Assured Tax

The jobless rate for those looking for employment is near 10%.  Although taxes aren’t on the priority list, job-hunters may want to know whether job-hunting expenses are deductible, and what kinds of expenses qualify.

When job-hunting expenses are deductible

If you have expenses in looking for a job in your line of work, the expense can be claimed as miscellaneous itemized deductions (subject to the 2%-of-AGI floor). However, if you are looking for work in a new field (or you have not worked before), then there's no deduction for those job-hunting expenses.

When determining if you are seeking work in your field, the focus is on the nature of the employment not than the status of employment. So, for example, a tax accountant who worked for an accounting firm could deduct expenses in seeking new employment as an accountant whether or not he eventually found employment as a self-employed tax accountant or in some other accounting capacity. Nothing could be deductible if that same tax accountant was looking for a job as an underwear model.  (Strange, but true, they are not the same line of work.)

Types of job-hunting expenses that are deductible

Employment and outplacement agency fees even if the fee is payable in any event and not contingent on the securing of a position. Nor does it matter that taxpayer voluntarily terminated his relationship with the agency before a new position was secured. If an employee pays for an agency fee and is reimbursed for it by his employer, the reimbursement is includible in the employee's gross income. But if an individual gets a job through an employment agency and the new employer pays the fee, then the fee isn't includible in income if the job hunter is not liable for it.

• Cost of preparing a resume
• Job counseling and referral services. (buying lunch for your mom doesn’t count)
• Legal expenses to get reinstated on a civil service list of eligible prospects
• “Professional career consultants”
• Travel expenses if undertaken primarily to look for a new job. If you travel out of town for a job interview you may deduct the round-trip travel cost, plus lodging and 50% of meals. If you use your car in 2010 to look for a job, you can deduct 50¢ cents per job-hunting mile. You must keep records of the time, place, mileage and purpose of each trip.

Expenses incurred by you in seeking employment are deductible regardless of whether you actually obtains a new job. For example, deduction was allowed for a fee paid in advance to an employment counseling firm which was not conditioned on the taxpayer's obtaining a new position and which in fact failed to produce any job offers.

What's not deductible as job-related expenses

Examples of expenses related to looking for a new job that are nondeductible as they are considered personal or living expenses are: (1) the cost of a new suit, shoes, and a tie for interviewing; (2) the cost of a phone, a fax machine, a computer, and phone and internet service; and (3) the cost of newspapers and magazines

A loss incurred on forfeiture of deposit for purchase of home in area where the taxpayer expected to get employment is nondeductible. Also nondeductible is a real estate broker's commission on sale of taxpayer's home in connection with move to a new job in another state. (nice try, though)

Deductible job-related moving expenses

An employee or self-employed individual who moves his residence because of a change in his principal place of work may deduct the reasonable expenses of: (1) moving household goods and personal effects from the old residence to the new place of residence; and (2) traveling (including lodging but not meals) from the old residence to the new place of residence. If a taxpayer uses his auto to travel to the new home, he may deduct actual expenses (e.g., gas and oil) or for 2010, 16.5¢ per mile.

Moving expenses are “above-the-line” deductions; that is, they are deductible from gross income in arriving at adjusted gross income.

The new job site must be at least 50 miles farther from the taxpayer's old principal residence than was the old principal job site. If he didn't have a full-time job before the move, the new job site must be at least 50 miles from his old residence. Additionally, either (1) during the 12-month period immediately following his arrival, the taxpayer must be a full-time employee during at least 39 weeks, or (2) during the 24-month period immediately following his arrival, the taxpayer must be a full-time employee or be self-employed on a full-time basis, during at least 78 weeks, of which not less than 39 weeks are during the 12-month period immediately following his arrival.

Moving expenses aren't deductible to the extent they are reimbursed by the employer and the reimbursements are excludable from the taxpayer's income.

Now, go get a job - or make your own!

On July 30, a bill to repeal a controversial section of the Patient Protection and Affordable Care Act (Health Care Act P.L. 111-148 ) was taken up by the House of Representatives. Under Sec. 9006 of the Health Care Act, for payments made after Dec. 31, 2011: (1) businesses that pay any amount greater than $600 during the year to non-tax-exempt corporate providers of property and services will have to file an information report with each provider and with IRS; and (2) businesses will have to file information returns with respect to any person (including corporations) that receives $600 or more from the business in exchange for property and merchandise. H.R. 5982, the “Small Business tax Relief Act of 2010,” would repeal Sec. 9006 of the Health Care Act and thus repeal the preceding Health Care Act requirements before they take effect.

