OTHER TIMES THE ECONOMY CRASHED

It seems that everybody is talking about the economy. When we think of economic crises in America, two periods come to mind—the Great Depression and whatever it is we’re in the middle of right now. But the U.S. stock market has crashed more times than we’d like to admit. Historically, our economy has been brought to its knees by everything from greedy bankers to horse illnesses. So let’s take a deep breath and remember that ‘panics’ are just part of the American way of life.

1. The Panic of 1873: America Stops Horsing Around

During the late 19th century, the American economy relied on horses the way it depends on gas today. Horse’s unloaded cargo from ports, transported goods from city to city, worked the farms, supported the army, and served as the emergency vehicles of choice. Without them, the American workforce would have ground to a halt.

And that’s exactly what happened in 1872, when an estimated 99% of all horses in America contracted equine influenza. The highly contagious strain started in Canada and spread through New England to the South in a matter of months, leaving horses across the country too weak to stand and coughing uncontrollably. Street buggies stopped running, paralyzing commerce in the cities. Railroads were stymied because trains run on coal —coal that was hauled out of mines by horses. And as the horse flu spread, U.S. military troops had to go into battle on foot (they were fighting Apache Indians at the time). More tragically, a fire in Boston raged for three days because there were no horses to carry water. The flames destroyed more than 700 buildings, causing an estimated $73.5 million in damages and killing at least 20 people.

The “Great Epizootic,” as it was called, spiraled out of control in less than a year. At the height of the panic, as many as 20,000 businesses failed, a third of all railroads went bankrupt, and unemployment spiked to almost 15 percent. The economy took nearly a decade to recover. Ironically, nearly all of the horses recuperated by the following spring.

2. The Winter of 1886: When the Cows Don’t Come Home

During the second half of the 19th century, cattle ranches in the American West were thriving. From the Montana grasslands to the Texas prairie, ranches were attracting investors back East and across the pond in Europe. But by 1886, things were getting dicey. Overgrazing, coupled with a hot and dry summer had left the plains almost bare.

Then came the snow. Known as the “Winter of Death”, the following season saw one of the worst cold spells in recorded history. More than half the cattle in the West froze to death, unable to move in the thick snow. Ghoulish firsthand accounts describe the bodies of dead cows stretching for miles across the horizon. When the spring thaw and floods came, thousands of bloated corpses floated into the streams and rivers. Some ranchers quit the business entirely and didn’t even bother to round up their surviving cattle.

By the end of 1887, the disaster had wiped out more than half of the United States’ western cattle and debilitated the national economy. Most cattle investors went bankrupt, and thousands of cowboys were left unemployed. But more than anything, the winter of 1886 put an end to all those turn-of-the-century idyllic fantasies of open-range ranching in the Wild West.

3. The Panic of 1907: Captains of Industry to the Rescue!

The Panic of 1907 started the way many panics do, with a greedy capitalist. Multimillionaire Augustus Heinze, who had made his fortune mining in Montana, believed he had enough control over the copper industry to corner the market. With the help of several major banks, he concocted a scheme to buy up all the shares of United Copper. But Heinze had overestimated his prowess, and the scheme failed, bringing down Heinze, United Copper, the banks, and many, many stockholders. The debacle sent ripples of anxiety throughout the market, and investors started pulling their money out of banks altogether. After one of New York City’s biggest trusts went under, panic ensued, and the stock market collapsed.

At the time, there were no central banks in place, so the federal government had no means of bailing out businesses or injecting cash into the economy. It just stood by, idly waiting for a hero to save the day. Amazingly, one did.

James Pierpont Morgan, banker extraordinaire, rescued the American economy. He propped up many of the failing banks in New York by twisting the arms of other financiers, and he assuaged investors’ fears by backing up the market with his own vast cash reserves. Before long, Wall Street was on the mend.

The government also learned its lesson. With the panic resolved, it created the Federal Reserve, ensuring that it could buttress the economy during hard times. Since then, the government has taken a more active role in financial matters and relied less on the kindness of robber barons.

