Taxes, National Debt, and, Oh – More Taxes

Why only the private sector can repay our National Debt

There has been much debate about increasing taxes to help balance the budget and repay our sky-rocketing National Debt.  The debate centers on the fact that even though annual federal, state and local tax revenues have increased by 18% over the last decade, this increase offsets a mere quarter of the same period’s 71% rise in government spending.  Today, nearly 50 cents of every dollar spent by the government is borrowed. 

Regardless of the fiscal path chosen, tax-debaters should keep two facts in mind as they seek a solution: 1) Tax revenues must increase (or government spending decrease) by at least 50% simply to balance the budget, and 2) tax revenues must increase (or government spending decrease) by substantially more than 50% BEFORE the U.S. can begin to repay the record $15.7 Trillion (over $50,000 for each man, woman, and child in the US) it has borrowed so far. 

Another point often missed by those debating this issue is the fact that only taxes generated by private enterprise can repay our Debt.  Taxes paid by public sector employees (and the ever-growing number of those working for government contracts) cannot. 

Why?  “Taxes” on those who receive government funding act as a decrease in government spending – not a “tax” in the traditional sense.  It’s like someone giving you a dollar and you handing them back 50 cents.

Why is this important?  Even if taxes on government salaries and funding were increased to 100%, the total “tax” collected would simply make government spending equal zero.  Beyond freeing up taxes paid by the private sector, which could now be applied to the debt, public sector taxation can do nothing – ABSOLUTELY NOTHING – to repay our National Debt.  Only taxes paid by vastly growing the private sector (and shrinking government) will give us any hope of repaying one thin dime of our collective debt.

How can this be?  Government spending nearly always generates less in tax revenue than the amount spent (unless the combined savings rate and import rate is negative). 

For example:  The government borrows and spends $1,000.  The current approx tax rate, saving rate, and import rate are 15%, 3.7% and 3.8% respectively.  The result: GDP increases by $4,476, savings by $161, and $166 is sent to other countries in the form of exports purchased.  Unfortunately, however, only $671 in new taxes are generated.  Who repays the $329 net-increase in the National Debt? 

Increase the tax rate to 60%, every $1,000 of new government spending still digs the hole deeper by over $100. 

If the government can’t recoup more than it spends in a given year (such as with 100% tax on all government spending or making its spending equal zero), any money that ultimately repays our $15 trillion National Debt must come from revenues generated by private enterprise.
 
Higher Taxes are Here: Those who desire higher taxes, however, needn’t worry – they’re already here!  Health Care Reform (via The Patient Protection and Affordable Care Act of 2010) will raise $450 billion in new tax revenues, partially offsetting its estimated $900 billion cost.  Below is a list of tax changes that have already occurred and those you can look forward to next year.

2010:

2011:

2012:

2013:

Today, I put on my economist cap and discussed taxation’s relationship to our National Debt.  I also shared a few often-overlooked tax increases brought about by Health Care Reform.  Unfortunately, the employer tax rules going into effect in 2014 are too complex to relate in a single article.  As always, if you need assistance with a particular tax issue, please feel free to contact our office to consult with a tax professional.

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S-Corporation: The Good, the Bad, the Scary (Part 1)

Some time ago I started writing a series of columns discussing potential tax problems posed by various business structures.  “Avoiding the Hobby Tax Trap” presented the danger, consequences, and how to avoid having a business reclassified as a hobby by the IRS.  “Business Owners: Lower your Red (Audit) Flags” warned sole proprietors of three audit triggers commonly found on their tax returns.  One most recent column, “Home Office Deduction Danger” discussed the (often overlooked) requirements for claiming the Home Office deduction. For those interested, these articles are available at both http://www.journal-news.net and http://hbsbusiness.com.

Today I will begin a discussion on S-Corporations.  The basics and their potential benefits for owners.  But first a word of warning: Business structures are highly complex.  Any single article (or series of articles) will barely scratch the surface.  The tax benefits provided by a particular business structure at one end of the business life-cycle can quickly become a major tax-headache at the other.  Before choosing a particular structure, research your options and obtain professional assistance from both an attorney and tax professional. Then, make this important decision yourself.  It is, after all, your business.

