by | ARTICLES, BUSINESS, ECONOMY, POLITICS, TAXES
It’s kind of funny that the AP is reporting a story that has not been “news” for years to tax professionals. The state of Illinois is running out of taxpayer money, as its obligations exceed its revenue intake. This is what happens when a state has been mismanaged for decades by incompetent Democrats: From CHICAGO (AP):
The Illinois official responsible for paying the state’s bills is warning that new court orders mean her office must pay out more each month than Illinois receives in revenue.
Comptroller Susana Mendoza must prioritize what gets paid as Illinois nears its third year without a state budget.
A mix of state law, court orders and pressure from credit rating agencies requires some items be paid first. Those include debt and pension payments, state worker paychecks and some school funding.
Mendoza says a recent court order regarding money owed for Medicaid bills means mandated payments will eat up 100 percent of Illinois’ monthly revenue.
There would be no money left for so-called “discretionary” spending – a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.
Is Illinois going to be the first state to become truly insolvent? Is Illinois going to file for bankruptcy? The situation is critical enough that we need keep an eye on it in the coming weeks and months.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, FED
In an interesting move this week and true to the Fed plan to raise rates three times this year, Fed Chair Janet Yellen raised interest rates .25%. It’s worth it to note that at the same time, the Feds downgraded the forecast for inflation:
The central bank now believes inflation will fall well short of its 2 percent target this year. The post-meeting statement said inflation “has declined recently” even as household spending has “picked up in recent months,” the latter an upgrade from the May statement that said spending had “rose only modestly.” The statement also noted that inflation in the next 12 months “is expected to remain somewhat below 2 percent in the near term” but to stabilize.
At the same time, the Feds up the forecast for GDP growth slightly to 2.2%, up from a 2.1% forecast. They also anticipated a drop in unemployment as well, from 4.5% to 4.3%.
The Fed vote to go up a quarter-percent was not unanimous, however. “Minneapolis Fed President Neel Kashkari on Friday said he voted against an interest-rate hike this week because he wasn’t convinced the recent spate of soft inflation readings was due to one-off factors…We should have waited to see if the recent drop in inflation is transitory to ensure that we are fulling our inflation mandate” to get inflation back to 2%, Kashkari said. Kashari was the only dissenting vote out of nine.
Earlier this year, the Federal Reserve tentatively planned three rate hikes in 2017 and three rate hikes in 2018. So far, they’ve completed two, and seem to want to stay on that track. Time will tell if this rate hike and pathway are good for the economy.
by | ARTICLES, BLOG, ECONOMY, TAXES
I always look forward to CNSNews each month when they do a roundup of the prior month’s spending and revenue. Their numbers come directly from the Monthly Treasury Statement released by mid-month for the previous month. Because they’ve been doing it for so long, they are able to often do comparison for previous months and years, which provide nice little tidbits of info.
The big takeaway from this month is, despite record revenue, the Trump administration still ran a deficit due to excessive spending. Their summary is reposted below in its entirety:
“The U.S. Treasury hauled in $240,418,000,000 in total taxes in the month of May, setting a record for inflation-adjusted tax revenues for that month of the year, according to the Monthly Treasury Statement released this week.
Despite these record revenues, however, the federal government still ran a deficit of $88,426,000,000 in May—because it spent $328,844,000,000 in the month.
In the first eight months of fiscal 2017 (October through May), the federal government hauled in $2,169,160,000,000 in total taxes and spent $2,602,013,000,000—thus, running a deficit of $432,853,000,000. Fiscal 2017 will end on Sept. 30, 2017.
Prior to this year, fiscal 2006 held the record for most federal taxes collected in the month of May. That year, the Treasury collected $232,837,160,000 (in constant 2017 dollars) during May.
The third largest tax haul the federal government ever achieved in the month of May was last year (fiscal 2016), when the Treasury collected $228,814,030,000 (in constant 2017 dollars.)
While the $240,418,000,000 that the Treasury collected this May set a record for federal tax revenues in the month May, federal tax collections in the first eight months of fiscal 2017 (October through May) did not set a record.
That distinction is still held by fiscal 2016—the last full fiscal year of President Barack Obama’s tenure.
In October through May of fiscal 2016, the Treasury collected $2,179,362,400,000 in total tax revenues (in constant 2017 dollars). That was $10,202,400,000 more than the $2,169,160,000,000 that the Treasury collected in October through May of this fiscal year.
(Tax revenues were adjusted to constant 2017 dollars using the Bureau of Labor Statistics inflation calculator.)
The $240,418,000,000 in taxes the federal government collected in the month of May 2017 equaled approximately $1,572 for each of the 152,923,000 people the Bureau of Labor Statistics said had a job in the United States during the month.