4. Whale of a Crisis: The Collapse of America’s First Oil Industry

During the early 19th century, America was one of the top oil-producing countries in the world. But it wasn’t petroleum the nation was exporting; it was whale oil. By the mid-1800s, the high-risk, high-profit business was the fifth-largest industry in the United States. At its height, the American whaling industry produced more than 10 million gallons of oil a year and sold it for $1.77 a gallon (about $35 per gallon today). Better still; an American fleet of 1,000 ships had exclusive access to the North Atlantic territories, which ensured profits.

What could have stopped such a juggernaut of an industry? For one thing, other sources of oil. In 1846, Canadian geologist Abraham Gesner developed a technique for distilling kerosene from petroleum, and within a few decades, kerosene had replaced whale oil as the most popular fuel for lamps. Another reason for the decline was that the whales were dying off. The enthusiastic slaughter throughout the 1800s drove some whale species to extinction and put others on the brink. With so few left to hunt, the cost of whaling became prohibitively expensive. The final blow to whalers came during the harsh winter of 1871, when the North Atlantic ice trapped and crushed the bulk of the American fleet.

Although American consumers didn’t suffer as the country switched from whale oil to petroleum, coastal towns in New England and the Mid-Atlantic languished, and shipbuilders and fishermen found themselves out of work. By the time of the Civil War, whaling ships had become so worthless that Union soldiers loaded a fleet of them with stones and sank them into Charleston harbor. The hope was to blockade the South from the port, but when the plan didn’t work, the ships were no great loss. America’s first oil industry had been tapped out.

So just hang on. We have been here before and I imagine that we will see problems again.

HOBBY WINNINGS

Q. Last year I was pretty lucky at golf. I actually won $2,800 in cash and about $4,000 in clubs, shoes, and golf clothes. Someone told me that this was taxable. Tell me it is not so.

A. Sorry, bad news. You must report your winnings on your income tax return.

Since this is most likely considered a hobby rather than a business, you would report winnings as “other income” on line 21 on your federal form 1040. If that’s the case, you can claim deductions – like entry fees, equipment, lessons, and other related expenses against your winnings but only if you itemize. This would be under the classification of “miscellaneous itemized deductions” on your Schedule A. Those miscellaneous itemized deductions are limited to those in excess of 2% of your AGI (adjusted gross income).

Additionally, if you treat golf as a hobby, your deductions are limited to the amount of your winnings. You also can’t carry excess deductions forwards or backwards.

In summary, the income is taxable and any deductions you have are only good if you itemize and if your miscellaneous deductions are greater than 2% of your adjusted gross income (found on the bottom of page one of your 1040).

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Ben Kingsley played compassionate accountant Itzhak Stern in the Oscar-winning 1993 Steven Spielberg movie, "Schindler's List." Stern was a real-life accountant who worked for German industrialist Oskar Schindler, played by Liam Neeson. The accountant typed and maintained the list of names of his fellow Jews who were hired to work in Schindler's factories, preventing them from being sent to the Nazi death camps. The real Itzhak Stern appeared in the movie, along with the surviving people on Oskar Schindler's real-life list.

HAPPY THANKSGIVING

Most of All

Thanksgiving Day brings to mind
the blessings in our lives
that usually go unnoticed:
a home that surrounds us
with comfort and protection;
delicious food, for pleasure
in both eating and sharing;
clothes to snuggle up in,
books and good entertainment
to expand our minds;
and freedom to worship our God.
Most of all we are thankful
for our family and friends,
those treasured people
who make our lives extra special.
You are part of that cherished group.
On Thanksgiving, (and every day)
we appreciate you.

Happy Thanksgiving
From Kopsa Otte

NEW ADDITION

We are excited to announce that
Megan had a beautiful little girl yesterday.

Adelynn Lauren
7lbs 8oz. and 20 inches long

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Jack Lemmon plays an accountant in the 1954 comedy "Phffft!" who decides to split with wife Judy Holliday after eight years of marriage. He met her while doing her taxes, and even after they break up and start seeing other partners, he continues to keep her as a client. The unusual title is supposed to be the sound of a marriage losing steam. Lemmon also played an accountant in Billy Wilder's 1960 comedy, "The Apartment," in which he lends his apartment to boss Fred MacMurray for assignations with girlfriend Shirley Maclaine. The movie was later the basis of the musical "Promises, Promises."

THREE TIPS IF YOU ARE OUTSOURCING PAYROLL

Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities.