This idea is not new - if you cut taxes business will increase and you will get more money into the Treasury.

The Harvard trained clueless in the WH & Congress don't understand Econ 101.  However, EU countries have learn a valuable lesson from the 'old' US and are now seeing the light.  If only they can teach US what we taught them:

Hungary to phase in flat tax system starting January 2011 [BUDAPEST, July 26 (Reuters)]:  Hungary will start phasing in a flat rate tax system in January 2011, Deputy Prime Minister Tibor Navracsics said on Monday, which may help reduce tax evasion and boost revenues as the country tries to cut its budget deficit. Analysts said, however, that the move may also add to uncertainty as the government is trying to win more fiscal leeway from the European Union. The IMF and the EU suspended a funding program review in Hungary on July 17 saying it must do more to cut its deficit, and ratings agencies said on Friday they may downgrade the country. "In the next few days we will scrap 10 minor tax types. We have cut the corporate tax rate to 10 percent from 19 percent, and the plans include -- and we will phase in gradually -- a flat tax," Navracsics told a news conference. Hungary is targeting a budget deficit of 3.8 percent of GDP this year under the 20 billion euro IMF/EU funding agreement, but the government has rejected heavy austerity measures. In June, the prime minister proposed introducing a flat personal income tax over two years at a rate of 16 percent instead of the current rates of 17 percent and 32 percent to boost the economy's competitiveness. Navracsics did not elaborate on the rates but said the first step towards a flat tax regime would take place next January. Flat personal income tax systems have helped reduce tax evasion and improve revenues in countries from Slovakia to Russia. Hungary, which has been under the European Union's excessive deficit procedure since joining the bloc in 2004, wants Brussels to set a uniform time frame for all states to bring their budget deficits below the bloc's 3 percent ceiling. The economy minister will present the first draft of the 2011 budget to the government by Oct. 15, later than in previous years and also after municipal elections where the ruling centre-right Fidesz party aims to consolidate its power. Fidesz was backed by 64 percent of decided voters according to an opinion poll published on Monday, while the main opposition Socialists had 16 percent support.

Lost in Taxation - The IRS's vast new ObamaCare powers

If it seems as if the tax code was conceived by graphic artist M.C. Escher, wait until you meet the new and not improved Internal Revenue Service created by ObamaCare. What, you're not already on a first-name basis with your local IRS agent?

National Taxpayer Advocate Nina Olson, who operates inside the IRS, highlighted the agency's new mission in her annual report to Congress last week. Look out below. She notes that the IRS is already "greatly taxed"—pun intended?—"by the additional role it is playing in delivering social benefits and programs to the American public," like tax credits for first-time homebuyers or purchasing electric cars. Yet with ObamaCare, the agency is now responsible for "the most extensive social benefit program the IRS has been asked to implement in recent history." And without "sufficient funding" it won't be able to discharge these new duties.

That wouldn't be tragic, given that those new duties include audits to determine who has the insurance "as required by law" and collecting penalties from Americans who don't. Companies that don't sponsor health plans will also be punished. This crackdown will "involve nearly every division and function of the IRS," Ms. Olson reports.

Well, well. Republicans argued during the health debate that the IRS would have to hire hundreds of new agents and staff to enforce ObamaCare. They were brushed off by Democrats and the press corps as if they believed the President was born on the moon. The IRS says it hasn't figured out how much extra money and manpower it will need but admits that both numbers are greater than zero.

Ms. Olson also exposed a damaging provision that she estimates will hit some 30 million sole proprietorships and subchapter S corporations, two million farms and one million charities and other tax-exempt organizations. Prior to ObamaCare, businesses only had to tell the IRS the value of services they purchase. But starting in 2013 they will also have to report the value of goods they buy from a single vendor that total more than $600 annually—including office supplies and the like.

Democrats snuck in this obligation to narrow the mythical "tax gap" of unreported business income, but Ms. Olson says that the tracking costs for small businesses will be "disproportionate as compared with any resulting improvement in tax compliance." Job creation, here we come . . . at least for the accountants who will attempt to comply with a vast new 1099 reporting burden.

Meanwhile, the IRS will be inundated with useless information, because without a huge upgrade its information systems won't be able to manage and track the nanodetails.

