http://news.yahoo.com/fact-check-rich-taxed-less-secretaries-070642868.html
By STEPHEN OHLEMACHER - Associated Press
WASHINGTON (AP) — President Barack Obama makes it sound as if there are millionaires all over America paying taxes at lower rates than their secretaries.
"Middle-class families shouldn't pay higher taxes than millionaires and billionaires," Obama said Monday. "That's pretty straightforward. It's hard to argue against that."
The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.
There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.
In his White House address Monday, Obama called on Congress to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion. He proposed that Congress overhaul the tax code and impose what he called the "Buffett rule," named for billionaire investor Warren Buffett.
The rule says, "People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay."
"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said. "It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."
Buffett wrote in a recent piece for The New York Times that the tax rate he paid last year was lower than that paid by any of the other 20 people in his office.
This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.
Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.
Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.
The latest IRS figures are a few years older — and limited to federal income taxes — but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.
Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.
Obama's claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15 percent. The top marginal tax rate for wages is 35 percent, though that is reserved for taxable income above $379,150.
With tax rates that high, why do so many people pay at lower rates? Because the tax code is riddled with more than $1 trillion in deductions, exemptions and credits, and they benefit people at every income level, according to data from the nonpartisan Joint Committee on Taxation, Congress' official scorekeeper on revenue issues.
The Tax Policy Center estimates that 46 percent of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes.
"People who are doing quite well and worry about low-income people not paying any taxes bemoan the fact that they get so many tax breaks that they are zeroed out," said Roberton Williams, a senior fellow at the Tax Policy Center. "People at the bottom of the distribution say, but all of those rich guys are getting bigger tax breaks than we're getting, which is also the case."
Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates.
"So it really depends on what is your profession, where's the source of your income, what's the specific circumstances you face, and the averages won't really capture that," Geithner said.
Tuesday, September 20, 2011
Friday, September 16, 2011
IRS Receives 30,000 Disclosures of Offshore Bank Accounts
http://www.accountingtoday.com/news/IRS-Disclosures-Offshore-Bank-Accounts-60005-1.html
By Michael Cohn, Accounting Today
The Internal Revenue Service has gotten 12,000 new applications under its 2011 voluntary disclosure program of offshore bank accounts, pushing the total number of disclosures to 30,000 since 2009, when the IRS began offering a way for U.S. taxpayers to voluntarily disclose their foreign bank accounts.
The IRS said it has collected $2.2 billion to date from taxpayers who participated in the original 2009 voluntary disclosure program from the 80 percent of those cases that have been closed so far. The IRS held open the program an extra long time because more and more taxpayers came forward, and it introduced a newer program this year with the stricter penalties for those taxpayers who did not come forward under the original program.
The IRS said it has also collected an additional $500 million in taxes and interest as down payments for the 2011 offshore disclosure program, a figure that will increase because it doesn’t yet include penalties.
The IRS has been ramping up its efforts to prod taxpayers into disclosing their secret bank accounts, in some cases teaming up with the Justice Department to pursue banks like UBS and Credit Suisse to encourage them to reveal information on their U.S. customers.
“By any measure, we are in the middle of an unprecedented period for our global international tax enforcement efforts,” said IRS Commissioner Doug Shulman in a statement. “We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.”
Global tax enforcement has turned into a top priority at the IRS. Shulman claimed progress on multiple fronts, including ground-breaking international tax agreements and increased cooperation with other governments. In addition, the IRS and the Justice Department have increased their efforts at criminal investigation of international tax evasion.
The combination of efforts helped support the 2011 Offshore Voluntary Disclosure Initiative, which ended on Sept. 9. The 2011 effort followed the strong response to the 2009 Offshore Voluntary Disclosure Program that ended on Oct. 15, 2009. The programs gave U.S. taxpayers with undisclosed assets or income offshore a second chance to get compliant with the U.S. tax system, pay their fair share and avoid potential criminal charges.
The 2009 program led to approximately 15,000 voluntary disclosures and an additional 3,000 applicants who came in after the deadline, but were allowed to participate in the 2011 initiative. Beyond that, the 2011 program has generated an additional 12,000 voluntary disclosures, with some extra applications still being counted. From these efforts, taxpayers came forward and made a total of 30,000 voluntary disclosures.
“My goal all along was to get people back into the U.S. tax system,” Shulman said. “Not only are we bringing people back into the U.S. tax system, we are bringing revenue into the U.S. Treasury and turning the tide against offshore tax evasion.”
In new figures announced Thursday from the 2009 offshore program, the IRS has $2.2 billion in hand from taxes, interest and penalties representing about 80 percent of the 2009 cases that have closed. These cases come from bank accounts in 140 countries.
The IRS said it is beginning to work through the 2011 applications. The $500 million in payments so far from the 2011 program brings the total collected through the offshore programs to $2.7 billion.
“This dollar figure will grow in the months ahead,” Shulman said. “But just as importantly, we have changed the risk calculus. Americans now understand that if they try to hide assets overseas, the chances of being caught continue to increase.”
People hiding assets offshore have received jail sentences running for months or years, and have been ordered to pay hundreds of thousands and even millions of dollars, the IRS noted. UBS AG, Switzerland’s largest bank, agreed in 2009 to pay $780 million in fines, penalties, interest and restitution as part of a deferred prosecution agreement with the U.S. government.