Recent prosecutions of individuals and companies who - acting under the guise of a payroll service provider - have stolen funds intended for payment of employment taxes makes it important that employers, who outsource payroll, are aware of the following three tips from the IRS:

1. Employer Responsibility: The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward the tax payments to the third party to make the tax deposits, you - the employer - are the responsible party.

If the third party fails to make the federal tax payments, the IRS may assess penalties and interest. The employer is liable for all taxes, penalties and interest due. The IRS can also hold you personally liable for certain unpaid federal taxes.

2. Correspondence: If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business.

3. EFTPS: Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.

The IRS web site – www.irs.gov has more information on the responsibilities of employers outsourcing payroll, payroll service providers and EFTPS.

1099K NO WORRIES THIS YEAR

If you have been following my blog, you know that I have been concerned about the new 1099K compliance form that credit card and debit card companies are required to send out to show the amount of your credit and debit card sales.

This is new for 2011 and there are several issues that I have been concerned with. Items such as cash back, tips, refunds, sales tax etc.

Now we have seen the 2011 forms and there is good news. There is a line on the income form that says "amounts reported on 1099k" but then it goes on to say "for 2011 enter 0." In other word the IRS has not worked out the kinks in the reporting so this is not going to be an issue for the 2011 returns

WHEW!

I FORGOT TO FILE MY 2010 RETURN. WHAT DO I DO?

Q. I’m an independent contractor using 1099s. I have one w-2 for a small amount from 2010. I missed the tax deadline and did not file an extension. What kind of advice can you give me? I live in CA but need some general direction.

A. File. That’s my advice in a nutshell.

One of the biggest mistakes that I see in my practice is giving up early. After a mistake or a missed deadline, many taxpayers get a bit overwhelmed and put their head in the sand – or they figure that since they’ve already messed up, they’ll wait and fix it later. Don’t fall into that trap.

Keep in mind that penalties are based on the passage of time. If you fail to file on time, you can be subject to a penalty of 5% of the amount of unpaid taxes for each month (or part of a month) that your tax return is late, not to exceed 25% of your unpaid taxes. If you also fail to pay, you can be subject to a penalty of ½ of 1% (or .005%) of the amount of your taxes due for each month or part of a month after April 15 that the taxes are not paid, also not to exceed 25% of your taxes. So the longer you wait to fix the problem, the more that it’s going to cost you. And don’t forget about interest, which will be charged on top of penalties.

Also keep in mind that the IRS is much happier when you come to them, as opposed to the IRS coming to you. If forms 1099 (or other forms) have been filed on your behalf by the issuer, the IRS knows that you exist. They’re going to be waiting to hear from you.

Filing your taxes late isn’t the end of the world. It’s fixable. But the faster you fix it, the better.

WASHINGTON D.C. UPDATE PART #4

Here are some Social Security facts that you might be interested in:

- If you are under 55 and they made no changes to the law so you can expect to receive 77% of the benefits that you normally would be eligible for; if you are over 55 you should receive 100% of the benefits.

- To fix the program Congress needs to do one of two things, or some combination: Increase income from payroll taxes by 17% AND Reduce current benefits by 14%

- Social Security was never meant to provide 100% of the living expenses for retired individuals.

- 80 million baby boomers will be eligible for Social Security in the next 10 years.

- As a cost cutting measure, the Social Security Administration has quit sending out the annual Social Security Statements that you normally received around you birthday. They are going to be providing the information on line, but they can't figure out how they are going to do that. Make sure you keep your last statement.

- Right now if you retire at age 62 versus age 65 you will get 75% of full benefits. The decision depends on your individual circumstances.

- The Social Security system is not a "the more you pay in the more you get." The lower 30% get much more than they pay in and more than the higher 70%.

WASHINGTON D.C. UPDATE PART #3

The Commissioner of the Small Business and Self Employed division spoke on initiatives that the IRS is taking especially the new requirement to turn over your software files if you are audited.

The IRS now can request backup copies of your software.

This is going to give them access to entries not only to your books but also it will allow the auditor to look at adjustments and changes that were made to your books by looking at the audit trail.

This is concerning. Think about yearend adjustments that are made when cleaning up the books and then when doing tax planning. The auditor is going to see those changes and will be asking questions.