Overview: S-Corporations are “elected” business structures for tax purposes.  One does not file with the Secretary of State to become an S-Corporation.  Instead, an eligible domestic (US based) corporation of other eligible entity (for example an LLC) files Form 2553 to elect to be treated as a S-Corporation for tax purposes. 

An S-corporation can have up to 100 eligible “shareholders.”  Generally, only US citizens or resident aliens, estates, and certain trusts and estates can be shareholders.  S-Corporations are also only allowed to have one class of stock.

Potential Benefits:  There are several benefits S-Corporations can provide to owners.  A few are listed below.

Today’s column has discussed the potential benefits of S corporations.  Later columns will visit the many tax-challenges that accompany these benefits.  As always, this article or any article does not constitute tax advice.  If you would like to speak with a tax professional, please feel free to contact our office to make an appointment.

 

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How to link internally – Optimization of Internal Linking

Internal linking refers to the links pointing to other pages within your site. Its importance has not valued as much as external links. But well-built internal links help your site rankings in search engine result pages (SERPs) as well as provide a good user experience. Also, its great advantage is that you have the entire control of how to manage them.

Use these tips to write the most efficient internal links both for your site visitors and the search engines.

1) Make the homepage navigation menu as text links. Images, DHTML, and JavaScript navigation menus look fancy and artsy. But that’s all about looks and the search engines don’t really know how to interpret them. The search engines “read” web pages rather “look” at them. If you’d like to keep your attractive image and dynamic menu effect, make sure that you have text links to those somewhere in the homepage.

2) Use descriptive anchor texts. Make them different from on another even though they point to the same page.

Anchor text is the visible clickable text in a hyperlink. Anchor texts are considered as keywords that user would use to get to the page. Therefore, it’s an advantage when the anchor text describes the content of the page. That is, use the keywords and phrase that would represent the page best.

When you refer to your homepage, give different anchor texts to each link instead of saying ‘Homepage’ all the time.

3) Use nofollow attribute to control which links are more important compared to others. When you add “rel=nofollw” to a hyperlink, the major search engines including Google, Yahoo and MSN don’t count the link in search engine rankings. (There is a debate on Google’s actual behavior on this. It is said Google may still count it a little, or soon it will if not now.)

Why to use “rel=nofollow”?

4) Make the main pages of your website accessible by one or two clicks from your home page. Make them easy to spot by visitors as well. The more clicks it needs, the less important it’s considered by search engines. The more clicks it needs, the more chances there are for users to leave your site. This is user-friendly and search engine friendly design.

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Develop a Profit Paradigm, Pillar Two: Make a Profit

Peter Richman stated it succinctly in his book, The Insider’s Guide to Growing a Small Business when he said: “Profit is the only objective measure of your company’s performance.”  If this is a fact, and it is, then your business’s Profit & Loss Statement is its scorecard – showing whether you are winning or losing the game of business. 

No one starts a business intending to lose.  Still, most business owner’s scorecards show just that – most are losing at the game of business.  Why do half of all new businesses close within the first three years?  Lack of profit.  Even those who beat these odds by surviving are not achieving their business potential.  Far from it – the average business “survivor” will earn 18% less than they would performing the same job for someone else.  Why?  Lack of profit.

If you want to win at the game of business, and win BIG, you must MAKE A PROFIT.  You must embrace your business “scorecard” and develop what I call a “Profit Paradigm.”  This article will explain what it means to develop this “Profit Paradigm.”  It will also share some items that will prepare you for your climb up the Second Pillar of Business Success:  Making a Profit.

The Profit Paradigm:  Having a Profit Paradigm means that you embrace two key facts about your business:

First, you are the owner.  You create the culture, define what is important, and develop the systems (steps and procedures) to ensure current customers are happy and new customers are obtained.  You are also the leader who guides your business to success or failure.  There is no way around it. You are responsible – the buck stops with you. 

Second, the only effective way to manage your business’s performance is to measure how profitably it makes current customers happy and gathers new customers.  Embrace, internalize, and live these two business-facts and you are on your way to developing Profit Paradigm.  You are ready climb the Second Pillar of Business Success: Make a Profit.