The two disclosure programs provided the IRS with a wealth of information on various banks and advisors assisting people with offshore tax evasion. The IRS said it would use this information to continue its international enforcement efforts.
By Michael Cohn, Accounting Today
The Internal Revenue Service has gotten 12,000 new applications under its 2011 voluntary disclosure program of offshore bank accounts, pushing the total number of disclosures to 30,000 since 2009, when the IRS began offering a way for U.S. taxpayers to voluntarily disclose their foreign bank accounts.
The IRS said it has collected $2.2 billion to date from taxpayers who participated in the original 2009 voluntary disclosure program from the 80 percent of those cases that have been closed so far. The IRS held open the program an extra long time because more and more taxpayers came forward, and it introduced a newer program this year with the stricter penalties for those taxpayers who did not come forward under the original program.
The IRS said it has also collected an additional $500 million in taxes and interest as down payments for the 2011 offshore disclosure program, a figure that will increase because it doesn’t yet include penalties.
The IRS has been ramping up its efforts to prod taxpayers into disclosing their secret bank accounts, in some cases teaming up with the Justice Department to pursue banks like UBS and Credit Suisse to encourage them to reveal information on their U.S. customers.
“By any measure, we are in the middle of an unprecedented period for our global international tax enforcement efforts,” said IRS Commissioner Doug Shulman in a statement. “We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.”
Global tax enforcement has turned into a top priority at the IRS. Shulman claimed progress on multiple fronts, including ground-breaking international tax agreements and increased cooperation with other governments. In addition, the IRS and the Justice Department have increased their efforts at criminal investigation of international tax evasion.
The combination of efforts helped support the 2011 Offshore Voluntary Disclosure Initiative, which ended on Sept. 9. The 2011 effort followed the strong response to the 2009 Offshore Voluntary Disclosure Program that ended on Oct. 15, 2009. The programs gave U.S. taxpayers with undisclosed assets or income offshore a second chance to get compliant with the U.S. tax system, pay their fair share and avoid potential criminal charges.
The 2009 program led to approximately 15,000 voluntary disclosures and an additional 3,000 applicants who came in after the deadline, but were allowed to participate in the 2011 initiative. Beyond that, the 2011 program has generated an additional 12,000 voluntary disclosures, with some extra applications still being counted. From these efforts, taxpayers came forward and made a total of 30,000 voluntary disclosures.
“My goal all along was to get people back into the U.S. tax system,” Shulman said. “Not only are we bringing people back into the U.S. tax system, we are bringing revenue into the U.S. Treasury and turning the tide against offshore tax evasion.”
In new figures announced Thursday from the 2009 offshore program, the IRS has $2.2 billion in hand from taxes, interest and penalties representing about 80 percent of the 2009 cases that have closed. These cases come from bank accounts in 140 countries.
The IRS said it is beginning to work through the 2011 applications. The $500 million in payments so far from the 2011 program brings the total collected through the offshore programs to $2.7 billion.
“This dollar figure will grow in the months ahead,” Shulman said. “But just as importantly, we have changed the risk calculus. Americans now understand that if they try to hide assets overseas, the chances of being caught continue to increase.”
People hiding assets offshore have received jail sentences running for months or years, and have been ordered to pay hundreds of thousands and even millions of dollars, the IRS noted. UBS AG, Switzerland’s largest bank, agreed in 2009 to pay $780 million in fines, penalties, interest and restitution as part of a deferred prosecution agreement with the U.S. government.
The two disclosure programs provided the IRS with a wealth of information on various banks and advisors assisting people with offshore tax evasion. The IRS said it would use this information to continue its international enforcement efforts.
Monday, September 12, 2011
Tax the rich: How Obama will pay for his stimulus package
http://money.cnn.com/2011/09/12/news/economy/stimulus_package/index.htm
By Jeanne Sahadi @CNNMoney
NEW YORK (CNNMoney) -- President Obama proposed Monday to pay for his $447 billion stimulus package largely by taxing the rich more.
Obama's largest proposed pay-for -- which the White House estimates would raise roughly $400 billion over 10 years -- would limit itemized deductions and certain other exemptions for individuals with adjusted gross incomes of $200,000 or more ($250,000 and up for married couples).
The tax measure would go into effect on Jan. 1, 2013, when the White House assumes the top two income tax rates would revert to 36% and 39.6%, up from the current 33% and 35% as a result of the Bush-era tax cuts.
Obama's proposal would cap itemized deductions at 28%. That would mean for every $100 in deductions the rich claim in 2013, they would be able to reduce their tax bill by only $28. That would be less than the $36 or $39.60 they would get if they are in the top two tax brackets.
Relative to other federal tax filers, high-income households benefit disproportionately from itemized deductions -- including those for mortgage interest and charitable contributions.
What's in Obama's stimulus package
Obama's plan is similar to one he offered in each of his three budgets. But the proposal has gone nowhere in Congress.
The president put forth other repeat proposals on Monday to pay for the stimulus package.
So-called carried interest -- a portion of the money paid to managers of hedge funds and other investments partnerships -- would be taxed as ordinary income under Obama. Translation: It would be subject to rates as high as 39.6%, up from the current preferential rate of 15%. The White House estimates this change could raise $18 billion over 10 years.