Here is an example: Assume the owner of the business takes money from the business during the year. The bookkeeper classifies this as a loan. After the yearend we are looking at the transactions and determine that this actually should have been a dividend. On March 1st of the subsequent year we either make an entry or reclassify the check. The auditor is going to know about the entry through the audit function and think that we are doing some "hankie pankie" post yearend planning.

Here are some of the questions and answers addressed by the panel from the IRS:

Q. Is this legal?
A. Yes. We have been to court several times and in all cases the judge has ruled that we should have access to the electronic books because they are the books of original entry.

Q. Could we turn off the audit function?
A. Yes but that would make us suspicious and would probably extend the audit. What are you trying to hide?

Q. What if the client uses QuickBooks as a checkbook and then the accountant takes the QuickBooks and makes entries. Can they still request?
A. Yes

Q. If the auditor has the books can he look at prior years? If he is looking at prior years he is supposed to open an audit for those years. Will they be looking at those years?
A. We have told the auditors during training not to look at prior years.

Q. HERE WAS MY QUESTION. Many clients have point of sale software that keeps track of transactions and inventory along with accounts receivable but is not downloaded into the general ledger. Is this type of software subject to review?
A. Yes. This is considered part of the books of original entry and is subject to request.

Q. What if the electronic books are kept by the accountant. Can they still be requested or subpoenaed?
A. Yes.

Because of this new initiative by the IRS, we are going to have to be more diligent in our recording into QuickBooks and other electronic software and be prepared to answer questions of why entries were made to change or to make journal entries after the end of the business year.

WASHINGTON D.C. UPDATE PART #2

Independent contractors are on the radar.

- There is a new initiative to have owners that are improperly treating workers to come forward and admit their mistake. The cost would be penalty of 10% of the payroll tax due for the prior 12 months. This is an effort by the IRS to allow businesses to get it right before they start a hard clamp down on worker classification.

- The IRS is now doing an extensive study sampling worker classification

- Estimates are that $64 billion is being lost in payroll taxes by misclassification.

- Hard lobbying in Washington to eliminate the Section 530 Relief.

- Efforts by the IRS to find employers that are improperly classifying workers:
~Independent research study on the issue
~New IRS specialist to help field auditors with the issue
~More exams
~1099/W-2 comparisons within individual industries
~Working with the states on classification. States are getting much more active.
~Flagging businesses with more than 5 1099's showing more than $20,000; thus indicating the use of independent contractors and workers.

WASHINGTON D.C. UPDATE PART #1

I am writing this from the National Tax Conference in Washington DC. This is a great conference because we hear from the "insiders" on what is happening, or not happening, with our tax policy. The Commissioner of the IRS even made a presentation. You may have seen his talk live on CSPAN, but come to think of it I would imagine not too many people would find his talk interesting so the ratings from CSPAN probably were not up there with Dancing With the Stars.

I wanted to share with you some highlights. This is really important because future tax policy is going to hit us right in our bank account. With taxes scheduled to increase substantially and with the economy waning the more we know the better we can plan.

Here is Part #1 of this 2 1/2 day conference:

+ Nobody can outguess what Congress is going to do. Even the “insiders” are concerned about the lack of direction.

+ We are fairly safe in planning for 2012. It is an election year so we won't see a lot of major changes. But in 2013 the Bush/Obama laws will be phased out and it is going to be a battle. If the past is any indication we may not know what the 2013 laws will be until late in the year. This is going to make planning in 2012 very important.

+ In 2011, we can take 100% write-off on certain leasehold improvements. This is scheduled to reduce to 50% in 2012 and then disappear in 2013. With the economy as it is we may see the ability to take 100% continue thru 2012- there is a chance but don't count on it. We are watching this for you.

+ The same is true with the write off of equipment. It reduces from $500,000 this year to $139,000 in 2012. This may also be extended. We are watching for you.

+ Many business owners are planning/hoping that Obama Care will be repealed. One of the Congressmen that spoke said that in his opinion it will not be repealed no matter who wins the White House. The Congressmen’s thinking is that it would take 60 Senators to overturn the bill and that will not happen.

