Tuesday, December 31, 2013

A debate with Norman Matloff

I am a member of chat group and we talk just about everything under the sun. Here is an exchange I had recently with UC Davis Professor Norman Matloff, a well known opponent to the H-1B visa, on China's President Xi Jinping visiting an inexpensive Beijing restaurant, queuing up and paying for his own meal. This is how I spent my time outside of tax season. :-) Here's an article covering the event, http://www.theatlantic.com/china/archive/2013/12/xi-jinping-eats-some-dumplings-at-a-restaurant/282719/
    Lots of pictures at this link, lots of food for $3.46.  I hope he finished his meal.

    To emphasize the government’s commitment to frugality, a casually dressed Xi was photographed yesterday queuing up to order and pay for his own meal at a branch of the Qingfeng Steamed Dumpling restaurant chain in Beijing. He chatted with fellow diners as he tucked in to a plate of green vegetables, steamed dumplings and a soup of stewed pig livers and intestines known as chaogan, according to photographs posted on the Xinhua website. His order cost 21 yuan ($3.46), according to a report on the Beijing News website.
    Gary Locke's influence?
    Not quite. I think Xi picked up from BO who stopped by SF Chinatown Restaurant to buy Dimsum to go for his staff

    I don't think Xi imitates anyone. His wife was seen walking into a concert with the general audience recently.

    The first U.S. president in recent history eating at restaurants was probably Bill Clinton.

    Gary Locke is far from Xi in terms of stature. Norm might as well said it was Norm Matloff's influence, assuming he does carry his own tray and order his own food. :-)

    I'm not sure you are aware of the incident I was alluding to, Guy.

    When Locke first came to China, he was seen carrying his own bags, and paying for coffee with a coupon at the airport Starbucks. This caused quite a stir in China, with the Chinese press referring to him as "the backpack ambassador."

    I don't know if you're aware Xi is the president of China while the highest office Locke has held was a state governor and a cabinet secretary.

    How much security does Locke get, compared to Obama? You may not think Xi has similar stature as Obama. But they are both head of their respective country; and China, FYI, has four times as many people.

    If Xi is that elitist, refusing to learn from someone "beneath" him, he's not a man of the people after all. I'm suprised you don't reject the idea that he emulated Obama, who heads a country 1/4 the size of China.

    Will an elitist go to lunch that costs only $3.46? God gave us a brain.

    I did mention Bill Clinton. If I remember correctly, he would stop by McDonald's during his jog.

    One thing you're really good at, though, making many unsubstantiated claims with so few words.

    I didn't make any claims, Guy. I merely suggested a possibility.

    Concerning your bringing up your "China is 4 times bigger" claim, we now see it was bogus.

    What a stupid thing to say! As I said, God gives us all a brain.

    That's your only response, Guy? If you think that you didn't contradict yourself on your 4X argument, please explain why.

    I don't think it's worth my time with someone who has no brain. Guess God didn't give everyone a brain after all. Too bad.

    It is indeed too bad, Guy. This was not your best day.

    In that case, do you mind if I publicize our exchange on this subject? I'll do it verbatim.

    Please do. I think that in piecing this together, you'll discover what I've been saying is true, i.e. that you indeed have been inconsistent.

Tuesday, December 10, 2013

A letter from the Sheriff

I’m receiving a larger number of emails and phone calls about property theft/burglaries this month and last. This time of year is seemingly high theft season:

If you’re home or off at work or on vacation, make sure that everything is locked up securely. This includes backyard gates, all doors to your garage, doors from your rear yard to your house and doggy doors when not in use.

Suspicious people loitering, lingering, wandering around going door to door or up on properties in your neighborhood at night should be reported to dispatch as being suspicious. Describe their behavior to the dispatcher. If they have a vehicle, get a good description of everything and be a good witness. Call immediately, don’t wait. 874-5115. Don’t tell them you’re calling the cops or tip them off. DON”T FOLLOW OR CONFRONT.