Obama also wants to repeal various oil subsidies for an estimated savings of $40 billion. And he would impose a less-generous depreciation rule for the purchase of corporate jets. That measure would raise an estimated $3 billion.
All told, the pay-for proposals would raise roughly $467 billion, White House budget director Jacob Lew told reporters.
Lew noted that the White House measures "intentionally overachieve" on savings to compensate for likely differences in estimates that will be made by the Congressional Budget Office, which is the official cost-and-savings arbiter for Congress.
"We've built in a cushion for the differences that happen," Lew said.
The president's pay-for proposals will likely meet with stiff opposition from Republicans. Many GOP lawmakers don't want to raise taxes on anyone and aren't keen on the president's jobs plan to begin with, even though it contains more than $200 billion in tax cuts.
And at a time when Congress' debt super committee is working to cut deficits by at least $1.2 trillion over 10 years, Obama's pay-for plan would reduce the committee's revenue-raising options.
On the other hand, many career deficit hawks support measures to spur the economy now, so long as they are paid for eventually and paired with a long-term debt reduction plan.
For more, read this AP story at http://news.yahoo.com/obama-hike-taxes-pay-jobs-bill-200510620.html
By Jeanne Sahadi @CNNMoney
NEW YORK (CNNMoney) -- President Obama proposed Monday to pay for his $447 billion stimulus package largely by taxing the rich more.
Obama's largest proposed pay-for -- which the White House estimates would raise roughly $400 billion over 10 years -- would limit itemized deductions and certain other exemptions for individuals with adjusted gross incomes of $200,000 or more ($250,000 and up for married couples).
The tax measure would go into effect on Jan. 1, 2013, when the White House assumes the top two income tax rates would revert to 36% and 39.6%, up from the current 33% and 35% as a result of the Bush-era tax cuts.
Obama's proposal would cap itemized deductions at 28%. That would mean for every $100 in deductions the rich claim in 2013, they would be able to reduce their tax bill by only $28. That would be less than the $36 or $39.60 they would get if they are in the top two tax brackets.
Relative to other federal tax filers, high-income households benefit disproportionately from itemized deductions -- including those for mortgage interest and charitable contributions.
What's in Obama's stimulus package
Obama's plan is similar to one he offered in each of his three budgets. But the proposal has gone nowhere in Congress.
The president put forth other repeat proposals on Monday to pay for the stimulus package.
So-called carried interest -- a portion of the money paid to managers of hedge funds and other investments partnerships -- would be taxed as ordinary income under Obama. Translation: It would be subject to rates as high as 39.6%, up from the current preferential rate of 15%. The White House estimates this change could raise $18 billion over 10 years.
Obama also wants to repeal various oil subsidies for an estimated savings of $40 billion. And he would impose a less-generous depreciation rule for the purchase of corporate jets. That measure would raise an estimated $3 billion.
All told, the pay-for proposals would raise roughly $467 billion, White House budget director Jacob Lew told reporters.
Lew noted that the White House measures "intentionally overachieve" on savings to compensate for likely differences in estimates that will be made by the Congressional Budget Office, which is the official cost-and-savings arbiter for Congress.
"We've built in a cushion for the differences that happen," Lew said.
The president's pay-for proposals will likely meet with stiff opposition from Republicans. Many GOP lawmakers don't want to raise taxes on anyone and aren't keen on the president's jobs plan to begin with, even though it contains more than $200 billion in tax cuts.
And at a time when Congress' debt super committee is working to cut deficits by at least $1.2 trillion over 10 years, Obama's pay-for plan would reduce the committee's revenue-raising options.
On the other hand, many career deficit hawks support measures to spur the economy now, so long as they are paid for eventually and paired with a long-term debt reduction plan.
For more, read this AP story at http://news.yahoo.com/obama-hike-taxes-pay-jobs-bill-200510620.html
Friday, September 9, 2011
Financial numbers you should know
MSNBC Money by the Numbers: Vera Gibbons illustrates limits on borrowing and savings toward retirement, aired on September 8, 2011:
http://money.msn.com/money-video/default.aspx?vid=82b71386-47df-4b91-b567-337da45297d3
http://money.msn.com/money-video/default.aspx?vid=82b71386-47df-4b91-b567-337da45297d3
- 0% of take home pay on credit card debts, definitely no more than 5%
- 15% or more of gross set aside for retirement savings
- 25% of take home pay is maximum for housing costs, including mortgage payment, property tax and insurance, or 30% for rent.
Thursday, August 25, 2011
Brown to propose new corporate tax package
http://www.sacbee.com/2011/08/24/3860066/brown-to-propose-new-corporate.html
Gov. Jerry Brown will ask lawmakers Thursday to tighten a corporate tax formula in exchange for giving manufacturers a sales tax exemption and offering enhanced jobs tax credits, according to legislative sources.
To enact the plan, the Democratic governor must win votes from at least two Republicans in each house, which Brown failed to do in his state budget fight earlier this year. Brown will portray his plan, which would start in 2012, as a job creation package as California grapples with a 12 percent unemployment rate.
The linchpin is a requirement that multi-state companies calculate their corporate tax liability only on the proportion of sales they have in California relative to elsewhere in the nation, a method called "single sales factor."