+ The extremely high tax rates for people making over $200,000 are getting closer. With the exit of the Bush/Obama cuts; the Obama proposal to raise taxes on those wealthy people making over $250,000; and Obama Care laws tax increases for Medicare coming in 2014 rates could go as high as 43.4%. Plus we still have Social Security and State taxes ~ Ouch.

+ Everything is now political. It used to be a few years back that the leaders from the two parties would get together to work out solutions to problems. This does not happen anymore.

+ Estate planning is a mess. In 2011 and 2012 you can have an estate of $5 million and no estate tax. Any of the $5 million that you do not use you can pass to your spouse. In addition you can give $5 million. But in 2013 the estate drops to $1 million. Who knows how to plan? It may be time to consider gifting. We are watching for you. If you have an old will you should consider reviewing. It most likely is outdated.

+ We even had a session on the power of Social Media. If you are not using any type of Social Media, you better catch up with the times. People trust testimonials 90% but advertising 14%. Social media creates a testimonial "feeling."

+ Health Savings Accounts are a great way to reduce healthcare costs.

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Danny Glover played bow-tied accountant Henry Sherman in Wes Anderson's 2001 comedy, “The Royal Tenenbaums” about an eccentric family of upper-class misfits. Besides doing the accounting, Henry also romances the matriarch of the family, Etheline Tenenbaum, played by Anjelica Huston. Other members of the all-star cast included Gene Hackman, Ben Stiller, Gwyneth Paltrow, Bill Murray, Luke Wilson and Owen Wilson, along with the voice of narrator Alec Baldwin.

11.11.11

FLAT TAX QUESTION

Q. Hello Larry,
Not sure if you remember me, but I attended York College and had a few of your classes in '03-'05. With all of this "flat tax" talk by Presidential candidates right now, all I could think about was my classes where you would talk about that proposed flat tax that you said if it ever became law, instead of putting you out of business you'd have more business than before because it was so complex. Anyways, I was just curious what you thought about the current suggestions (Cain's 9-9-9 and Perry recent proposal-20% or normal, etc.). Thanks for listening! ~ Samuel

A. Sam, sure I remember you. I hope all is going well. Looks like a nice accounting firm that you are with.

Regarding the 9-9-9 and Perry’s 20% Alternative I don’t see any way that those plans are anything other than campaign rhetoric. To start with, tax laws must originate in the House Ways and Means Committee not with the President. And even with that, as people start studying the plans they realize that there is not enough money in the plan to make it work.

Oh yea… I forgot … “you can take away all the deductions but don’t take away my ________________ (fill in the blank -depreciation/charitable/tax exempt interest/child tax credit/medical expense etc.)

And don’t forget what I said in class, “people want fair and simple, but in reality that does not exist. Something can be simple but usually it is not fair so to make it fair we have to make it more complex.” Law of the universe.

Keep in touch.

A NEW CHRISTMAS TRADITION

I received this from someone and thought maybe you might be interested.

Christmas 2011 -- Birth of a New Tradition

As the holidays approach, the giant Asian factories are kicking into high gear to provide Americans with monstrous piles of cheaply produced goods -- merchandise that has been produced at the expense of American labor.

This year will be different. This year Americans will give the gift of genuine concern for other Americans. There is no longer an excuse that, at gift giving time, nothing can be found that is produced by American hands. Oh.... Yes there is! It is time to think outside the box, people. Who says a gift needs to fit in a shirt box, wrapped in Chinese produced wrapping paper?

Everyone -- yes EVERYONE gets their hair cut. How about gift certificates from your local American hair salon or barber?

Gym membership? It's appropriate for all ages who are thinking about some health improvement.

Who wouldn't appreciate getting their car detailed? Small, American owned detail shops and car washes would love to sell you a gift certificate or a book of gift certificates.

Are you one of those extravagant givers who think nothing of plunking down the Benjamins on a Chinese-made flat-screen TV? Perhaps that grateful gift receiver would like his driveway sealed, or lawn mowed for the summer, or driveway plowed all winter, or games at the local golf course.

There are a gazillion owner-run restaurants—all offering gift certificates. And, if your intended isn't the fancy eatery sort, what about a half dozen breakfasts at the local breakfast joint.

Remember, folks this isn't about big National chains—this is about supporting your home town Americans with their financial lives on the line to keep their doors open.

How many people couldn't use an oil change for their car, truck or motorcycle, done at a shop run by the American working guy?

