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.   

1%

Want to know where the 1% that everybody is talking about?

$1 BILLION AWAITS PEOPLE WHO HAVEN’T FILED 2008 TAXES

Tax refunds amounting to over $1 billion are awaiting an estimated 1 million people who still have not filed a federal income tax return for 2008.

To collect, taxpayers and preparers must file a return with the Internal Revenue Service no later than Tuesday, April 17. The IRS estimated that half of the potential tax refunds are for more than $600.

In some cases, the IRS acknowledged, people may not have filed because they had too little income in 2008 to require filing a tax return, even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund.

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."

BACK IT UP - YOUR COMPUTER THAT IS

We always hear people talking about backing up their computer. Unfortunately, a lot of people take the “that won’t happen to me approach.”  Several times a year I deal with clients who have had computer crashes and for some reason or another had not backed up their data. Can you imagine trying to enter a full year’s data in your software? Plus there is the question of would the IRS really believe you that the computer crashed should they come calling.

Here’s a good example of someone who is a good business person. One of my clients has recently informed me that they were broken into and the computer and other items were stolen. Fortunately, the individual had her computer locked down and the individuals were not able to steal any of the client’s names or pertinent information. Furthermore, they had backup of all their computer data so their business did not skip a beat.

If you haven’t taken time to setup a backup system, I strongly urge you to do that now. Something like this could happen to you.

TEN TIPS ON A TAX CREDIT FOR CHILD AND DEPENDENT CARE EXPENSES

If you paid someone to care for your child, spouse, or dependent last year, you may qualify to claim the Child and Dependent Care Credit when you file your federal income tax return. Below are 10 things the IRS wants you to know about claiming the credit for child and dependent care expenses.

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.

2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

3. You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, and other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.

4. The payments for care cannot be paid to your spouse, to the parent of your qualifying person; to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.

5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.

6. The qualifying person must have lived with you for more than half of 2011. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.

7. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.

8. For 2011, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income, such as a flexible spending account for daycare expenses.

10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer's Tax Guide.

If you need any more information let us know.

BEWARE OF PHONY 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.

In recent weeks, the IRS said it has identified and stopped an upswing in these bogus tax refund claims coming in from across the country.