Under a 2009 budget deal, firms won the ability to pick the more generous of two tax formulas starting this tax year, making California one of only two states to give companies that choice on an annual basis.
Brown wanted a mandatory single sales factor in January to raise nearly $1 billion for the state budget, but Republicans and business groups blocked that plan. Proponents say that making that formula mandatory would benefit companies that build facilities and create jobs in California. But it would force some major firms to pay more taxes and has divided the membership of leading business groups.
Rather than use the money to attack the deficit, the governor now wants to direct it toward a nearly 4 percent state sales tax exemption for manufacturing start-up companies and a 3 percent state sales tax exemption for existing firms, legislative sources said. The exemption would also apply to the biotechnology, software and clean energy industries.
Brown also wants to enhance employer tax credits by expanding the amount from $3,000 to $4,000 per worker and providing it to businesses with up to 50 employees, rather than 20.
The latest Brown proposal builds on Senate Bill 116 by Sen. Kevin de León, D-Los Angeles. SB 116 is on the Senate floor and has yet to be heard in the Assembly. The California Chamber of Commerce, California Taxpayers Association and California Manufacturers and Technology Association oppose the bill, according to a Senate analysis.
Brown called a Capitol press conference for Thursday morning, his first in nearly two months since reaching a tentative budget deal with Democrats. The governor has faced mounting criticism for ignoring job creation while other state leaders, most notably Lt. Gov. Gavin Newsom, have announced their own ideas.
"Promoting job creation in California should be a top priority for all legislators," said Brown spokesman Gil Duran in an e-mail. "We are hopeful that there will be bipartisan support for job creation in California."
Gov. Jerry Brown will ask lawmakers Thursday to tighten a corporate tax formula in exchange for giving manufacturers a sales tax exemption and offering enhanced jobs tax credits, according to legislative sources.
To enact the plan, the Democratic governor must win votes from at least two Republicans in each house, which Brown failed to do in his state budget fight earlier this year. Brown will portray his plan, which would start in 2012, as a job creation package as California grapples with a 12 percent unemployment rate.
The linchpin is a requirement that multi-state companies calculate their corporate tax liability only on the proportion of sales they have in California relative to elsewhere in the nation, a method called "single sales factor."
Under a 2009 budget deal, firms won the ability to pick the more generous of two tax formulas starting this tax year, making California one of only two states to give companies that choice on an annual basis.
Brown wanted a mandatory single sales factor in January to raise nearly $1 billion for the state budget, but Republicans and business groups blocked that plan. Proponents say that making that formula mandatory would benefit companies that build facilities and create jobs in California. But it would force some major firms to pay more taxes and has divided the membership of leading business groups.
Rather than use the money to attack the deficit, the governor now wants to direct it toward a nearly 4 percent state sales tax exemption for manufacturing start-up companies and a 3 percent state sales tax exemption for existing firms, legislative sources said. The exemption would also apply to the biotechnology, software and clean energy industries.
Brown also wants to enhance employer tax credits by expanding the amount from $3,000 to $4,000 per worker and providing it to businesses with up to 50 employees, rather than 20.
The latest Brown proposal builds on Senate Bill 116 by Sen. Kevin de León, D-Los Angeles. SB 116 is on the Senate floor and has yet to be heard in the Assembly. The California Chamber of Commerce, California Taxpayers Association and California Manufacturers and Technology Association oppose the bill, according to a Senate analysis.
Brown called a Capitol press conference for Thursday morning, his first in nearly two months since reaching a tentative budget deal with Democrats. The governor has faced mounting criticism for ignoring job creation while other state leaders, most notably Lt. Gov. Gavin Newsom, have announced their own ideas.
"Promoting job creation in California should be a top priority for all legislators," said Brown spokesman Gil Duran in an e-mail. "We are hopeful that there will be bipartisan support for job creation in California."
Parcel number required for property tax deductions
From Spidell Publishing Inc.®
The California Franchise Tax Board is planning to add a line to Schedule CA of Form 540 asking taxpayers who deducted property tax to list the address and parcel number of the property. There will apparently be language cautioning taxpayers that certain payments, such as Mello Roos, are not deductible property tax payments.
Interestingly, Schedule CA is used to adjust federal income for California nonconformity items and California conforms to federal law as it pertains to individuals who claim deductions for property tax.
The California Franchise Tax Board is planning to add a line to Schedule CA of Form 540 asking taxpayers who deducted property tax to list the address and parcel number of the property. There will apparently be language cautioning taxpayers that certain payments, such as Mello Roos, are not deductible property tax payments.
Interestingly, Schedule CA is used to adjust federal income for California nonconformity items and California conforms to federal law as it pertains to individuals who claim deductions for property tax.
Sunday, August 21, 2011
Social Security disability on verge of insolvency
http://news.yahoo.com/social-security-disability-verge-insolvency-090119318.html
By STEPHEN OHLEMACHER - Associated Press
WASHINGTON (AP) — Laid-off workers and aging baby boomers are flooding Social Security's disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.
Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can't find new ones in an economy that has shed nearly 7 million jobs.
The stampede for benefits is adding to a growing backlog of applicants — many wait two years or more before their cases are resolved — and worsening the financial problems of a program that's been running in the red for years.
