The Tax Attic

THE TAX ATTIC with Jerry Coon

January 5, 2012 // 0 Comments

Refining old, proposing new Welcome to the 2012 tax season! For tax professionals, this is a day that was on the horizon as soon as the previous tax season ended on April 15, 2011. There weren’t a lot of changes that Congress made last year. Furthermore, this is an election year so there most likely won’t be many moves by Congress this year before the November election. The party to the left—affectionately called by its supporters, the Democrats—won’t let the party on the right—affectionately called by its supporters, the Republicans—pass any law that might be perceived as giving them an advantage with the voters. By the same token, the party on the right won’t let the party on the left pass any law that might be perceived as giving them an advantage with the voters. That means common sense is thrown out the window in favor of trying to get elected or, what seems to be important, trying to make sure the other party doesn’t get elected. Somehow, I think George Washington, John Adams, Thomas Jefferson, and the other founding fathers would not be amused. I can’t believe they would conclude that they fought and won a war of independence and then came together to agree on one of the greatest documents in the history of mankind, our Constitution, to see the debacle going on in Washington, D.C. today. In fact, I think they would be mortified. It’s not that Washington, Adams, Jefferson and the others weren’t passionate about our country and passionate in their beliefs about how the government should operate. They were strong personalities, so there were strong disagreements. They were, however, able to put the country first and work out their differences for the good of the country. Shame on you, Barack Obama, Joe Biden, Harry Reid, Nancy Pelosi, John Boehner, Mitch McConnell, and most of the remaining members of Congress, for not putting the country before the party. What may be even worse, shame on us for electing these people for term after term. For the most part, either the people in Washington need to change how they do business or we need to find some new people who will act as Americans and not as Democrats or Republicans. Well, I […]

THE TAX ATTIC with Jerry Coon

January 27, 2011 // 0 Comments

Congress is using new tactic   It goes without saying that our tax system is very complicated. Our Congress helps to make that system more complicated when they pass laws that are not first and foremost tax laws. Buried within those non-tax laws, however, are tax provisions; sometimes very complicated tax provisions. The most glaring example of late is the Health Care Reform bill passed last year. In many ways, Congress tied Health Care Reform directly to the tax code. For example, all taxpayers will eventually be required to buy a health insurance policy. If a health insurance policy is not purchased, the taxpayer may pay a penalty on his/her tax return. The “may” part comes into play because if the taxpayer’s income is low enough, there won’t be a penalty. The taxpayer’s final out-of-pocket cost for the policy itself will also be tied to his/her level of income as reported on the tax return. The lower the income, the lower the taxpayer’s final cost of insurance. Congress has just given another incentive to keep total income down. A second example is the provision that requires all businesses to file 1099s to all other businesses from which they buy at least $600 of goods and services. I’m not exactly sure at this moment what filing 1099s has to do with Health Care Reform. What I do know is that if this provision is not repealed, an additional 40,000,000 form 1099s will have to be filed and will be clogging up an already overburdened tax system. Businesses will be paying for those additional 40,000,000 forms to be prepared and filed. We all know that businesses don’t pay taxes or for tax preparation—consumers pay those costs. Tax and tax preparation costs are just another part of the cost of doing business that a business simply passes on to the buyer of the product. When these types of costs go up, our costs go up as consumers. It’s a thought to keep in mind two years from now when this particular provision kicks in. A third example is the provision that requires all charge card companies to report to the IRS all transactions for all taxpayers. If you sell one item on e-bay and accept a credit card […]

