March 5, 2014
- When Uncle Sam can’t tax the rich enough, here’s what he does
- Insulating yourself from everything new at the IRS this year
- Guenthner spots a slice of the market due for a rest
- Why now might be an especially good time to add to your metals stash
- Latest California gold find rumor shot down… readers sound off about Ukraine… the financial event one in three U.S. women say is better than sex… and more!
We dip our toe this morning, with no small amount of trepidation, back into the roaring and scalding waters of “income inequality”… with an eye toward reducing your tax bill.
We’re in debt to money manager and blogger extraordinaire Barry Ritholtz for pointing us to the following infographic from the site Visualizing Economics. The chart, says Barry, “shows just how fantastic the spread was in 2010 between those who are merely rich and the fabulously wealthy. This is an unweighted scale. It isn’t skewed for population. It merely ranks top incomes by dollars earned.”
[Click to enlarge]
See that little red dot down there in the inset? That’s “the 99%.”
To make it anywhere higher on the scale, you need an adjusted gross income of $388,905 — going by the latest IRS figures.
From Uncle Sam’s standpoint, the problem with “the rich” is there just aren’t enough of them.
Perhaps you’ve seen the YouTube videos explaining how if the IRS confiscated 100% of the income of everyone above $250,000 a year, it would keep the federal government running for a mere 141 days — less than five months.
Seen in that light, it’s a wonder Congress and the president held off scaling back the “Bush tax cuts” for as long as they did. But shortly after the calendar turned from 2012 to 2013, they could no longer stop themselves…
And the bill comes due on April 15 — unless you have the joy of filing “estimated taxes” every quarter, in which case it’s been your nightmare for a while now.
Let’s quickly recap…
- Couples who make more than $450,000 have reverted to Clinton-era rates (single $400,000)
- In addition, their tax rate on dividends and long-term capital gains jumps from 15% to 20%
- Itemized deductions and the personal exemption start phasing out on couples’ incomes above $300,000 (single $250,000). “Both phaseouts complicate tax planning and return preparation while raising taxes,” the accounting firm Grant Thornton helpfully reminds us.
Not related to the midnight legislation but nonetheless new this year, is the 3.8% tax on net investment income, ostensibly to feed the insatiable maw of Medicare.
You will need professional help with this one: “The 3.8% tax applies to whichever is less — their taxable investment income or the amount that their modified adjusted gross income (AGI) exceeds the $200,000/$250,000 threshold,” CNN Money gamely tries to explain.
At least the capital gains from a home sale are still off-limits — up to $500,000 for a couple ($250,000 single).
Conventional wisdom has it that there are few changes you can make now to reduce your 2013 tax bill due April 15.
The most common advice: Contribute to an IRA if you haven’t already — that’s an “above the line” deduction good for as much as $6,500 if you’re over age 50.
Yawn… stretch.
What you need about now is a bag of tricks — legal and ethical, of course — to slash your tax bill and effectively “disappear” from the IRS come April 15, less than six weeks from now.
Did you know, for instance…
- There’s a loophole allowing you to file under head-of-household rates — even if you have no children?
- There’s a way to deduct 100% of your medical expenses? (Yes, you can save money under Obamacare)
- You can deduct a portion of your mortgage or rent, without owning a home-based business?
All told, our friend Gale Dent from the Laissez Faire Letter has unearthed 97 ways to lower your taxes to the absolute minimum.
The research, she tells us, wasn’t drudgery at all. Indeed, it was personal — borne of her experience as the daughter of an IRS “hit man” who hunted down and intimidated taxpayers into costly settlements.
After two years of that, he crossed over from the dark side and began helping people keep their tax bill as low as possible.
Like father, like daughter… and you can reap the benefits in time for April 15. But it’s best if you get going right now…
Click here to slash your tax bill this year… and for years to come.
The major U.S. stock indexes are taking a breather after their powerful run-up yesterday. As we write, the Dow and the Russell 2000 are fractionally in the red; the S&P and the Nasdaq are fractionally in the green.
“It’s good to see the Dow industrials see some action,” writes Greg Guenthner in today’s Rude Awakening. “The Dow has woefully underperformed lately. But yesterday’s bounce occurred right at the Dow’s 50-day moving average — helping take the blue chips out of the danger zone for now.
“But the Russell’s performance yesterday is complete insanity. Small caps are flying a little too close to the sun right now. I wouldn’t be surprised to see the Russell take a break here.”
Gold is creeping its way back toward the $1,350 level that’s been on our radar for a couple of weeks. The bid as we write is $1,340.
If you’ve been waiting for premiums on precious metals to come back down, now’s your chance.
“With the recent uptick in gold and silver prices, there has been a slight increase in the amount of bullion-priced gold and silver being liquidated by retail customers in the United States,” writes Michigan-based dealer Patrick Heller at the NumisMaster site.
And with demand softening a bit, “within the past week, there have been several opportunities to acquire selected coins or bars at lower-than-normal premiums.”