Thinking about a heartfelt gift for mom? Mom would LOVE the services of a local cleaning lady for a day.

My computer could use a tune-up, and I KNOW I can find some young guy who is struggling to get his repair business up and running.

OK, you were looking for something more personal. Local crafts people spin their own wool and knit them into scarves. They make jewelry, and pottery and beautiful wooden boxes.

Plan your holiday outings at local, owner operated restaurants and leave your server a nice tip.

And, how about going out to see a play or ballet at your hometown theatre. Musicians need love too, so find a venue showcasing local bands.
Honestly, do you REALLY need to buy another ten thousand Chinese lights for the house? When you buy a five dollar string of lights, about fifty cents stays in the community.

If you have those kinds of bucks to burn, leave the mailman, trash guy or babysitter a nice BIG tip.

You see, Christmas is no longer about draining American pockets so that China can build another glittering city. Christmas is now about caring about US (We the People), encouraging American small businesses to keep plugging away to follow their dreams. And, when we care about other Americans, we care about our communities, and the benefits come back to us in ways we could not imagine.

THIS could become the new American Christmas tradition!!

TAXING YOUR AIRLINE TICKET

You may soon be paying more in taxes than the cost of the airline ticket -

The Obama administration wants to add a giant tax to your next airline ticket. The government is proposing a $100-per-takeoff tax for passenger and cargo flights to reduce the federal budget deficit. And Congress is considering increasing the $2.50 per passenger security tax to $5 and then raising it again to $7.50 by 2017. The airlines currently pay up to 17 different taxes to government entities (actually you pay in the form of higher ticket prices). This one might be killing the goose that lays the golden egg. Can you imagine buying a ticket from Omaha to Chicago for $79 and then paying taxes of $200 on top of that. The government taxes airlines more than they tax sin (alcohol and tobacco). Let's hope that this tax proposal dies a fast death in congress.

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

Joe Pesci plays accountant Leo Getz, who is protected by cops Danny Glover and Mel Gibson after he become a witness against his money-laundering clients in three of the four "Lethal Weapon" action-comedy movies. Leo continually gets his bodyguards in trouble, but he seems to be having a lot more fun than doing the books. By the final movie, he went through a career change and became a private detective.

SOCIAL SECURITY DISASTER

Twenty one years ago, I did a tax seminar and my main theme was not income tax savings but rather Social Security savings. I was concerned way back then about the financial feasibility of the program. The point is that the Social Security problem is not something that is new. We knew way back then it was projected that by 2025, there would be two workers for every worker on Social Security.

We started doing everything we could to avoid paying in because the system is not set up so that the more you pay in the more you get out.

Unfortunately, I was correct way back then. It was political suicide to change the system so the politicians just kicked the can to the next guy/girl in office.

The following article is a really good summary:
Politicians who are principled enough to point out the fraud of Social Security, referring to it as a lie and Ponzi scheme, are under siege. Acknowledgment of Social Security's problems is not the same as calling for the abandonment of its recipients. Instead, it's a call to take actions now, while there's time to avert a disaster. Let's look at it.

The term “Ponzi” was derived from the scheme created during the 1920s by Charles Ponzi, a poor but enterprising Italian immigrant. Here's how it works. You persuade some people to give you their money to invest. After a while, you pay them a nice return, but the return doesn't come from investments. What you pay them with comes from the money of other people whom you've persuaded to "invest" in your scheme. The scheme works so long as you can persuade greater and greater numbers of people to "invest" so that you can pay off earlier "investors." After a while, Ponzi couldn't find enough new investors, and his scheme collapsed. He was convicted of fraud and sent to prison.

The very first Social Security check went to Ida May Fuller in 1940. She paid just $24.75 in Social Security taxes but collected a total of $22,888.92 in benefits, getting back all she put into Social Security in a month. According to a Congressional Research Service report titled "Social Security Reform" (October 2002), by Geoffrey Kollmann and Dawn Nuschler, workers who retired in 1980 at age 65 got back all they put into Social Security, plus interest, in 2.8 years. Workers who retired at age 65 in 2002 will have to wait a total of 16.9 years to break even. For those retiring in 2020, it will take 20.9 years. Workers entering the labor force today won't live long enough to get back even half of what they will put into Social Security. Social Security faces Ponzi's problem, not enough new "investors." In 1940, there were 160 workers paying into Social Security per retiree; today there are only 2.9 and falling.