New congressional estimates say the trust fund that supports Social Security disability will run out of money by 2017, leaving the program unable to pay full benefits, unless Congress acts. About two decades later, Social Security's much larger retirement fund is projected to run dry as well.
Much of the focus in Washington has been on fixing Social Security's retirement system. Proposals range from raising the retirement age to means-testing benefits for wealthy retirees. But the disability system is in much worse shape and its problems defy easy solutions.
The trustees who oversee Social Security are urging Congress to shore up the disability system by reallocating money from the retirement program, just as lawmakers did in 1994. That would provide only short-term relief at the expense of weakening the retirement program.
Claims for disability benefits typically increase in a bad economy because many disabled people get laid off and can't find a new job. This year, about 3.3 million people are expected to apply for federal disability benefits. That's 700,000 more than in 2008 and 1 million more than a decade ago.
"It's primarily economic desperation," Social Security Commissioner Michael Astrue said in an interview. "People on the margins who get bad news in terms of a layoff and have no other place to go and they take a shot at disability,"
The disability program is also being hit by an aging population — disability rates rise as people get older — as well as a system that encourages people to apply for more generous disability benefits rather than waiting until they qualify for retirement.
Retirees can get full Social Security benefits at age 66, a threshold gradually rising to 67. Early retirees can get reduced benefits at 62. However, if you qualify for disability, you can get full benefits, based on your work history, even before 62.
Also, people who qualify for Social Security disability automatically get Medicare after two years, even if they are younger than 65, the age when other retirees qualify for the government-run health insurance program.
Congress tried to rein in the disability program in the late 1970s by making it tougher to qualify. The number of people receiving benefits declined for a few years, even during a recession in the early 1980s. Congress, however, reversed course and loosened the criteria, and the rolls were growing again by 1984.
The disability program "got into trouble first because of liberalization of eligibility standards in the 1980s," said Charles Blahous, one of the public trustees who oversee Social Security. "Then it got another shove into bigger trouble during the recent recession."
Today, about 13.6 million people receive disability benefits through Social Security or Supplemental Security Income. Social Security is for people with substantial work histories, and monthly disability payments average $927. Supplemental Security Income does not require a work history but it has strict limits on income and assets. Monthly SSI payments average $500.
As policymakers work to improve the disability system, they are faced with two major issues: Legitimate applicants often have to wait years to get benefits while many others get payments they don't deserve.
Last year, Social Security detected $1.4 billion in overpayments to disability beneficiaries, mostly to people who got jobs and no longer qualified, according to a recent report by the Government Accountability Office, the investigative arm of Congress.
Congress is targeting overpayments.
The deficit reduction package enacted this month would allow Congress to boost Social Security's budget by about $4 billion over the next decade to invest in programs that identify people who no longer qualify for disability benefits. The Congressional Budget Office estimates that increased enforcement would save nearly $12 billion over the next decade.
At the same time, the application process can be a nightmare for legitimate applicants. About two-thirds of initial applications are rejected. Most of these people drop their claims, but for those willing go through an appeals process that can take two years or more, chances are good they eventually will get benefits.
Astrue has pledged to reduce processing times for applicants' appeals, and he has had some success, even as the number of claims skyrockets. The number of people waiting for decisions has increased, but their wait times are going down.
"It's ludicrous to say that the backlog problem is getting worse," Astrue said. "The backlog problem has gotten dramatically better."
Patricia L. Foster said she was working as a nurse in a hospital in Columbia, S.C., in 2005 when she was attacked by a patient who was suffering from a mental illness. Foster, 64, said she injured her neck so bad she had a plate inserted. She said she also suffers from post-traumatic stress disorder.
Foster was turned down twice for Social Security disability benefits before finally getting them in 2009, after hiring an Illinois-based company, Allsup, to represent her. She said she was awarded retroactive benefits, though the process was demeaning.
"I have to tell you, when you're told you cannot return to nursing because of your disability, you don't know how long I cried about that," Foster said. "And then Social Security says, 'Oh no, you don't qualify.' You don't know what that does to you emotionally. You have no idea."
By STEPHEN OHLEMACHER - Associated Press
WASHINGTON (AP) — Laid-off workers and aging baby boomers are flooding Social Security's disability program with benefit claims, pushing the financially strapped system toward the brink of insolvency.
Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can't find new ones in an economy that has shed nearly 7 million jobs.
The stampede for benefits is adding to a growing backlog of applicants — many wait two years or more before their cases are resolved — and worsening the financial problems of a program that's been running in the red for years.
New congressional estimates say the trust fund that supports Social Security disability will run out of money by 2017, leaving the program unable to pay full benefits, unless Congress acts. About two decades later, Social Security's much larger retirement fund is projected to run dry as well.
Much of the focus in Washington has been on fixing Social Security's retirement system. Proposals range from raising the retirement age to means-testing benefits for wealthy retirees. But the disability system is in much worse shape and its problems defy easy solutions.
The trustees who oversee Social Security are urging Congress to shore up the disability system by reallocating money from the retirement program, just as lawmakers did in 1994. That would provide only short-term relief at the expense of weakening the retirement program.