The $88,246,000,000 deficit the Treasury ran during May equaled approximately $577 for each of the 152,923,000 people with a job.”
by | ARTICLES, BLOG, BUSINESS, ECONOMY, OBAMA, OBAMACARE, TAXES
We’ve written about the collapse of many Obamacare markets as well as the removal of several insurers from the Obamacare system across multiple states and exchanges. Earlier this year Aetna Inc. and Wellmark Inc. announced that they would not participate in Iowa for 2018 due to unsustainable costs; only the insurer Medica would be available in the state.
In response, Bloomberg reports that “Iowa is asking the Trump administration to let it reallocate millions of dollars and create a stopgap program that would provide health insurance options for 72,000 Iowans covered by the Affordable Care Act.
Under the proposal made public on Monday, the state would use $352 million in federal money to provide backup funding for insurers and overhaul Obamacare’s subsidies for consumers next year. The state would also create a single standardized plan that insurers would offer.”
Iowa’s proposal has three main pieces:
- It would create a standard plan, pegged to Obamacare’s mid-level silver offering. Insurers and consumers who want the extra help would need to buy that plan.
- The state would use about $220 million of funding to provide the new subsidies.
- And the state would create a reinsurance program, funded with an estimated $80 million, to help insurers deal with high-cost claims.
The program needs to be approved by the Trump administration and would be known as a “Stopgap” measure while the future of Obamacare gets played out in Congress. Nonetheless, the current form of Obamacare is financially unstable; expect to see more of these types of proposals in the coming months.
by | IRS
Issue Number: IR-2017-105
Inside This Issue
Taxpayers Abroad Must File by June 15; Extensions Available; New Filing Deadline Now Applies to Foreign Account Reports
WASHINGTON — The Internal Revenue Service today reminded taxpayers living and working abroad that they must file their 2016 federal income tax return by Thursday, June 15.
The special June 15 deadline is available to both U.S. citizens and resident aliens abroad, including those with dual citizenship. For those who can’t meet the June 15 deadline, tax-filing extensions are available and they can even be requested electronically. In addition, a new filing deadline now applies to anyone with a foreign bank or financial account required to file an annual report for these accounts, often referred to as an FBAR.
Here is a rundown of key points to keep in mind:
Most People Abroad Need to File An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return. A taxpayer qualifies for the special June 15 filing deadline if both their tax home and abode are outside the United States and Puerto Rico. Those serving in the military outside the U.S. and Puerto Rico also qualify for the extension to June 15.
Be sure to attach a statement indicating which of these two situations applies. Interest, currently at the rate of four percent per year, compounded daily, still applies to any tax payment received after the original April 18 deadline. For details, see the When To File and Pay section in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. Special Income Tax Return Reporting for Foreign Accounts and Assets
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.
Choose Free File
U.S. citizens and resident aliens living abroad can use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $64,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.
A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return.
Both the e-file and Free File electronic filing options are available until Oct. 16, 2017, for anyone filing a 2016 return. Check out the e-file link on IRS.gov for details on the various electronic filing options. Free File is not available to nonresident aliens required to file Form 1040NR.
Automatic Extensions Available Taxpayers abroad who can’t meet the June 15 deadline can still get more time to file, but they need to ask for it. Their extension request must be filed by June 15. Automatic extensions give people until Oct. 16, 2017, to file; however, this does not extend the time to pay tax. An easy way to get the extra time to file is through the Free File link on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an extension on Form 4868. To get the extension, taxpayers must estimate their tax liability on this form and pay any amount due.Another option for taxpayers is to pay electronically and get an extension of time to file. IRS will automatically process an extension when taxpayers select Form 4868 and they are making a full or partial federal tax payment using Direct Pay, the Electronic Federal Tax Payment System (EFTPS) or a debit or credit card. There is no need to file a separate Form 4868 when making an electronic payment and indicating it is for an extension. Electronic payment options are available atIRS.gov/payments. International taxpayers who do not have a U.S. bank account should refer to the Foreign Electronic Paymentssection on IRS.gov for more payment options and information.Combat Zone Taxpayers get More Time Without Having to Ask for it Members of the military and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any taxes due. This includes those serving in Iraq, Afghanistan and other combat zone localities. A complete list of designated combat zone localities can be found in Publication 3, Armed Forces’ Tax Guide, available on IRS.gov. Various circumstances affect the exact length of the extension available to any given taxpayer. Details, including examples illustrating how these extensions are calculated, can be found in the Extensions of Deadlines section in Publication 3.
New Deadline for Reporting Foreign Accounts
Starting this year, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, was normally required to be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. But FinCEN is granting filers missing the original deadline an automatic extension until Oct. 16, 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available. In general, the FBAR filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website. Report in U.S. Dollars Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.