THE TAX ATTIC with Jerry Coon — December 16, 2010

December 16, 2010 // 0 Comments

Negotiations to benefit economy Chicago is a great place to spend a weekend. Our daughter, Kim, is working on her master’s degree at DePaul University, so visiting her provides the perfect excuse to go to Chicago and take in some of the sights. On Friday night, we went to the Christkindlmarkt in downtown Chicago. The Christkindlmarkt is an outdoor bazaar that originated in Germany. Knowing the Germans, it most likely was really just a great reason to get together and drink some beer. It has evolved and now has many merchants from many European countries displaying their Christmas wares. Beautiful handcrafted ornaments, Christmas decorations and gifts were available from a variety of countries. We sampled and bought some made-on-the-spot chocolate. Hot, spiced wine was available as well as German beer. It was a clear, cold perfect night for strolling around Daley Plaza. Of course, that changed on Saturday. It was still cold, but the clear went away. It rained all day Saturday so we went inside to the Museum of Science and Industry. Among the attractions we looked at were the Christmas trees on display from around the world. The museum has more trees than Meijer Gardens, but all of us agreed that the Meijer trees are better. When we left, we were greeted by much windier, much colder, and thicker rain that eventually did freeze and then turned to snow. Sunday was brutal and it took us about twice the normal time to get home, but we did get home safely. Friday, on the way down, we did stop at the Cabalas in Hammond. Too bad the Cabalas in Walker was never built. That could have been a destination-type of attraction for Walker. Rockford could use a large destination-type of attraction. Chicago has several attractions to bring people into the area such as the Ferris wheel on Navy Pier, the U-505 German submarine within the Museum of Science and Industry, the Shedd Aquarium, and the Goose Island Brew Pub. I had to throw in the brew pub because we aren’t going to match Chicago on those other attractions, but I believe our city would support a Brew Pub. Sometime in the future, I hope to not have to travel to Chicago, Holland or even […]

The Tax Attic with Jerry Coon — October 14, 2010

October 14, 2010 // 0 Comments

Integrity is a way of life My minister at Rockford Reformed Church, Rick Tigchon, sometimes hits a “grand slam” of a sermon. Since the baseball playoffs are in full swing, I thought I would borrow one of its terms to describe his wonderful sermon given to us this last Sunday. Since the Lions finally won a game, I know I should be using a football term. But I love baseball, while I just like football, so I’m sticking to the baseball term. The sermon dealt with the subject of “integrity.” One of the examples he cited involved a father and son buried close to each other. The father had a very lengthy list of accomplishments on his gravestone detailing his life’s accomplishments. He must have been quite the fellow. The son, however, had only five words inscribed on his grave marker: “A man of unquestioned integrity.” Now that’s my kind of guy. Those words are powerful and say as much as we need to know about the son. It doesn’t say that his middle name was Solomon and he was the wisest man of the day. It doesn’t say he was a great athlete, or the best man at his job, or the best businessman in the area. It doesn’t say he was a great family guy, or the wealthiest man in the region, or even the nicest of guys. What it does say is that he dealt with people on an honorable basis and with “unquestioned” integrity. He was a man of his word. Oh, he could have been wise, probably was a great family man, perhaps was someone who could hit a curveball, and may have operated a successful business. Those characteristics and abilities are items that his dad would have listed on his tombstone. Those accomplishments in and of themselves don’t tell the whole story. The son took it all one step further and let integrity be his guide. Those who knew him honored him with that five-word inscription: “A man of unquestioned integrity.” What a different type of world this would be if everyone followed the son and let integrity be their guide. Rick and I are members of the Reformed Church, but integrity is much greater than the Reformed Church. It […]

The Tax Attic with Jerry Coon — March 4, 2010

March 4, 2010 // 0 Comments

  Taxable Social Security income There are few items on a tax return that are more confusing or more difficult to explain to taxpayers than that of taxable Social Security. Prior to the late 1980s, Social Security was not taxable. Tax-free income is the best deaa still too good of a deal, because the law was changed to tax up to 85% of gross benefits received. It seems like the logic in taxing benefits was that this would help extend the time when the Social Security system would go bankrupt. One never knows for sure when trying to figure out where federal tax money ends up, but I find it hard to believe that any of the tax dollars due to taxable Social Security tax end up at the Social Security Administration. I think that big black hole in Washington just sucks up those dollars. I wouldn’t be surprised that at some point in time, 100% of benefits will become taxable just like a distribution from any pension. The fly in the ointment is that today everyone pays into Social Security. These payments made at the rate of 6.2% of earnings are not voluntary. Granted, employers pay in another 6.2% matching contribution, but employers get to deduct this amount on their tax return. The 6.2% each taxpayer pays represents a nondeductible cost to that taxpayer. Taxpayers should be able to recover the amounts they paid in to the Social Security system using one of two options: either the taxpayer would be able to recover his cost as a nontaxable amount received each year over his life, or he would be able to recover his cost in total from the first benefits received before any benefits become taxable. Either approach has tax theory behind it, but there is a larger book of theory that would require taxpayers to recover their cost over their life. The Social Security system keeps track of how much tax is paid in to the system by each taxpayer. Up to now, it’s just kept for statistical reasons, because benefits are calculated on earnings, not taxes paid in. But it would not take much of a software program to calculate the taxable benefit based on recovering the taxes paid in. I hope […]

1 2