Claims for disability benefits typically increase in a bad economy because many disabled people get laid off and can't find a new job. This year, about 3.3 million people are expected to apply for federal disability benefits. That's 700,000 more than in 2008 and 1 million more than a decade ago.
"It's primarily economic desperation," Social Security Commissioner Michael Astrue said in an interview. "People on the margins who get bad news in terms of a layoff and have no other place to go and they take a shot at disability,"
The disability program is also being hit by an aging population — disability rates rise as people get older — as well as a system that encourages people to apply for more generous disability benefits rather than waiting until they qualify for retirement.
Retirees can get full Social Security benefits at age 66, a threshold gradually rising to 67. Early retirees can get reduced benefits at 62. However, if you qualify for disability, you can get full benefits, based on your work history, even before 62.
Also, people who qualify for Social Security disability automatically get Medicare after two years, even if they are younger than 65, the age when other retirees qualify for the government-run health insurance program.
Congress tried to rein in the disability program in the late 1970s by making it tougher to qualify. The number of people receiving benefits declined for a few years, even during a recession in the early 1980s. Congress, however, reversed course and loosened the criteria, and the rolls were growing again by 1984.
The disability program "got into trouble first because of liberalization of eligibility standards in the 1980s," said Charles Blahous, one of the public trustees who oversee Social Security. "Then it got another shove into bigger trouble during the recent recession."
Today, about 13.6 million people receive disability benefits through Social Security or Supplemental Security Income. Social Security is for people with substantial work histories, and monthly disability payments average $927. Supplemental Security Income does not require a work history but it has strict limits on income and assets. Monthly SSI payments average $500.
As policymakers work to improve the disability system, they are faced with two major issues: Legitimate applicants often have to wait years to get benefits while many others get payments they don't deserve.
Last year, Social Security detected $1.4 billion in overpayments to disability beneficiaries, mostly to people who got jobs and no longer qualified, according to a recent report by the Government Accountability Office, the investigative arm of Congress.
Congress is targeting overpayments.
The deficit reduction package enacted this month would allow Congress to boost Social Security's budget by about $4 billion over the next decade to invest in programs that identify people who no longer qualify for disability benefits. The Congressional Budget Office estimates that increased enforcement would save nearly $12 billion over the next decade.
At the same time, the application process can be a nightmare for legitimate applicants. About two-thirds of initial applications are rejected. Most of these people drop their claims, but for those willing go through an appeals process that can take two years or more, chances are good they eventually will get benefits.
Astrue has pledged to reduce processing times for applicants' appeals, and he has had some success, even as the number of claims skyrockets. The number of people waiting for decisions has increased, but their wait times are going down.
"It's ludicrous to say that the backlog problem is getting worse," Astrue said. "The backlog problem has gotten dramatically better."
Patricia L. Foster said she was working as a nurse in a hospital in Columbia, S.C., in 2005 when she was attacked by a patient who was suffering from a mental illness. Foster, 64, said she injured her neck so bad she had a plate inserted. She said she also suffers from post-traumatic stress disorder.
Foster was turned down twice for Social Security disability benefits before finally getting them in 2009, after hiring an Illinois-based company, Allsup, to represent her. She said she was awarded retroactive benefits, though the process was demeaning.
"I have to tell you, when you're told you cannot return to nursing because of your disability, you don't know how long I cried about that," Foster said. "And then Social Security says, 'Oh no, you don't qualify.' You don't know what that does to you emotionally. You have no idea."
Friday, August 19, 2011
IRS Lowers Interest Rates in Fourth Quarter
http://www.accountingtoday.com/news/IRS-Lowers-Interest-Rates-Fourth-Quarter-59598-1.html
Washington, D.C. (August 18, 2011)
By Michael Cohn, Accounting Today
The Internal Revenue Service said Thursday that interest rates will decrease in the fourth quarter for tax underpayments and overpayments by a full percentage point.
For the calendar quarter beginning Oct. 1, 2011, the IRS is lowering the interest rate to 3 percent for overpayments, or 2 percent in the case of a corporation. That’s a percentage point lower than the rates in the third quarter for corporations and other taxpayers.
For underpayments, the interest rate will be 3 percent in the fourth quarter, down from 4 percent in the third quarter.
For large corporate underpayments, the interest rate will be 5 percent in the fourth quarter, down from 6 percent in the third quarter.
For the portion of a corporate overpayment exceeding $10,000, the interest rate in the fourth quarter will be 0.5 percent, down from 1.5 percent in the third quarter.
http://www.blogger.com/img/blank.gif
Under the Tax Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate, plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus half a percentage point. The interest rates are computed from the federal short-term rate during July 2011 to take effect Aug. 1, 2011, based on daily compounding.
The IRS describes the interest rates in more detail in Revenue Ruling 2011-18.
Washington, D.C. (August 18, 2011)
By Michael Cohn, Accounting Today
The Internal Revenue Service said Thursday that interest rates will decrease in the fourth quarter for tax underpayments and overpayments by a full percentage point.
For the calendar quarter beginning Oct. 1, 2011, the IRS is lowering the interest rate to 3 percent for overpayments, or 2 percent in the case of a corporation. That’s a percentage point lower than the rates in the third quarter for corporations and other taxpayers.
