It’s hard to hang a tax break on a thong

Repeat after me: Just Because You Wear It For Business Doesn’t Make It Deductible

I want my small business clients to write off every expense they’re entitled to. Supplies, business travels, meals, conferences–we take everything that’s allowed.

I get very skeptical, though, when they start telling me how much they had to spend on business-related clothes. The reason: IRS has been steadfast, and rung up lots of Tax Court wins, in disallowing deductions for wardrobe and makeup.

IRS picked up another win in 2011, nailing former Columbus, Ohio TV anchor Anietra Hamper for almost $20,000 in back taxes and penalties, as the New York Daily News reported in its usual understated manner.

Hamper saved receipts. She kept the clothes she wore on-air in a separate room in her house. None of it mattered. Because the clothes (and other items such as contact lenses, makeup, and teeth whitening) were useful in daily life, they weren’t deductible. Trying to also take deductions for such items as gym fees, bedding, jewelry, and thong underwear probably didn’t help her case.

Most of us can wear our business clothes in social circumstances, so we don’t get a writeoff. On the other hand, if I ever have Steven Tyler as a client, I guarantee you that we’ll deduct the boas he wears on-stage. Maybe some of his plastic surgery also–I mean, that can’t have any useful social benefit, can it?

0

Rick Perry launches class warfare on the poor

In case you missed Governor Perry’s speech as he announced he was running for President, he made several references to lowering taxes while at the same time declaring, “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.”

Wow.

The reason that many households don’t pay any federal income tax is because their incomes are so low that they are simply exempt. If you don’t want to pay any income tax either, here’s how you can do it: Be part of a couple that earns less than $26,400 and has two children. But you’ll still be paying Social Security and Medicare tax of 7.65% of your wages, plus all the other taxes–gas tax, property tax, sales tax (in most states) etc.–that Americans are subject to.

Does that sound like a good financial trade compared to your life today?

Ruth Marcus does a good job here in the Washington Post of breaking it all down.

So Perry thinks it’s an “injustice” that some of the lowest-earning Americans don’t have a federal income tax burden. And if as president he raised taxes on the poor, who would that benefit?

Rick Perry, taking us from the War on Poverty to the War on The Poor.

0

The rich are different from you and me: they pay less taxes

Think you pay too much in taxes compared to the ultra-wealthy?

Guess who agrees with you: Warren Buffett.

In this New York Times op-ed piece, Buffett points out that people who make most or all of their money from investments may pay only 15% in federal income tax, and that overall federal taxes on the wealthiest 400 Americans has dropped by more than one-quarter in the past 20 years. This, on people with incomes averaging more than $227.4 million apiece.

warren buffett The rich are different from you and me: they pay less taxesBuffett himself paid $6,938,744 in federal taxes last year–only 17.4% of his taxable income, and a lower percentage than everyone else working in his office, including his secretary.

“I would leave rates for 99.7 percent of taxpayers unchanged…bur for those making more than $1 million…I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more–there were 8,274 in 2009–I would suggest an additional increase in rate,” says Buffett. “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”

Couldn’t agree more.

0

Three ways the budget deal is an underhanded scam

The so-called ‘compromise’ on raising the federal debt ceiling debt ceiling is fine if you’re not worried about being able to keep your job, don’t think you’ll need Medicare benefits someday, and live in a state that can raise all of the revenue it needs. For the rest of us, here are three ways the deal is bad social and tax policy:

–No extension of emergency unemployment benefits.
Fully 3.8 million people have received benefits after being out of work more than 26 weeks; these extended benefits are now set to end on December 31–and anyone who gets laid off after July 1 will get no more than 26 weeks of unemployment under the current regimen. Don’t ask me how eliminating around $60 billion of consumer spending on groceries, clothes, rent and other necessities is supposed to be good for the economy.

–Cuts in Medicare benefits stay on the table. The deal requires Congress to eventually find another $1.5 trillion in long-term budget cuts. Senators Tom Coburn (R-OK) and Joe Lieberman (I-CT) (about as scary a duo as you could want to encounter in a dark alley of regressive social policies) have floated a proposal to cut $600 billion from Medicare spending. It would increase Medicare premiums as well as deductibles and co-pays and raise the age at which you would first qualify for Medicare. Appallingly, President Obama backed such changes during the so-called compromise negotiations in July.

–State funding and programs remain under attack. Since states get about one-third of their funding directly or indirectly from the federal government, federal cutbacks will tend to cascade down to the state level, where the programs that benefit citizens are carried out. Road programs, education, public assistance, and Medicaid cuts could be coming to a town near you. Meanwhile any efforts at simplifying the tax code or closing egregious loopholes get kicked down the road yet again.

0

IRS backs off from challenging political heavyweights

Should big political donors pay gift tax? IRS won’t say

Earlier this year the story broke that the IRS had notified five bigfoot political donors that they could owe gift taxes on secret contributions made to nonprofit political advocacy groups which then shuttle the money over to political campaign efforts. The New York Times weighed in with an editorial, saying, “The Federal Election Commission should be policing some honest disclosure here, but it has abdicated its responsibility. So it is commendable that the tax agency has the will to enforce existing law, particularly if it puts some caution in the minds of donors preparing to flood the next elections with secret money.”

Eh, never mind.

This month the IRS did a rarely-seen bureaucratic backbend, dropping any audit programs aimed at bigwig political moneybags. In a three-paragraph memo, an IRS deputy commissioner said, “This is a difficult area with significant legal, administrative, and policy implications with respect to which we have little enforcement history.”

Translation: IRS is backing off, and another barrier is removed to a 2012 flood of political advertising beyond anything we’ve ever seen. Did the agency come under political pressure? Who knows. But when Senator Orrin Hatch says in a statement, “The decision today ensures that the IRS remains free from even the hint of undue political influence,” does it make you think that maybe there was some political influence?