In a Monday letter, even Democratic Senators Mark Begich (Alaska), Ben Nelson (Nebraska), Jeanne Shaheen (New Hampshire) and Evan Bayh (Indiana) denounce this new "burden" on small businesses and insist that the IRS use its discretion to find "better ways to structure this reporting requirement." In other words, they want regulators to fix one problem among many that all four Senators created by voting for ObamaCare.

We never thought anyone would be nostalgic for the tax system of a few months ago, but post-ObamaCare, here we are.

Bottom Line - we are so screwed!

The so-called Bush tax cuts are scheduled to expire at the end of the year. Although some of the cuts retain bipartisan support in Congress and may yet be extended, as of now, Washington has some severe changes in store for you and your family. Grab a scotch and sit down.

Higher tax rates for all

You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone -- not just a sliver of the wealthiest Americans. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%. Just a few months ago, it seemed like a safe bet that Congress would make a fix to keep the existing 10%, 15%, 25% and 28% rate brackets to help out lower and middle-income folks. That bet is now looking iffy.

Higher capital gains and dividends taxes for all

Right now, the maximum federal rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains will increase to 20%. The maximum rate on dividends will skyrocket to 39.6% unless action is taken to limit the rate to 20%, as the president has repeatedly promised. Plan on 39.6%, and hope I’m wrong.

Right now, an unbeatable 0% rate applies to long-term gains and dividends collected by folks in lowest two rate brackets of 10% and 15%. Starting next year, those folks will pay 10% on long-term gains and 15% and 28% on dividends (compared with 0% now) unless a change is made. Otherwise, taxes on long-term gains and dividends will go up for everyone.

Return of the marriage penalty

Right now, the standard deduction for married joint-filing couples is double the amount for singles. For this, we can thank the Bush tax cuts, which included several provisions to ease the so-called marriage penalty. The penalty can force a married couple to pay more in taxes than when they were single. Starting next year, the joint-filer standard deduction will fall back to about 167% of the amount for singles unless Congress takes action and the president approves. We don’t know if that will happen. If not, lots of lower and middle-income couples will face higher tax bills.

Now, the bottom two tax brackets for married joint-filing couples are exactly twice as wide as those for singles. That ratio helps keep the marriage penalty from biting lower- and middle-income couples. Starting next year, the joint-filer tax brackets will contract, causing higher tax bills, unless a change is made.

Return of phase-out rule for itemized deductions

Before the Bush tax cuts, a nasty phase-out rule could eliminate up to 80% of a higher-income individual’s itemized deductions for mortgage interest, state and local taxes, and charitable donations. The rule was gradually eased and finally eliminated this year. Next year, it will be back in full force unless Congress takes action -- which is unlikely. So if you itemize and have adjusted gross income above about $170,000 ($85,000 if you use married filing separate status), be ready for this phase-out rule to take a toll.

Return of phase-out rule for personal exemptions

Before the Bush tax cuts, another nasty phase-out rule could eliminate some or all of a higher-income individual’s personal exemption deductions. The rule was gradually cut back and finally eliminated this year. But it will be back with a vengeance next year unless Congress blocks it. So be ready for another tax hike if your adjusted gross income exceeds about $252,000 if you file jointly; about $168,000 if you’re single; about $210,000 if you’re a head of household; or about $126,000 if you use married filing separate status. (For 2010, personal exemption deductions are $3,650 each, and they will be about the same next year.)

The bottom line

The Bush tax cuts don’t just offer tax relief to the wealthiest Americans. They offer it to just about anyone who pays federal income taxes. Their scheduled demise next year will raise the tax bill of nearly every taxpayer, unless Congress makes changes and the president jumps on board.

Think your tax returns are only between you and the IRS?  This information about the proposed health care bill is from CBS news...

Section 431(a) of the bill says that the IRS must divulge taxpayer identity information, including the filing status, the modified adjusted gross income, the number of dependents, and "other information as is prescribed by" regulation. That information will be provided to the new Health Choices Commissioner and state health programs and used to determine who qualifies for "affordability credits."

Section 245(b)(2)(A) says the IRS must divulge tax return details -- there's no specified limit on what's available or unavailable -- to the Health Choices Commissioner. The purpose, again, is to verify "affordability credits."

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Only nine states have the costly rules that Obama wants to impose nationwide. This is a WSJ editorial showing pitfalls produced by some state insurance regulation now proposed for the country.

This is a quick read on Whole Foods employee health insurance.  WSJ 8/11/09 opinion piece by John Mackey the CEO of Whole Foods Market.