Before we begin our ascent, however, please take a few moments to consider these three important facts:

Learn about the different types of “profit” and the one your business must earn.

This article has helped prepare you for the Second Pillar of Business Growth, Make a Profit by sharing the importance of developing a Profit Paradigm.  Learn more about Growth Strategies and the Five Pillars of Business Success.

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How to link internally – Optimization of Internal Linking

Internal linking refers to the links pointing to other pages within your site. Its importance has not valued as much as external links. But well-built internal links help your site rankings in search engine result pages (SERPs) as well as provide a good user experience. Also, its great advantage is that you have the entire control of how to manage them.

Use these tips to write the most efficient internal links both for your site visitors and the search engines.

1) Make the homepage navigation menu as text links. Images, DHTML, and JavaScript navigation menus look fancy and artsy. But that’s all about looks and the search engines don’t really know how to interpret them. The search engines “read” web pages rather “look” at them. If you’d like to keep your attractive image and dynamic menu effect, make sure that you have text links to those somewhere in the homepage.

2) Use descriptive anchor texts. Make them different from on another even though they point to the same page.

Anchor text is the visible clickable text in a hyperlink. Anchor texts are considered as keywords that user would use to get to the page. Therefore, it’s an advantage when the anchor text describes the content of the page. That is, use the keywords and phrase that would represent the page best.

When you refer to your homepage, give different anchor texts to each link instead of saying ‘Homepage’ all the time.

3) Use nofollow attribute to control which links are more important compared to others. When you add “rel=nofollw” to a hyperlink, the major search engines including Google, Yahoo and MSN don’t count the link in search engine rankings. (There is a debate on Google’s actual behavior on this. It is said Google may still count it a little, or soon it will if not now.)

Why to use “rel=nofollow”?

4) Make the main pages of your website accessible by one or two clicks from your home page. Make them easy to spot by visitors as well. The more clicks it needs, the less important it’s considered by search engines. The more clicks it needs, the more chances there are for users to leave your site. This is user-friendly and search engine friendly design.

Source


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Health Reform Passes – Penalties are “Taxes”

In the Supreme Court’s 5-4 decision allowing most of the Affordable Care Act to stand, Justice John Roberts interpreted “fees” levied on individuals who choose not buy something (in this case health insurance) as a tax and not a penalty.  If such a fee is, in fact, a tax (and not a penalty), Justice Roberts reasoned, it falls within the scope of congress’s constitutional authority. 

Although such an interpretation may have profound legal and social implications, those of us in the tax profession are waiting to see if the IRS shares Justice Robert’s sentiment: Will this “penalty/tax” be a deductible business expense or a nondeductible penalty?  Many taxes such as the employer’s share of social security and Medicare are deductible.  Penalties for a violation of law or legal “mandate,” however, are generally not.

Professionals who had taken a wait-and-see posture regarding the Act’s constitutionality are also starting to dig into the details of the Affordable Care Act.  This article will share a few uncovered details that may impact you and/or your business in 2013.  It will also discuss the penalty/tax scheduled to begin in 2014.

2013

2014: The Penalty/Tax Kicks In:

This article has highlighted a few of the major tax changes created by the Affordable Care Act for 2013 and 2014.  This article (or any article) should not be relied upon to make tax or financial decisions.  If you would like assistance regarding a particular tax issue or have a question regarding how Health Care Reform may impact you and/or your business’s tax obligations, please feel free to contact our office to consult with a tax professional.

 

 

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WordPress Size of Post Box – Length of Editor Box

I was a little annoyed by the tiny editing box of WordPress admin ‘Write’ and ‘Manage’ pages. Although I got used to its smallness, I thought I would give it a try to figure out and looked into the PHP script ‘post-new.php’. And I realized that it looked like it’s something that a user can easily configure through WordPress admin interface.

I looked at the ‘Settings’ page. There it was! Settings for ‘Writing’.

I just clicked it and changed to the value of ‘Size of the Post Box’ to 25. That will definitely satisfy me!