For underpayments, the interest rate will be 3 percent in the fourth quarter, down from 4 percent in the third quarter.
For large corporate underpayments, the interest rate will be 5 percent in the fourth quarter, down from 6 percent in the third quarter.
For the portion of a corporate overpayment exceeding $10,000, the interest rate in the fourth quarter will be 0.5 percent, down from 1.5 percent in the third quarter.
http://www.blogger.com/img/blank.gif
Under the Tax Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate, plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus half a percentage point. The interest rates are computed from the federal short-term rate during July 2011 to take effect Aug. 1, 2011, based on daily compounding.
The IRS describes the interest rates in more detail in Revenue Ruling 2011-18.
Wednesday, August 17, 2011
Social Security Mistakenly Reports Thousands of Deaths
http://finance.yahoo.com/retirement/article/113342/social-security-mistakenly-reports-deaths-cnnmoney
by Blake Ellis
More Americans are being erroneously killed off by the Social Security Administration every day.
Of the approximately 2.8 million death reports the Social Security Administration receives per year, about 14,000 -- or one in every 200 deaths -- are incorrectly entered into its Death Master File, which contains the Social Security numbers, names, birth dates, death dates, zip codes and last-known residences of more than 87 million deceased Americans. That averages out to 38 life-altering mistakes a day.
While these errors occur online, in the depths of the administration's database, they have a very real impact on the people who have effectively been declared dead.
"Erroneous death entries can lead to benefit termination, cause severe financial hardship and distress to affected individuals, and result in the publication of living individuals' [personal identifying information] in the [Death Master File]," the Inspector General said in its most recent evaluation of the database.
Laura Brooks, of Spotsylvania, Va., discovered she had been declared dead when she stopped receiving her disability checks, and her rent and student loan payments unexpectedly bounced.
She went to her bank and a representative said her account had been closed because she was dead. Brooks, a 52-year old mother of two, was already on permanent disability because of a severe depressive disorder, so hearing this turned her already difficult world completely upside down.
"It was one of those surreal things, like seeing a UFO," said Brooks. "When you are a person who already thought that maybe you should be dead because life was so bad to you, I thought this could be a premonition."
The bank representative told Brooks she couldn't reopen her account until she could prove she was alive. When she went to the Social Security office in January 2001, she found out she was declared dead on Dec. 6, 2000. To correct this, she had to submit the pay stubs she was receiving from a program that helps people on disability get back to work.
It took two months for the Social Security Administration to finally "revive" her. The administration later explained that a funeral director had mistyped a Social Security number when submitting a death notice to the agency.
Because of that misstep, Brooks said she accumulated between $300 and $400 in fees for bounced checks, and she hadn't received the more than $1,000 in disability payments she was owed. Once she was declared alive again, the Social Security Administration only resumed her payments -- it wouldn't reimburse her for missed payments, she said.
"Those disability checks were everything I had, and the $300 to $400 I had to pay in fees was more than half of that weekly income," she said. "But more than the financial impact of all of this was the psychological shock -- it spiraled me into further depression and really started me on the road to questioning authority."
Making matters worse, Brooks said the Social Security Administration had somehow lost the file containing all of her information, including her disability benefit records and medical history. It took her two years to rebuild it.
Eleven years after being declared dead by the Social Security Administration, Brooks claims the agency has yet to apologize to her for the debacle.
The Social Security Administration said it cannot comment on specific cases but said it works as quickly as it can to fix these types of mistakes and that two months is too long for an error like this to be resolved.
36,657 Erroneous Deaths in Three Years
Of course, Brooks isn't the only living person to have been put in the Social Security graveyard. In a recent investigation, the Social Security Office of the Inspector General, which oversees the Social Security Administration, discovered that the Death Master File contained 36,657 death entries between May 2007 and April 2010 for people who were very much alive.
In fact, the Social Security Administration admits that erroneous entries slip through the cracks.
"It is unfortunate, but some of the death data that we post to our records ... proves to be wrong and we correct it as soon as possible," said administration spokesman Mark Hinkle. "Usually the error was inadvertently caused because of a human typing error when death information was entered into a computer system."
This inaccurate information is then sold to the public, as well as to banks and credit bureaus.
Those who are declared dead not only lose their ability to apply for credit or receive benefits, but they are also at a high risk for identity theft now that all of their personally-identifying information has been made public.
In one review, the Inspector General found that months after the Social Security Administration deleted incorrect information from the database, the personally identifiable information of 28% of the individuals was still publicly available on at least one other web site.
What to Do If You've Been Declared Dead
To avoid the financial hardship or risk of identity theft as a result of being named to the Social Security's death list, the Identity Theft Resource Center recommends that you do the following:
First, find out who reported you as dead.
Then, get a copy of your death certificate from the county clerk's or recorder's office where the death was reported, and fill out a form to amend the certificate. The death certificate will include the name of whoever reported your death. This person is typically contacted to sign the amendment as well.
To remove your name from the database, you need to make an appointment at your local Social Security office. Bring a photo ID and the certified copy of the amended death certificate, the ITRC said.
http://www.blogger.com/img/blank.gif
Once you correct the information with Social Security, you may need to contact your bank, credit bureaus and any other entities that are under the impression that you're deceased to let them know you've been born again.
Social Security's Hinkle said it's typically easier to fix than this.