If someone knocks or rings your doorbell, talk through the door. Teach your kids to talk through the door, but not to open it.

Leave lights on timers on inside your home. Have timers go off in different parts of your house at different times to mimic that you’re actually home.

If you have a work vehicle or trailer, and it contains tools it is a target if it is parked on your driveway or street.

Work vehicles/trailers containing tools must be parked in an enclosed yard or garage. In the Arden area we are having multiple reports of trailer hasps being cut with saws and metal around the hasps being sawed to enter and steal high dollar items. Lots of $150 to $3,000 bikes being stolen. Also many vehicle break-ins and gas thefts and numerous mail thefts in many areas of the county. Cars and motorcycles and dirt bikes and power tools and hand tools and coins, any and all electronic digital cameras and laptops, phones and presents in the car or wrapped under the tree, designer goods; eye glasses to shoes, cash, guns, jewelry, alcohol are being stolen. LOCK UP VALUABLES. Buy an engraver and put your driver’s license number on expensive tools and bikes.

Check your mailbox regularly if your mail is coming late in the day. Don’t leave mail overnight in your box. Report mail theft to the US Post office or to the Sheriff’s Department. Report ID theft/ fraud to the Sheriff’s Department. NEVER mail outgoing mail from your mailbox. If you see someone taking mail, call emergency line 874-5111.

If you have a vacant house nearby please or know that your neighbor is gone, be alert to unusual lights/activity in the house/garage at night. Call 9-1-1 if you think that a burglar may be there. The early cover of darkness and , cold and rain will keep most people inside as soon as they get home. Its perfect weather for burglars.

When you shop, go store to store or arrive home, take everything, out of your vehicle. Never leave anything including jackets or bags.

Finally, please go and visit the elderly neighbors down the street. See if they have their heat on, if they need to take a trip to the grocery store or might need someone to talk to.

Sherrie Carhart
Crime Prevention Specialist
North Division

Charles Dickens, A Christmas Carol
But I am sure that I have always thought of Christmas time, when it has come round... as a good time; a kind, forgiving, charitable, pleasant time; the only time I know of, in the long calendar of the year, when men and women seem by one consent to open their shut-up hearts freely.

Friday, November 22, 2013

Thursday, October 31, 2013

Change to Cafeteria Plan

IRS Notice 2013 -71 now permits § 125 cafeteria plans to be amended to allow up to $500 of unused amounts remaining at the end of a plan year in a health FSA to be paid or reimbursed to plan participants for qualified medical expenses incurred during the following plan year, provided that the plan does not also incorporate the grace period rule. This carryover of up to $500 does not affect the maximum amount of salary reduction contributions that the participant is permitted to make under §125(i) of the Code ($2,500 adjusted for inflation after 2012). This carryover option provides an alternative to the current 2½ month grace period rule and administrative relief similar to that rule.

Wednesday, October 2, 2013

Obamacare enrollment

This won't affect most people as they're either covered by an employer health plan or by Medicare. But it may affect some of their children and friends.

This is the California exchange site. The Spanish web portal isn't ready yet and I don't know if they plan to have any other language portal.

The federal web site, www.healthcare.gov, has had many problems on its first day. But there is plenty of time to sign up.

It's questionable whether healthy young folks should sign up purely from a financial point of view. The plan calls for young insureds to subsidize the elderlies. Their premium will therefore be high.

There are four different plans, all with the same coverage. The difference is the amount of monthly premium vs the amount of annual deductibles and co-pays. The Platinum plan has the highest premium but the lowest deductible and co-pay. So if one needs extensive medical care, s/he should sign up for the Platinum plan.

People making up to 400% of poverty level will get federal subsidies on a sliding scale. But if you make just $1 over that threshold, you will lose the entire subsidy. On a family plan, even if one family member is covered by an employer health plan, you will lost the federal subsidy as well. That's why some people have suggested Obamacare may discourage marriages and encourage divorces.

To get the federal subsidy, one must sign up through the exchanges.