Both Forms 114 and 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRSaccepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.
Expatriate Reporting
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2016 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.
More Information Available Any U.S. taxpayer here or abroad with tax questions can refer to the International Taxpayers landing page and use the online IRS Tax Map and the International Tax Topic Index to get answers. These online tools group IRS forms, publications and web pages by subject and provide users with a single entry point to find tax information. Taxpayers who are looking for return preparers abroad should visit the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
To help avoid delays with tax refunds, taxpayers living abroad should visit the Helpful Tips for Effectively Receiving a Tax Refund for Taxpayers Living Abroad page.
More information on the tax rules that apply to U.S. citizens and resident aliens living abroad can be found in, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, available onIRS.gov.
by | BLOG, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, HYPOCRISY, OBAMA, POLITICS
The idea of “disparate impact” holds that a defendant can be held liable for racism and discrimination for a race-neutral policy that statistically disadvantages a specific minority group even if that negative “impact” was neither foreseen nor intended. This tactic was increasingly used in recent years during the Obama Administration, most often by Loretta Lynch, Obama’s Attorney General, and Thomas Perez, his Secretary of Labor.
It follows then that minimum wage laws are racist and discriminatory. There’s no question that the effect these policies have on minorities are unfavorable. The citizens who are going to lose their jobs or will be unable to get jobs as a result of raising the cost of wages are disproportionately larger populations of minorities. If you can impute and infer racial bias because of an adverse impact and then use it to determine the legality of a law, it is unequivocally clear that minimum wage laws should be deemed unconstitutional.
by | ARTICLES, BUSINESS, ECONOMY, POLITICS
23% of Puerto Ricans voted today for a statehood referendum, and 97% of them cast a vote in favor of it. 1.5% percent voted for independence from the United States, according to Decision Desk HQ, while 1.3% voted to keep the current status of a territory of the United States.
The catalyst for this vote for statehood — the first one since 2012 — was the declaration of a form of bankruptcy in early May. Many did not vote because the vote actually did nothing. Congress would still have to formally agree to statehood, which is highly unlikely due to its crippling debt.
Last month, Puerto Rico sought financial relief in federal court, “the first time in history that an American state or territory had taken the extraordinary measure. The action sent Puerto Rico, whose approximately $123 billion in debt and pension obligations far exceeds the $18 billion bankruptcy filed by Detroit in 2013, to uncharted ground.”
I have written numerous times on Puerto Rico in the past due to business there over the years. My take has always been about reduction; reducing the size and scope of government is a major key part of getting Puerto Rico back on track.
Puerto Rico’s debt crisis is the result of years of government mismanagement. Dozens of agencies and publicly owned corporations have run deficits year after year, making up the difference by borrowing from bond markets, though there was a brief respite during the year of Governor Fortuño. Puerto Ricans must have to first experience tough reforms and cutbacks help Puerto Rico thrive once again.
by | ARTICLES, ECONOMY, GOVERNMENT, OBAMA, OBAMACARE
From the LATimes:
A proposal to adopt a single-payer healthcare system for California took an initial step forward Thursday when the state Senate approved a bare-bones bill that lacks a method for paying the $400-billion cost of the plan.
The proposal was made by legislators led by Sen. Ricardo Lara (D-Bell Gardens) at the same time President Trump and Republican members of Congress are working to repeal and replace the federal Affordable Care Act.
The bill, which now goes to the state Assembly for consideration, will have to be further developed, Lara conceded, adding he hopes to reach a consensus on a way to pay for it.
Republican senators opposed the bill as a threat to the state’s finances.
“We don’t have the money to pay for it,” Sen. Tom Berryhill (R-Modesto) said. “If we cut every single program and expense from the state budget and redirected that money to this bill, SB 562, we wouldn’t even cover half of the $400-billion price tag.” (emphasis added)
Lara’s bill would provide a Medicare-for-all-type system that he believed would guarantee health coverage for all Californians without the out-of-pocket costs. Under a single-payer plan, the government replaces private insurance companies, paying doctors and hospitals for healthcare.
The California Nurses Assn., which sponsored the bill, released a fiscal analysis this week that proposed raising the state sales and business receipts taxes by 2.3% to raise $106 billion of the annual cost, with the rest proposed to come from state and federal funding already going to Medicare and Medicaid services.
Even if the bill is approved, it has to go to Gov. Jerry Brown, who has been skeptical, and then voters would have to exempt it from spending limits and budget formulas in the state Constitution. In addition, the state would have to get federal approval to repurpose existing funds for Medicare and Medicaid.”
The state of California is already facing severe financial difficulties. To try to actually implement something like this, at so staggering a cost, would be reckless for the taxpayers of California. Hopefully, commonsense will prevail.