"It normally involves seeing the person face-to-face and verifying some form of current ID," he said, adding that the administration occasionally writes letters that people can present to other entities to prove they are alive.
"We take these situations seriously and wish they didn't happen at all, but when we find out it has occurred, we help the person fix it," said Hinkle.
Direct CNN link: http://money.cnn.com/2011/08/17/pf/social_security_deaths_mistakes/index.htm
by Blake Ellis
More Americans are being erroneously killed off by the Social Security Administration every day.
Of the approximately 2.8 million death reports the Social Security Administration receives per year, about 14,000 -- or one in every 200 deaths -- are incorrectly entered into its Death Master File, which contains the Social Security numbers, names, birth dates, death dates, zip codes and last-known residences of more than 87 million deceased Americans. That averages out to 38 life-altering mistakes a day.
While these errors occur online, in the depths of the administration's database, they have a very real impact on the people who have effectively been declared dead.
"Erroneous death entries can lead to benefit termination, cause severe financial hardship and distress to affected individuals, and result in the publication of living individuals' [personal identifying information] in the [Death Master File]," the Inspector General said in its most recent evaluation of the database.
Laura Brooks, of Spotsylvania, Va., discovered she had been declared dead when she stopped receiving her disability checks, and her rent and student loan payments unexpectedly bounced.
She went to her bank and a representative said her account had been closed because she was dead. Brooks, a 52-year old mother of two, was already on permanent disability because of a severe depressive disorder, so hearing this turned her already difficult world completely upside down.
"It was one of those surreal things, like seeing a UFO," said Brooks. "When you are a person who already thought that maybe you should be dead because life was so bad to you, I thought this could be a premonition."
The bank representative told Brooks she couldn't reopen her account until she could prove she was alive. When she went to the Social Security office in January 2001, she found out she was declared dead on Dec. 6, 2000. To correct this, she had to submit the pay stubs she was receiving from a program that helps people on disability get back to work.
It took two months for the Social Security Administration to finally "revive" her. The administration later explained that a funeral director had mistyped a Social Security number when submitting a death notice to the agency.
Because of that misstep, Brooks said she accumulated between $300 and $400 in fees for bounced checks, and she hadn't received the more than $1,000 in disability payments she was owed. Once she was declared alive again, the Social Security Administration only resumed her payments -- it wouldn't reimburse her for missed payments, she said.
"Those disability checks were everything I had, and the $300 to $400 I had to pay in fees was more than half of that weekly income," she said. "But more than the financial impact of all of this was the psychological shock -- it spiraled me into further depression and really started me on the road to questioning authority."
Making matters worse, Brooks said the Social Security Administration had somehow lost the file containing all of her information, including her disability benefit records and medical history. It took her two years to rebuild it.
Eleven years after being declared dead by the Social Security Administration, Brooks claims the agency has yet to apologize to her for the debacle.
The Social Security Administration said it cannot comment on specific cases but said it works as quickly as it can to fix these types of mistakes and that two months is too long for an error like this to be resolved.
36,657 Erroneous Deaths in Three Years
Of course, Brooks isn't the only living person to have been put in the Social Security graveyard. In a recent investigation, the Social Security Office of the Inspector General, which oversees the Social Security Administration, discovered that the Death Master File contained 36,657 death entries between May 2007 and April 2010 for people who were very much alive.
In fact, the Social Security Administration admits that erroneous entries slip through the cracks.
"It is unfortunate, but some of the death data that we post to our records ... proves to be wrong and we correct it as soon as possible," said administration spokesman Mark Hinkle. "Usually the error was inadvertently caused because of a human typing error when death information was entered into a computer system."
This inaccurate information is then sold to the public, as well as to banks and credit bureaus.
Those who are declared dead not only lose their ability to apply for credit or receive benefits, but they are also at a high risk for identity theft now that all of their personally-identifying information has been made public.
In one review, the Inspector General found that months after the Social Security Administration deleted incorrect information from the database, the personally identifiable information of 28% of the individuals was still publicly available on at least one other web site.
What to Do If You've Been Declared Dead
To avoid the financial hardship or risk of identity theft as a result of being named to the Social Security's death list, the Identity Theft Resource Center recommends that you do the following:
First, find out who reported you as dead.
Then, get a copy of your death certificate from the county clerk's or recorder's office where the death was reported, and fill out a form to amend the certificate. The death certificate will include the name of whoever reported your death. This person is typically contacted to sign the amendment as well.
To remove your name from the database, you need to make an appointment at your local Social Security office. Bring a photo ID and the certified copy of the amended death certificate, the ITRC said.
http://www.blogger.com/img/blank.gif
Once you correct the information with Social Security, you may need to contact your bank, credit bureaus and any other entities that are under the impression that you're deceased to let them know you've been born again.
Social Security's Hinkle said it's typically easier to fix than this.
"It normally involves seeing the person face-to-face and verifying some form of current ID," he said, adding that the administration occasionally writes letters that people can present to other entities to prove they are alive.
"We take these situations seriously and wish they didn't happen at all, but when we find out it has occurred, we help the person fix it," said Hinkle.
Direct CNN link: http://money.cnn.com/2011/08/17/pf/social_security_deaths_mistakes/index.htm
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