On my show this morning, I talked about how next week is going to be a show with our regular tax experts. I advised listeners to get their tax questions ready to go.
Here’s the first tax question I received. I hope it will spark an interesting discussion online this week, in advance of the show.
While I was really asking you to come up with your personal tax questions (like about deductions for rental property), I’m happy to throw this out there.
Q: Here is a tax question for next week’s show, or actually, a couple of tax questions that the pundits and talk radio and TV seem to avoid. Ready?
The Feds reduced F.I.C.A. tax for all employees by 2%, thus feigning a pay increase on each pay check. But, only the employee side of the F.I.C.A. The employers continue to pay the 6+ %. Does this make sense with Social Security is known to be in deep trouble and entitlements is a serious contributor to the national deficit? (I won’t go there now as to the reasons Social Security is not solvent.)
And, at the same time, the Feds raised the tax payroll deduction percentage. So, if you work, the Feds give you a pittance via a reduction in Social Security taxes in the left hand and take it away in the right hand via higher tax deductions. Does this make any sense and how much further will Social Security’s shortfall go because if this?
I have an extra amount of federal taxes taken from my pay check to make up for a projected short-fall in tax payments due to 1099 income. Of course, this overpayment wasn’t taken into consideration.
The challenge is on! Who can explain these obvious contradictions?
Don Rehwaldt, Mayor
A: Hi Don:
Well, your questions aren’t tax questions, per se – which I think you already know. They’re political questions framed around tax.
What’s happened is that some of our politicians want to be able to brag about giving “tax cuts.” They believe that “tax cuts” will somehow bring about enough boom in the economy to spur much bigger tax payments to the IRS. In other words, business will boom, so tax receipts will soar far above the cost of the tax cuts.
And yet, the government is taking away these cuts. I’m getting a tax increase because Illinois is in such a huge hole that my state taxes are going up from 3 percent to 5 percent. So, I’m not getting a tax cut at all.
Personally, I think most of the folks who live on Main Street are smart enough to see around this. But not all.
None of this is going to fix the deficit. And, it’s fine to cut big government spending, but when another 500,000 to 1 million people file for unemployment, because they’ve been fired because we cut their budget, no one is going to be happy that we’re paying more in benefits.
We’re in a vicious economic cycle and it will be interesting to see where it all leads. Personally, I’m a little worried.
You’re welcome to call in with your “tax” question, but I’m going to post it on today’s show notes for open discussion.
Thanks for listening.
My question is not directly related to what was on your show but I do hope that you can help. It involves inheritance property and the associated taxes. My mother-in-law passed Feb 6 2009. She passed an apartmnet building on to my wife , her sister and husband and I. She live in in the building as well and rented out one of the two apartments upsatirs. The property is in Washington, DC. It has gone through probate and it doesn’t have a mortgage. We need help on how to file taxes on the property. How do we claim it on our 2010 (amended) and current 2011 taxes between the two households? I hope that you can help.