The administration has been touting employers could get up to 35% tax credit for providing their employees with health insurance, but that's a myth in most cases.

Monday, September 23, 2013

Android vs. iPhone

Apple sold 9 million new iPhones over the weekend, many more than expected, despite the Gold and Grey color 5S were sold out early on Friday. But they would not release a breakdown of how many 5S and 5C were sold. I suspect the 5C sales were disappointing. This also shows how many die-hard Apple fans are out there. I watch a local independent TV channel in the morning a lot, an Apple fan. And he's been saying he's dying for a larger screen and he will wait patiently until Apple does. Why? He has all sorts of choices right now. And they are better choices too, according to this USA Today article.

Here's the video report from USA Today, the reporter is a 6 year iPhone user. I first saw his report over the weekend but never could find his follow-up article.

The written article is at http://usat.ly/1eQzsLD

Tuesday, August 27, 2013

Should You Renounce Your U.S. Citizenship?

More and more U.S. persons living permanently abroad are renouncing their U.S. citizenship due to the high cost of increasing compliance. Click on this link to read the entire article from the Wall Street Journal:


For some people, the best tax strategy is simply to pack up and leave.
That is the lesson from the disclosure that Eduardo Saverin, the 30-year-old billionaire who helped found Facebook, FB -4.11% has renounced his U.S. citizenship to become a resident of Singapore.

You might owe an exit tax. U.S. citizens who expatriate are treated as though they sold all of their property the day before they renounce, even if they will continue to own it and pay property or other taxes.

Capital gains (net of losses) are taxed at the current top rate of 15%, after an exemption of $651,000. The tax on some assets, such as an individual retirement account, will be at ordinary income rates up to 35%, notes Dean Berry, an attorney with Cadwalader, Wickersham & Taft in New York.

The tax applies to U.S. taxpayers whose net worth is greater than $2 million or whose average annual income tax for the past five years is $151,000 (adjusted for inflation).

There are important exemptions; one involves people who have been dual citizens from birth. For more information, see the instructions to IRS form 8854.

Sunday, April 28, 2013

Motley Fool: Mutual Fund Pros Falter

This was publish in the Bee's business page today.  I've advocated investing in indexed funds for a long time.

I put $10,000 into the Vanguard S&P 500 index fund in July, 1996.  Today, that account is worth $32,465.63, after re-investing all the dividends.

When the tax law changed in 2000 allowing me to convert my IRA into a Roth, I did that.  And that account has grown by 58.01% in the 3 years, all invested in index funds, with about half of it in the Total Market Index Fund and the other half in the S&P 500 Index Fund.

My philosophy is to invest money I won't need for at least 10 years into index funds and just let it sit.  No one can time the market with consistent success.

If you change your investment strategy, however, beware of any potential tax consequence.


Fool’s School
Beware of the Experts

Some have accused professional mutual fund managers of being no better at picking stocks than a dart-throwing chimp. That’s insulting to chimps, though.

In any given year, the majority of professional fund managers underperform their benchmark index — a virtual certainty given a limited amount of return to capture and an unlimited amount of fees to charge.

For example, in 2011, 84 percent of U.S. stock fund managers underperformed the S&P 500 index, according to Standard & Poor’s. That’s bad enough, but dig deeper and it gets far worse. It turns out that the overwhelming majority of professional fund managers focused on the minority of stocks that underperformed the market. It takes skill to be that bad.

(Per S&P Capital IQ data, the average stock that rose more than 2.07 percent returned 20.4 percent, while the average stock below that threshold fell 16.6 percent.)

This isn’t rare, and it extends beyond fund managers to Wall Street analysts. According to Bloomberg, “The 50 stocks in the S&P 500 with the lowest analyst ratings at the end of 2011 posted an average return of 23 percent (in 2012), outperforming the index by 7 percentage points.”

Meanwhile, fees make the situation worse. In one report, IBM concluded that global money managers overcharge investors by $300 billion a year for failing to deliver returns above a benchmark index. Vanguard cites data by the Financial Research Corp. showing that the single best predictor of a fund’s future performance is its expense ratio (essentially an annual fee).

