INCOME COMPARED TO THE NATIONAL DEBT

To give you some prospective on how large the national debt is: Net farm income in the USA was $98.1 billion in 2011 (i.e., gross income less expenses), up +59% in the last 2 years. The $98.1 billion was an all-time record, exceeding the $87.4 billion earned in 2004 (source: Department of Agriculture).

Now let’s compare that to the national debt.  If you want to get really concerned look at the debt clock at http://www.usdebtclock.org/

As I write this on Saturday March 31, 2012 at 8:50 AM you can see that our total US national debt (upper left hand corner) is a $15,603,671,688,728.  That’s over fifteen and a half trillion dollars.  It shows the annual deficit at $1,318,819,988,953.  I challenge you to open the hyperlink above and see how much it has grown since I wrote this.

So what does this all mean?  It would take all of the farm income for 13.44 years just to cover the current year’s budget deficit.  And, that number is growing.  If that is not scary enough, it would take over 159 years of all the farm income in the United States just to cover our national debt.

Politicians need to do something to reverse this trend but it is not politically correct so they do nothing.  Eventually we are going to see higher taxes and less government services.  I hope they fix it before it’s not too late.   

WHAT IS THE REAL INFLATION RATE

If you have been following my blogs you will know that I have been concerned that because of the national debt that inflation will be raising its ugly head.  Now according to CBS Report: U.S. Inflation Is Really ‘around 8%' the rate of inflation is quietly creeping up.

(CBS News) -- CBSnews.com reports, "Forget the modest 3.1% rise in the Consumer Price Index, the government's widely used measure of inflation. Everyday prices are up some 8% over the past year, according to the American Institute for Economic Research." 

According to the story, the AIER study looked at Americans' typical daily purchases, "such as food, gasoline, child care, prescription drugs, phone and television service, and other household products."  The story notes that the biggest factor is motor fuel and transportation costs, which "are up 21.06% from year-ago levels."

NEW STATISTICS ON REFERRALS

One of the 5 Ways To Make More Money that I discuss with my clients and in my programs is REFERRALS.  I think we all know the importance of growing our business through a referral so I won't get into that discussion.

What I do think is interesting in a new study that came out reported asking for a referral once brings negligible results, BUT asking a second time in the same year is proven to bring significant results.  That's not all, a third time brings even more clients.

So why do so many referral programs fail?  I believe the problem is management.  When I ask owners that have low referrals what their systems are they say "we tell them to ask" or "it's in the handbook."  Statistics show that does not work.  What owners need is intergrated systems to monitor and focus on referral.  I know I sound like a broken record (okay some of you do not know what a broken record is, so ask someone that is over 45) but WHAT YOU CAN MEASURE YOU CAN MANAGE! 

Watch your referrals and discuss them with your professionals at staff meetings and during your one on one's.

BEWARE OF PHONEY TAX SCHEMES

Recently I was in Chicago speaking at an industry conference.  After my tax program a participant came up to me and said that he had been contacted by a group that promised him a refund due to a “loophole” in the tax law that would give him some type of education credit.  He was going to have to send them some money to have them get the credit for him.  My advise… run.

As a matter of fact the IRS recently issued a warning about the new scheme.  Scammers have been targeting senior citizens, members of church groups, working families and other potential victims this tax season.  Just like the person that talked to me, the schemes promise large tax refunds to people who have little or no income and normally don’t have a tax filing requirement. Promoters claim they can obtain for their victims a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.

Con-artists falsely claim the tax refunds are available even if the victim went to school decades ago. A variation of the scheme also falsely claims the college credit is available to compensate people for paying taxes on their groceries. Huh?

The schemes can be extremely costly for the victims. Promoters may charge them exorbitant upfront fees to file the tax claims and are often gone before victims discover that they have been scammed.

There is a bigger problem in that regardless of who prepared their tax return, the taxpayer is legally responsible for the accuracy of your tax return and must repay any refunds received in error, plus any penalties and interest. You could even face criminal prosecution.

IRS AUDITS CASH INTENSIVE BUSINESSES

Do you want to know what the IRS is going to be looking at if you are audited?  We can tell you.  The IRS posts their audit guides on their website.  You have to dig around to find them but they are out there.  If you know what they are looking for you can be prepared. 

Now the IRS has posted an Audit Techniques Guide (ATG) to provide guidance to its agents on how to examine income in a cash intensive business. While the ATG is not an official pronouncement of the law or IRS' position and cannot be used, cited, or relied upon as such, it does provide valuable information on how IRS audits cash intensive businesses including specific types of cash businesses.

If you would like a copy or a link to the IRS website showing the guide let me know and I will send to you.

