sites that led me to this conclusion on W-2 reporting and withholding. Sometimes I get in the mood to research and I had done this earlier when I received the one Action posted to start this thread.

I searched some more this morning, and now find totally conflicting information, none of which confirms what I said about Withholding on Health Benefit amounts for employees. There seem to be lots of sites reassuring us that these HB amounts to be put on the W2 are NON TAXABLE. But, I don't see where they are getting their information. Kiplinger is one of them, and is a simple, easy-to-read summary; but for the skeptical, it doesn't leave me with wanting to necessarily believe that. Unfortunately, many of these sites look like information has been cut and pasted in from other sites...not researched! : (

This all starts with IRS Sec 6051(a) that calls for a 'written statement' to be given to the employee with itemized requirements. This is what we have come to know as the W-2. Now within Obama's PPACA HR 3590, there is Section 9002, which relates to changes to this 'written statement.' Basically, it's requiring reporting of an "aggregate cost..of employer-sponsored coverage...except.... Archer MSA...HSA...Section 125." I was hoping to find EXACT wording that would clarify my confusion, but I found that the section just amends an existing section...confusing!  : ( I found a link to a CPA here who confirms what I found:


So, the 'information' is to be shown on the W-2. But, who says WHAT reporting box is to be used and IF it will be considered as part of income, and, therefore, affecting WITHHOLDING?? It could then come off below in the Adjusted Gross Income section if other criteria is met, having the net effect of being Non Taxable.

The more I read, the more confused I am. I guess I'll just wait until the new 2011 Form W-2 and Instructions are released. I couldn't find one yet.  : ( Thanks for those helpful links!  : )

OCNumberz (talk|edits) said:

23 August 2010
FYI, Sec. 9002 is under this provision:

Title IX. Revenue Provisions

The word 'Revenue' would lead you to believe it's going to generate them some funds to work with. ; )

Natalie (talk|edits) said:

August 23, 2010
OC, maybe it would help to just kind of think about the implications of having health care included in income. People who receive social security benefits and work just up to the allowed annual maximum would no longer qualify to receive benefits. All calculations that rely on earned income would be affected, etc. Can you imagine the impact that would have on those in the lowest tax brackets -- more taxes and no EIC yet no more cash in the pocket?

Maybe it's in the revenue section because those who don't have coverage will have to pay a penalty.

OCNumberz (talk|edits) said:

24 August 2010
Natalie, although I'm not sure Obama has the financial background to make all this happen, I do think he's trying to level the playing field. When some receive wages ONLY in cash and report all of it, it doesn't compare with those who get benefits in addition to cash wages. What's the difference if one guy makes $50,000 and pays $10,000 out of his own pocket for health premiums and another makes $40,000 and lets his employer pay his health benefits for him? I remember back in the (late ?) 90's when those of us who paid our own insurance premiums got no DEDUCTION. It was phased in gradually over the years, and then we finally got to deduct 100% of it.

So, once all the 'apples' become 'oranges', 1040 Line 22 Total Income computations become more meaningful. All the IRS would have to do is change limits that rely on this number. By the length of Obama's bill, it doesn't look like he's concerned with how much work this will cause anybody. ;)

It could go either/any way...it will be interesting to see what happens come January.

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