A common rebuttal is that, while money managers underperform an index, they are better at managing risk and lowering volatility. But studies have shown that the average mutual fund closely tracks the ups and downs of the overall market.

Some professional managers can beat the market and earn their fees. The majority can’t. If you don’t have the time or inclination to manage your own money, you’re likely to do best buying a passive, low-cost index fund.

Monday, April 15, 2013

Social Security: Many pay more in taxes than they'll get back



Up until now, Social Security has been a windfall for many retirees: They collected far more in benefits than they shelled out in taxes.

That's changing. Many of those retiring will have paid more into the coveted entitlement program than they will get back.

Here are the numbers:

A couple who each earned the average wage during their careers and retired in 1990 would have paid $316,000 in Social Security taxes, but collected $436,000 in benefits, according to data crunched by Eugene Steuerle, an economist at the Urban Institute.

Had that couple turned 65 in 2010, however, they would have paid $600,000 in taxes, but could expect to collect just $579,000. This is the first time in the program's history that taxes outweighed benefits for this group, a couple with average earnings.

The imbalance will get more pronounced for future generations of retirees. Couples now in their early 40s will have forked over $808,000 in Social Security taxes by the time they retire, but get back only $703,000 in benefits.

The Urban Institute included payroll taxes paid by both the employee and employer, but did not include the portion used for Social Security's disability insurance program. Since 2000, taxes for just the retirement program have totaled 10.6% -- 5.3% from the employee and the same from the employer. The levy is paid on income up to a certain threshold -- $113,700 for 2013. The institute said it adjusted its calculations for inflation plus 2%, about what a person could have traditionally realized in savings had they put the money in the bank.

So why is the shift happening now? It's because the first waves of recipients saw their promised benefits rise without sufficiently large tax increases to pay for them, Steuerle said. Rates rose significantly after the program was overhauled in 1983.

"Younger generations are paying much higher tax rates for the same benefits," he said.

Still, there are many folks who will collect more than they'll have paid. The typical American couple do not each earn the average wage during their careers since women often have lower incomes or take years off to raise children. In this scenario, the couple would receive more benefits than they pay in taxes because the wife's checks often will be based on her husband's earnings. Also, most lower-wage workers receive more in benefits than they pay in taxes.

To be clear, Social Security, created in 1935, doesn't operate like a savings account. Today's workers' taxes are funding the monthly checks being sent to today's retirees.

When it comes to Medicare, however, virtually all Americans are getting far more than they pay in taxes, which is 2.9% on all of one's income, not including the new 0.9% surtax on high earners. The couple turning 65 in 2010 paid a scant $122,000 in Medicare taxes, but can expect to get $427,000 in benefits.
And that pattern isn't reversing any time soon ... the spread actually widens for future generations.
Though many people are now putting more into Social Security than they will take out doesn't mean the entitlement program is on sound footing. A big part of the problem is that there are fewer workers to support the growing number of retirees.

The system is now paying out more in benefits than it collects in income, with the difference coming from the so-called trust fund, the result of surplus revenue previously paid into the system. But the trust fund is set to run out in 2033, after which the program will only be able to pay about three-quarters of promised benefits, according to the Social Security trustees.

"What we are paying into the system is paying for our parents' benefits," Steuerle said. "But it's not clear what that entitles us to get from our kids."

Monday, April 8, 2013

Pay your taxes electronically when you e-file your tax return


In my opinion, this is the best and safest way to pay taxes.  Doing so avoid checks getting lost or mis-used and data entry error by government personnel.   There is always a risk when one's social security number shows up on a check especially when banks these days routinely truncate the checks and store them electronically on their computers.

Friday, April 5, 2013

Proper Support for Charitable Contributions Critical

The IRS has been winning court cases where taxpayers do not follow all the requirements in supporting their charitable contributions.  Here are the IRS requirements:

David and Veronda Durden lost their $25,171 donation to their church because the acknowledgment from the church does not have the phrase, "no goods or services were provided in exchange" or "only intangible religious benefits were provided" even though they have all the cancelled checks.