GIVE ME ONE OF THOSE STEM CELL BURGERS

Using the stem cells from an adult cow, a Dutch physiologist has grown a sliver of edible artificial "meat."  He claimed this could offer a better way than traditional animal farming to satisfy the world's booming taste for meat. 

According to researchers within the next 50 years meat production will have to double worldwide to meet the demands of a growing population.  This method could help avoid the cost of using precious farmland.

But you might not want to order a stem cell burger just yet.  The first patty, promised for later this year will cost $300,000.

OBAMA CARE MISCALCULATION

One of the most heavily promoted piece of Obama Care turns out to be a dismal failure.The White House endlessly trumped that more than 4 million small business might benefit from the health insurance tax credit. The promise was that because you would get a tax credit for offering health insurance to their employees businesses would provide insurance as a fringe benefit.

In actuality this did not happen.Instead of 4 million small businesses only 300,000 filed for the credit and the average was only $1,200.Far less to make offering insurance to employees.

I have yet to find a client that will spend, for example, $10,000 to save $1,200.

The Supreme Court will hear arguments on Obama Care on March 26 to 28.We are watching closely and will keep you posted.

MORE PRESSURE ON BUSINESSES USING INDEPENDENT CONTRACTORS

There is legislation floating around Washington that would permit the IRS to issue guidance on classifying workers as employees. That's not all, the Service would also get the power to reclassify workers who’ve been misclassified, despite a contrary 1978 law, in essence voiding the controversial Section 530 relief that many business rely on.

We will keep you posted if we hear anymore on this.

HOW MUCH IS THE PRICE YOU PAY AT THE PUMP TAX - SEE THE MAP

This new map show the state gasoline tax rates. How much does your state tax gas?

ONE OF THE WALL STREET PROTESTERS SALUTED ME

I can't figure out why this happened.  I have been trying to figure out the psychology of why a young man would for some reason give me the middle finger salute.  I finally came to the conclusion that he was angry at me because I was part of the establishment.

Here is what happen.  First of all I have to tell you I have a nice car.  Not a Rolls or a Porsche, but a really nice black Infinite.  I have to tell you I have earned this vehicle by working hard (and smart).  For example during the last two weeks I have put in over 70 hours each week.  I am not complaining but just trying to justify my Infinite 50FX.  It is a good car for me because it is like me.  It is a SUV that thinks it is a sports car and I am a old guy (63) who thinks he is a young guy.

On Monday I was in Waterloo Iowa doing a class on how to take your business to the next level.  My wife Maggie came along with me.

After the program I put my brief case in the back of my SUV.  My car was dirty so I grabbed my California Duster and started wiping down my car.  I noticed a guy who was about 25 years old with tattooed arms and sloppy clothes walking accross the parking lot to a car behind me. 

I noticed him but did not even make eye contact because I was concentrating on my car.  When I got in my car my wife, who was waiting patiently in the car said that before the young man  got into his car looked towards me and although i was not looking he felt it necessary to give me the middle finger salute. 

Just why would he do that?  Because I have a nice car.  Because I cared how it looked? Because apparently I am successful.  If someone knows why I deserved this please let me know.  I know that my new friend will not be reading this.  I doubt if he can read.  By the way new friend, if you do happen to be reading this, I did notice that your pants were falling off.

WHICH PRESIDENTS TAX PROPOSAL IS BEST... AND DOES IT REALLY MATTER?

Q: We are seeing a lot of proposals to revamp the tax system.  Obama has a plan and Rommey has a plan.  Which one do you think would be better for the average person?

A: Tax reform plans are popping up all over, like Robins showing up in the spring, but don't get too excited.  If you think about it this is just election posturing.  It takes more than just the president to change the tax code.  Legislation must first start with the House Ways and Means Committee and then make it all the way through Congress before it hits the president’s desk.  Sure the president has some power to influence but that is about all.  Because of this I don't get too excited about election promises. 

We are watching and will keep you posted.

RESEARCHING CHARITIES

Q: My mother is thinking about a sizable contribution to a charity. I am not opposed to her spending her money but I want to make sure the charity is legit. Any thoughts?

A: You are wise to look into this. There are a lot of scams out there. The more comfort you want the more you should research. Here are a few basic steps that you can take.

Check the organization's tax exempt status with the IRS and confirm that it is in good standing. The IRS compiles a list of organizations eligible receive tax deductible charitable contributions in Publication 78. Check out www.irs.gov\app\pub-78

Secondly, you can review the nonprofit's financials using online tools such as the Foundation Center's 900 Finder www.foundationcenter.org/findfunders/990finder. You can see the organizations tax return which can give you a lot of information on the finances of the operation.

Use the above tools to check the funding sources and check for debt levels.

