This past Saturday (7/25/09), we had “Opportunities & Pitfalls in 2009 Tax Law Changes.” It seems strange to have a summary of tax law changes mid-year. But, that’s how many changes there have been!
The other thing that was strange is that I was only able to hit the items on the surface and still filled that hour up fast. Since then, we’ve gotten a lot of emails and calls with people expressing their outrage, concern and out and out fear at the changes. “Why hasn’t anyone told us this before?” most ask.
I think the main issue is that most accountants and tax attorneys are too buried in the day to day of keeping their clients afloat, and don’t get the luxury of stepping back to look at what is really happening.
Here are some highlights from comments we’ve received. I’ve paraphrased them and put most in my own words.
One sharp lady caught my concern about Rangel’s plan for the surtax. Yes, it will raise the tax on most small businesses to a marginal rate of over 50% and that will hurt jobs. That’s what other new agencies are reporting. Both the writer and I were more concerned about the part of Rangel’s bill that would give the Executive Branch authority to increase the rate, without notice and with approval, if there was a shortfall from expected revenue.
With that one statement, we’ve completely undone how tax law is supposed to work. And it will also add a huge level of uncertainty into planning. If there is one thing business and Wall Street hates, it’s uncertainty.
Others were rightfully concerned about California’s far-reaching attempts. Starting in 2011, they have a very broad interpretation of what it means to do business in California. The problem is that the other states don’t agree. It’s very possible that if the US Supreme Court doesn’t step in, in 1 1/2 years you could live in CA, have an interest in a business that is located in New Jersey and suddenly subject the NJ to CA tax. But NJ doesn’t agree and so they’ll want their tax too.
The taxpayer and the business get caught in the middle. In that case, if NJ doesn’t get paid, it will seize business assets. If CA doesn’t get paid, it will seize the CA resident’s assets.
And if you don’t live in CA or have CA assets, CA can still get a judgment against you and tank your credit score.
CA has been known to take aggressive stances before, figuring someone will challenge them in Tax Court and if they lose, oh well. If they win, they’ve just set precedent. The problem is that the average taxpayer doesn’t have the legal muscle, time and money to start a battle with the state. So, CA will win most of the time, even though they are wrong.
No one has commented yet on the part that I’m most concerned about: Social Security and Medicare. I wonder if the facts I shared were just too big to think about. There is a huge problem coming with Social Security and Medicare. The benefits can’t be cut enough to stop the required massive increase. And by massive, we mean 81% increase. Soon. As in today. Every day this is delayed, is more cost to you.
I didn’t have a lot of good news on the phone call. But I did have some ideas on how to get ready for it. If you didn’t get registered at www.DianesSeminars.com please do so in the next few days. I’ll be sending out info on the link for the recording along with my notes from the seminar. It will take us a week or so to get that ready. Don’t worry – if you’re registered, you’ll get the information!