WordPress Size of Post Box, Length of Editor Box

I should start to check out Settings page more carefully as I’m one of those people who are too busy or too lazy(?) to read the long WordPress manual. I think I can figure out a lot of things just by checking out admin pages including Settings. BTW, I really appreciate WordPress that it has made blogging so easy!

By TeMc, September 23, 2009 @ 5:08 am

Oh my god, that was só incredibly simple.

Thanks a lot for that tip, I didn’t eve think of checking the Writing-settings.
I was almost considering editing core files.

Thanks again :)

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S-Corporations Loss-Deduction Danger

In an earlier column, “S Corporations, the Good, the Bad, the Scary” I provided an overview of S Corporations and discussed several potential benefits of operating a business as an S Corporation. Today, we will continue our discussion of S Corporations by sharing a common pitfall that can land shareholders in hot water with the IRS.  The Pitfall: deducting losses on their individual return to which they are not entitled.

Before we continue, however, please consider these words of warning: S Corporation taxation is highly complex.  Any single article (or series of articles) will barely scratch the surface.  This article is for informational purposes only and does not constitute tax advice. 

S Corporation Losses are Limited: S Corporations are considered “pass through” entities for tax purposes.  Each shareholder’s share of profits, losses, and other items are generally not taxed at the entity level.  Instead, each shareholder receives a form, called a K-1, from the corporation showing their share of items that may (or may not) impact their individual return.  Unfortunately, preparing the shareholder’s tax return is seldom as simple as copying the K-1 information onto their return.  Such “copy and paste” tax preparation can result in serious mistakes.  One of the most common mistakes is deducting S Corporation losses that exceed shareholder “basis.” 

What is Shareholder Basis? A simplified way to view basis is to think of an investor buying a share of stock.  If they pay $50 for a share of company X, they have a “basis” of $50 in that stock.  They cannot lose more than the $50 paid for the stock.  The same is true for S Corporation investors – they cannot lose more than the amount “invested.”

Calculating an S Corporation shareholders “investment” (basis), however, is much more complex.  Because S Corporations are pass-through entities, a shareholder’s basis is fluid and constantly changing. 

To determine stock basis we start with the purchase price and add in chronological order of occurrence:

We must also subtract:

This “basis,” however, cannot be negative.  Once basis reaches zero, corporate losses cannot be deducted on the shareholders return.  Instead, they must be carried forward until the shareholder obtains the positive basis needed to deduct them. 

IRS Audit Target:  The frequency of basis-loss errors, combined with an improved ability to cross-reference K-1 and individual returns has resulted in increased IRS scrutiny.  The best way to avoid this scrutiny is to avoid these three common reasons basis-loss errors are made:

This article has discussed the potential pitfalls of deducting S Corporation losses on your individual tax return.  If you would like to speak with a tax professional, please feel free to contact our office to make an appointment.

 

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Overall RatingNo Rating
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WordPress Size of Post Box – Length of Editor Box

I was a little annoyed by the tiny editing box of WordPress admin ‘Write’ and ‘Manage’ pages. Although I got used to its smallness, I thought I would give it a try to figure out and looked into the PHP script ‘post-new.php’. And I realized that it looked like it’s something that a user can easily configure through WordPress admin interface.

I looked at the ‘Settings’ page. There it was! Settings for ‘Writing’.

I just clicked it and changed to the value of ‘Size of the Post Box’ to 25. That will definitely satisfy me!

WordPress Size of Post Box, Length of Editor Box

I should start to check out Settings page more carefully as I’m one of those people who are too busy or too lazy(?) to read the long WordPress manual. I think I can figure out a lot of things just by checking out admin pages including Settings. BTW, I really appreciate WordPress that it has made blogging so easy!

By TeMc, September 23, 2009 @ 5:08 am

Oh my god, that was só incredibly simple.

Thanks a lot for that tip, I didn’t eve think of checking the Writing-settings.
I was almost considering editing core files.

Thanks again :)

Source


Overall RatingNo Rating
ProfessionalismNo Rating
Top QualityNo Rating
Great BenefitsNo Rating