Some politicians claim that Social Security has a huge trust fund and is in good health. An uniformed public and a derelict news media don't challenge that lie. Back in August, politicians were in a tizzy over raising the federal debt limit. In an effort to frighten seniors, President Barack Obama said in a CBS interview, "I cannot guarantee that those checks go out on Aug. 3 if we haven't resolved this issue, because there may simply not be the money in the coffers to do it." Here's how we reveal the trust fund lie: According to the Social Security Administration, it has a trust fund with $2.6 trillion in it. If those were real assets, then the Social Security Administration could have mailed checks out regardless of what Congress did about the debt limit. The reality is that the Social Security trust fund consists of government IOUs that have no real value at all and probably are not even worth the paper upon which they are printed.

I believe that a person who is 65 years old and has been forced into Social Security is owed something. But the question is- Who owes it to him? Congress has spent every penny of his Social Security "contribution." Young workers have no obligation to be fleeced in order to make up for the dishonesty and dereliction of Congress. The tragedy is that most seniors just want their money and couldn't care less about whom Congress takes it from.

U.S. SOCIAL SECURITY GOES "CASH NEGATIVE"

Social Security will add $46 billion to the U.S. budget problem this year, a figure that would increase to $267 billion if Congress adopts President Barack Obama's proposal to expand this year's tax break into 2012, according to the system's trustees. Congressional leaders of both parties are avoiding the issue, fearful of angering senior citizens and their advocates.

SOCIAL SECURITY BENEFIT INCREASE FOR 2012

Social Security benefits will go up 3.6% in 2012...the first hike in two years. The earnings limits will be heading up, too. Individuals who turn 66 in 2012 will not lose any benefits if they earn $38,880 or less before they reach that age. Individuals between ages 62 and 66 by the end of 2012 can make up to $14,640 before they lose any benefits. There is no earnings cap once a beneficiary turns 66.

For more informaiton on Social Security: Click Here

ACCOUNTANTS IN THE MOVIES

In Hollywood, accounting can seem like a pretty glamorous profession, or not.

The opening sequence in the 1983 comedy, "Monty Python's The Meaning of Life," is a short movie called "The Crimson Permanent Assurance," in which a group of beleaguered British chartered accountants decides to fight their corporate overlords by turning into pirates and sailing off on the high seas of accountancy. "It's fun to charter an accountant and sail the wide accountant-sea," the pirates sing.

CHARITABLE CONTRIBUTIONS FROM IRAS

Year-end planning Tip: Individuals age 70 1/2 or older should consider making charitable contributions from IRAs

This year may well be the last chance for taxpayers age 70 1/2 or older to take advantage of an up-to-$100,000 annual exclusion from gross income for otherwise taxable individual retirement account (IRA) distributions that are qualified charitable distributions. Such distributions aren't subject to the charitable contribution percentage limits and aren't includible in gross income. This tax advantage will not be available for distributions made in tax years beginning after Dec. 31, 2011.

This is a great opportunity for taxpayers that do not have enough itemized deductions to file the “long form.” For married couples over age 65 the standard deduction is $13,900 and for singles it is $7,250.

Where this becomes a great planning tool is when the taxpayer is in the zone where they are paying tax of Social Security Benefits and making charitable contributions that they effectively can’t deduct because they are taking the standard deduction.

For example:
Bonnie and Clyde are both over age 70 ½. They have interest and other income of $20,000 and are taking $10,000 per year from their IRA. In addition they have Social Security benefits of $20,000. Bonnie and Clyde got religion after they retired from the banking business and annually make charitable contributions of $7,500.

If they draw money from their IRA and put it in their checking account and then make a charitable contribution their total federal and state tax is $1,703.

On the other hand if they direct their IRA administrator to take the IRA money of $7,500 and give it to their charity their tax drops to $176.

There is a saving so $1,527. Pretty cool… easier than robbing a bank.

If you need any more information on this let me know. Remember, unless Congress renews this tax strategy 2011 is your last chance. You might want to think about doing your 2012 contribution in 2011 to beat the expiration deadline.