Premiums have climbed down in particular on Silver Eagles and pre-1965 “junk” silver dimes, quarters and halves. If it’s gold you’re looking for, “premiums have fallen for pre-2014-dated U.S. gold American Eagles and Maple Leaves, Mexico 50 pesos, Austria 100 coronas and various sizes of gold bars.”
The California Gold Discovery: Day 5. Every time we think the story’s over, we see a new wrinkle.
In case you need to catch up: Word came out last week that a couple from northern California was out walking the dog on their property when they stumbled on $10 million worth of U.S. gold coinage from the 19th century.
Yesterday’s installment featured speculation the haul was stolen from the San Francisco Mint in 1899.
“It’s provably incorrect,” comes the riposte from numismatist David McCarthy of Kagin’s, the dealer helping the couple sell the stash.
McCarthy cites five reasons to NBC News. The most compelling to us is that many of the coins had been heavily circulated — which the Mint would have melted down and reissued.
“If the coins were stolen from the U.S. Mint, they remain government property,” points out our Byron King, catching up on emails while at the PDAC mining conference in Toronto.
“The government never loses title to certain property, certainly not by theft.”
Byron reminds us of the Langbord family, heirs of a Philadelphia coin dealer. They claimed ownership of 10 extremely rare 1933 gold Double Eagles. The feds argued the coins were stolen from the Philadelphia Mint… and won.
“So the finders may not owe tax after all,” Byron sums up — “because the government can seize the entire stash.
“Lesson: If you find gold coins, sell them quietly, for cash… or melt them down. Don’t get yourself written up in news articles.”
Even anonymously.
“Russia doesn’t need to invade Ukraine,” writes one of our regulars. “They can just raise the price of the commodity that all of Europe uses!”
The reader then points us to an article that says the Russian gas giant Gazprom will cancel the discount it had extended to Ukraine under an agreement negotiated by the now-deposed President Yanukovych.
“Hmm, what would this mean to the European business recovery if the price on Russia’s natural gas doubles? It seems Putin beat Obama to the punch on sanctions. Since Russia is an independent nation, they can do what they want, although it’s in Russia’s interest not to kill the goose (Europe).”
“I haven’t heard you mention,” a reader gently chides us, “the natural gas that Russia exports to the EU; approximately 80% of the pipelines are located in Ukraine.
[Maybe you missed this map we shared a few days ago…]
“Also,” adds the reader, “I heard something about a treaty we signed with Ukraine to protect them in the future after they got rid of their nukes. That sounds a lot like the call to Rome you mentioned yesterday.”
The 5: Yes and no. There’s a lot of misunderstanding over the 1994 Budapest Memorandum. In recent days, Russophobes like CNN’s Christiane Amanpour have insisted Russia must back off to comply with the agreement.
“This is noteworthy,” says the University of Illinois’ Francis Boyle, “because the Budapest Agreement also states that the U.S., Russia, Ukraine and U.K. need to immediately jointly ‘consult’ — meaning meet at least at the foreign minister level.” No such meeting has yet taken place…
“I would just like to know what exactly the Ukrainians were protesting!” says a reader, peeling the onion further. “Apparently, the parliament passed a Russia-favorable law, but I’ve never heard any details.
“In the U.S., I’ve seen something called Occupy Wall Street protests, and I have no respect for them. Was the issue over gas prices that the Russians sell to them? Were they denied a minimum wage increase? They had snipers shooting the protesters? Sometimes, I wish that would occur here in the U.S.!”
The 5: Careful what you wish for, pardner…
To answer your question, the initial protests came after the now-deposed President Yanukovych turned down a bailout from the European Union that came with many strings attached and opted for a Russian bailout instead.
The ethnic Ukrainian upper middle class revolted, and some neo-Nazi types quickly glommed on. Then the likes of Sen. John McCain went over there and said their fight was our fight, and it quickly snowballed.
Recall that State Department official Victoria Nuland — the one caught using the F-word on the phone — stated last year the U.S. government had “invested” $5 billion in bringing an anti-Russian government to power in Ukraine. Mission accomplished.
Of course, no one could have possibly foreseen that Russian leaders might get ticked off about regime change in their backyard, right?
“Yep, your Texican reader is right,” writes a reader pivoting to a related thread in our inbox. “The American squatters in Texas stole the land fair and square from a sovereign nation and set up their own country first.
“The Bear Flaggers tried to do the same thing in 1846 California, but the feds stepped in and cut out the straggly middlemen. Viva Manifest Destiny!”
The 5: Sea to shining sea, right?
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. While taxes are on our mind today, we see a poll commissioned by TurboTax finds 32% of American women claim their tax refunds are more satisfying than sex.
Hmmm… Giving Uncle Sam an interest-free loan like that does sound a lot like getting screwed, doesn’t it?
Chances are you know better than to overwithhold. But you might not be clued in to dozens of other tips and tricks — many of which you can apply right now, in time to file this year’s return. Join the 127,531 Americans who are already clued in, right here.