• I would check the organizations mission. Does their mission meet your mothers wishes?
• If you still are not satisfied, there are organizations that specializes in philanthropic issues that you may want to consult.

THE IRS IS WINNING CASES WHEN S CORP OWNERS PAY LOW WAGE TO AVOID SOCIAL SECURITY TAX

The IRS is continuing its assault on S corporations that pay low salaries to owners.

Many owners of S companies take low salaries so the bulk of the profits are passed through to their own returns free of Social Security and Medicare taxes.  This has been a good strategy that has saved thousands of dollars but the approach may be coming to an end.  The IRS and now the courts are balking at this practice.

In a recent case, a CPA set up an S corporation to serve as a partner in an accounting firm. He took a $24,000 salary from the S firm in a year when its share of the partnership’s profits was $203,000. An Appeals Court agreed with IRS that the pay was unreasonably low.  The IRS brought in an expert who testified that the CPA’s services were worth $91,000. The Court held that $67,000 of the profits was properly reclassified as salary and subject to payroll taxes (Watson, 8th Cir.).

Determining what is a reasonable salary is the key. In this case, the reason the CPA’s services were valued at less than half of his share of the partnership’s profits was that employees who weren’t partners also performed significant services thus creating income.  The approach did not convince the judge.

STATE BEER TAX

Did you ever wondered what the state excise tax rates on off-premise beer sales were? Well take a look at this....

http://www.taxfoundation.org/UserFiles/Image/maps/beermap_large_r1.png

MORE ON NLRB

Recently I posted that the National Labor Relation Board (NLRB) was requiring businesses to post a notice for the employees telling the employees that they could form a union.  This requirement was challenged in the courts and now, as listed below a judge has ruled that the NLRB has the authority to make this requirement.  Also below is an announcement that the judge’s decision will be challenge.

'Judge Rules NLRB Can Require Businesses To Display Union-Rights Posters'

(AP/FoxNews.com) -- The AP reports, "A federal judge ruled Friday that the National Labor Relations Board (NLRB) can require most private businesses to put up posters telling workers they have a legal right to form a union. But U.S. District Judge Amy Berman Jackson limited how the board can enforce the requirement." In her ruling, Berman Jackson said that nothing in the notice posting suggests that employers favor collective bargaining activities.

To read more on the article: CLICK HERE

AND

'Business groups appeal court ruling on union poster rule'

(The Hill) -- TheHill.com reports, "Several business groups" -- including the National Association of Manufacturers -- "filed appeals Monday to a court ruling that allowed the National Labor Relations Board (NLRB) to require union posters in the workplace."  NAM President Jay Timmons said:  "Manufacturers will appeal this decision on the numerous grounds available in order to reverse this unfair rule. The Board has grossly overstepped its authority."

To read more on the article: CLICK HERE

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NEW VEHICLE RATES

Each year, IRS issues the amounts that can be claimed as depreciation for vehicles placed into service that year, over their useful lives. As has been the case since these Luxury Vehicle rules were implemented in 1984, they do not apply to vehicles weighing more than 6,000 pounds gross vehicle weight (GVW).

The IRS has just issued the following amounts for business vehicles placed into service during 2012.

Passenger Automobiles:
Year 1 – $3,160 ($11,160 if bonus depreciation applies)
Year 2 – $5,100
Year 3 – $3,050
Year 4 and on – $1,875 per year

Trucks and Vans:
Year 1 – $3,360 ($11,360 if bonus depreciation applies)
Year 2 – $5,300
Year 3 – $3,150
Year 4 and on – $1,875 per year

REFUND DELAYS

The Internal Revenue Service is providing an update on the status of the tax refund delays that plagued the agency this season.

In late January, the IRS sent an email to us tax professionals warning that tax refunds could be delayed a week this tax season because of new anti-fraud safeguards. The IRS had fine-tuned its identity theft filters to prevent the growing trend of tax refund fraud. Many taxpayers who wrote to have said that they were experiencing much longer delays than a week.

The IRS also had problems with its “Where’s My Refund" tool giving a different date whenever taxpayers checked up on the status of their refunds, and last month the page told many taxpayers that it had no information on the status of their tax refunds.

NEW HSA AMOUNTS FOR 2012

Here are the new contribution limits for 2012 HSA:

•Contribution limit ~ Family: $6,250 Self: $3,100

•Catch up if over 55 ~ Family: $1,000 Self: $1,000

•Minimum deductible ~ Family: $2,400 Self: $1,200

•Max out of pocket ~ Family: $12,000 Self: $6,050

The catch up contribution can only be made by individuals who are at least 55 and are not yet enrolled in Medicare.

Remember that starting in 2011 because of Obama Care over-the-counter medicines may not be reimbursed thru HSA.