A Sacramento couple lost an $18.5 million charitable contribution deduction because they did not attach a qualified appraisal to their tax returns:

Sunday, March 31, 2013

10 things financial advisers won’t say

  1. “We’re your biggest advocate, except when we’re not.”
  2. "What we charge is all over the map.”
  3. “Your future looks bright, according to our software.”
  4. “There’s no easy way to judge our stock-picking performance...”
  5. “...But we’re tops at raking in the dough.”
  6. “We get paid by mutual-fund companies…”
  7. “…And the loan departments of banks.”
  8. “You read our disclosures, right?”
  9. “We put more initials after our names than crown princes do.”
  10. “You want to sue us? That is so cute.”

Thursday, March 21, 2013

12 tax audit red flags

While I don't think #2 is a red flag per se, I pretty much agree these are some of the areas that can cause an IRS audit.  But how the IRS selects tax returns for audit is a well kept secret.  Nobody really knows.

  1. You have foreign assets
  2. Your ex wants revenge
  3. Your return has too many zeroes
  4. You have a home office
  5. You forgot some income
  6. You claim fishy deductions
  7. You're rich
  8. You say the wrong things
  9. You do a lot of 'work-related' driving
  10. You exaggerate donations  
  11. You own a money-losing business 
  12. You have a shady tax preparer

Tuesday, February 5, 2013

5 tax breaks on the chopping block

The article names these five items below as possibly on the chopping block.  If they become law, a side-effect would make income tax return preparation simpler as more people would be taking the standard deduction.  However, those who live in high cost states will most likely be unfairly punished.
  • Make employer sponsored health insurance premium taxable
  • Limit mortgage interest deduction to the primary residence and/or $500,000 in loan principal
  • Eliminate deduction of state and local taxes on Schedule A
  • Set a 2% floor for charitable contributions, much like miscellaneous itemized deductions
  • Limit exclusion for interest income on municipal bonds
This article provides the top ten tax breaks, in terms of lost revenue to the Treasury:

Saturday, January 26, 2013

Petition the White House to Relax Phone Unlocking Rule

I was really surprised when I read an NBC News story with the headline, "Unlocking cellphones becomes illegal Saturday".  But found the All Things Digital link below that says as long as we have the carrier's permission, we can still unlock our phone legally.  It's so nice to take our phone overseas and be able to use it by just inserting a local SIM card.


The practice of unlocking cellphones without carrier permission so you can use a device with another network will be illegal starting on Jan. 26.

The new law, which applies to devices purchased after today, came about &in October when the Library of Congress’ Register of Copyrights, which determines exemptions to the Digital Millennium Copyright Act (DMCA), ruled that unlocking cellphones and tablets without carrier permission should be illegal.

I have signed a petition on the White House web site for the removal of this ban, see link below.
  I don't understand why carriers lock the phones anyway because we can't jump to another carrier without compensating the carrier.  The goal is to gather 100,000 signatures by February 23rd.  They are way short of signatures at this time.


From both of these articles, it appears AT&T has changed its policy from 90 days to the entire term of the contract before they will unlock your phone.  This is terrible for those of us who travel overseas.

Here is a copy of the Library of Congress ruling:

Saturday, January 12, 2013

Refurb Samsung Galaxy S III Android Phone for AT&T for $30 + free shipping


If you're looking for a new cell phone and don't mind a refurbished one, here is a great deal, assuming you are either an AT&T customer or don't mind changing your carrier.

They charge you sales tax based on $550.  And of course, you must also have a data plan.

Thursday, January 10, 2013

List of IRS forms that 1040 filers can begin filing in late February or into March 2013


The following tax forms will be accepted by the IRS in late February or into March after updating forms and completing programming and testing of its processing systems. A specific date will be announced in the near future.

Form 3800 General Business Credit
Form 4136 Credit for Federal Tax Paid on Fuels
Form 4562 Depreciation and Amortization (Including Information on Listed Property)
Form 5074 Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands
Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations
Form 5695 Residential Energy Credits
Form 5735 American Samoa Economic Development Credit
Form 5884 Work Opportunity Credit
Form 6478 Credit for Alcohol Used as Fuel
Form 6765 Credit for Increasing Research Activities
Form 8396 Mortgage Interest Credit
Form 8582 Passive Activity Loss Limitations
Form 8820 Orphan Drug Credit
Form 8834 Qualified Plug-in Electric and Electric Vehicle Credit
Form 8839 Qualified Adoption Expenses
Form 8844 Empowerment Zone and Renewal Community Employment Credit
Form 8845 Indian Employment Credit
Form 8859 District of Columbia First-Time Homebuyer Credit
Form 8864 Biodiesel and Renewable Diesel Fuels Credit
Form 8874 New Markets Credits
Form 8900 Qualified Railroad Track Maintenance Credit
Form 8903 Domestic Production Activities Deduction
Form 8908 Energy Efficient Home Credit
Form 8909 Energy Efficient Appliance Credit
Form 8910 Alternative Motor Vehicle Credit
Form 8911 Alternative Fuel Vehicle Refueling Property Credit
Form 8912 Credit to Holders of Tax Credit Bonds
Form 8923 Mine Rescue Team Training Credit
Form 8932 Credit for Employer Differential Wage Payments
Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit

Tuesday, January 1, 2013

Avoiding the Fiscal Cliff

The Senate measure of HR 8 did little to rein in huge annual budget deficits that have helped push the U.S. debt to $16.4 trillion. It would raise $620 billion in tax revenue over the coming decade.

Under the agreement, tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000.

Taxes on capital gains and dividends over $400,000 for individuals and $450,000 for couples would be taxed at 20 percent, up from 15 percent.

The deal would reinstate provisions to tax law that phase out personal exemptions and itemized deductions, beginning at $250,000 for single people and $300,000 for couples.

The estate tax would also rise. The value of estates over $5 million would be taxed at 40 percent, up from 35 percent. The lifetime exemption level would be indexed for inflation.

The 2% social security payroll tax holiday is allowed to expire.  But many expiring provisions are extended, some for as long as five years:
  • deduction for certain expenses of elementary and secondary school teachers through 2013.
  • exclusion from gross income of discharge of qualified principal residence indebtedness through 2013.
  • parity for exclusion from income for employer-provided mass transit and parking benefits through 2014.
  • mortgage insurance premiums treated as qualified residence interest through 2013.
  • deduction of State and local general sales taxes through 2014.
  • special rule for contributions of capital gain real property made for conservation purposes through 2013.
  • above-the-line deduction for qualified tuition and related expenses through 2013.
  • tax-free distributions from individual retirement plans for charitable purposes through 2013.
  • American Opportunity Tax Credit, through 2017.
  • earned income tax credit, through 2017.
  • certain modifications relating to child tax credit for eligible dependent through 2017, permanently increases credit amount from $500 per child to $1,000

Under the deal, the new rates on income, investment and inheritances would be permanent, as would a provision to stop the alternative minimum tax from hitting middle-class families, setting AMT exemption to $78,750 for married couples and $50,600 for singles, with inflation index adjustments.

The bill would also extend jobless benefits for the long-term unemployed for an additional year at a cost of $30 billion, and would spend $31 billion to prevent a 27 percent cut in Medicare payments to doctors.

Another $64 billion would go to renew tax breaks for businesses and for renewable energy purposes, like tax credits for energy-efficient appliances.

Click http://i2.cdn.turner.com/cnn/2013/images/01/01/american.taxpayer.relief.act.pdf to read a copy of the Senate bill.

Click http://tax.cchgroup.com/downloads/files/pdfs/legislation/ATPR.pdf for a CCH explanation of the new American Taxpayer Relief Act of 2012