MYTH : Trump's Social Security Tax Holiday Will Help Employers and Their Employees

Well, this is a solid myth, that's for sure.  Smart and ethical CPAs are recommending that their clients not just walk, but sprint away from the Memorandum Deferring Payroll Tax Obligation.  Let me preface this by declaring that I'm not an attorney and that all of this is my opinion.  But I can read and think. 

First, a little background.

The current IRS Commissioner is Trump appointee Charles Rettig, who, during his confirmation hearing, "told lawmakers he would ensure that the agency is 'impartial and non-biased from top to bottom' and follows the law."  

This seems unlikely, given that Rettig's Beverly Hills law firm specialized in defending wealthy clients against taxing authorities.  Since taking over the IRS, Rettig has slashed 4000 employees, including 19% of enforcement and compliance staff.  Like every single other Trump appointee, Rettig was selected for his ability and enthusiasm to vandalize the very agency to which he was appointed.

So Trump's Memorandum Deferring Payroll Tax Obligations allows any employee with bi-weekly pay of less than $4000 to defer paying of their 6.2% share of Social Security tax.  This appeals to two kinds of Trump supporters:  the wealthier ones who hate Social Security and, including this group, the less well-off supporters who hate taxes and government in general, despite all the benefits they enjoy as a result.

The key word here is "deferring".  What could make this tax easier to pay in the future?  Some tax people are rightly claiming that only Congress has the ability to waive such taxes.  But they've already granted that right to the President in the event of a national emergency, which Trump declared in April due to the [fake, according to him] pandemic.  

In fact, it will simply put employers at risk of fees and penalties.  On top of that, I've seen nothing in the regulations that prevents employers from going after former employees for reimbursement. According to our Senator & Senate Finance Committee ranking member Ron Wyden, "Donald Trump's scam is obvious — juice paychecks before the election and sock workers with a massive tax bill early next year when he’ll be out of office or never have to face voters again. While many businesses are unlikely to go along with Donald Trump’s fake tax cut, billions could be drained from the Social Security trust fund. This scheme is designed to give Donald Trump a talking point — it won’t benefit workers in any way.”*

Whether you're an employee or an employer, don't be seduced by this nonsensical campaign trick.

 

*Thanks to Think Advisor for their excellent article on this and choice quotes.

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IRS Makes It Easy to Pay Your Federal Student Tax On The Phone

Well, that's a myth.  There is no such thing as a "Federal Student Tax " (other than the larcenous interest rates they charge students)  But here are some recent things scammers do that IRS definitely will NOT do:

• Demanding immediate tax payment for taxes owed on an iTunes gift card.
• Soliciting W-2 information from payroll and human resources professionals (IR-2016-34) 
• “Verifying” tax return information over the phone (IR-2016-40) 
• Pretending to be from the tax preparation industry (IR-2016-28) 

IRS Warns of Latest Scam Variation Involving Bogus “Federal Student Tax”

IR-2016-81, May 27, 2016                                                                                   

WASHINGTON — The Internal Revenue Service today issued a warning to taxpayers about bogus phone calls from IRS impersonators demanding payment for a non-existent tax, the “Federal Student Tax.”

Even though the tax deadline has come and gone, scammers continue to use varied strategies to trick people, in this case students. In this newest twist, they try to convince people to wire money immediately to the scammer. If the victim does not fall quickly enough for this fake “federal student tax”, the scammer threatens to report the student to the police.

“These scams and schemes continue to evolve nationwide, and now they’re trying to trick students,” said IRS Commissioner John Koskinen. “Taxpayers should remain vigilant and not fall prey to these aggressive calls demanding immediate payment of a tax supposedly owed.”

Scam artists frequently masquerade as being from the IRS, a tax company and sometimes even a state revenue department. Many scammers use threats to intimidate and bully people into paying a tax bill. They may even threaten to arrest, deport or revoke the driver’s license of their victim if they don’t get the money.

The IRS urges taxpayers to stay vigilant against these calls and to know the telltale signs of a scam demanding payment.

The IRS Will Never:

• Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
• Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.

If you get a phone call from someone claiming to be from the IRS and asking for money and you don’t owe taxes, here’s what you should do:

• Do not give out any information. Hang up immediately.
• Contact TIGTA to report the call. Use their IRS Impersonation Scam Reporting web page or call 800-366-4484.
• Report it to the Federal Trade Commission by visiting FTC.gov and clicking on “File a Consumer Complaint.” Please add “IRS Telephone Scam” in the notes.
• If you think you might owe taxes, call the IRS directly at 1-800-829-1040.

More information on how to report phishing or phone scams is available on IRS.gov.

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I CAN'T AFFORD TO SAVE ANY MONEY THIS YEAR

The heading of this post is, as usual, a myth.  You can save money this year.  Thanks to WealthManagement.com for some of these tips:

1. I think all parents of college-bound kids are aware of the FAFSA.  There is no charge for this application for student aid.  And the early bird gets the worm; funds are limited.
2. Start or increase your 401(k) contributions, especially if you're not taking full advantage of  company matching.
3. Consider Traditional or Roth IRA contributions, especially for non-working spouses and your kids.  If your kids have earned income, the full amount (up to $5500) can be shunted into a Roth IRA.  IRA planning is complex and the best strategies depend on a careful analysis of your retirement expectations.
4. Max out Health Savings Account contributions ($3350 for singles, $6650 for couples and families).  As with IRAs if you're over age 50 you can kick in an extra $1000/yr.  This money can be triple tax free!:  Contributions are deductible, earnings are tax-deferred, and withdrawals are tax-free if used for legitimate medical expenses (see IRS pub. 969).
5. If you did a Roth conversion at the peak of the market in 2015, you have until 10/15/2016 to re-do it.  If your Roth is worth less than when you converted, you un-convert or "recharacterize" it, and then reconvert at the lower value thereby reducing your tax bill accordingly.
6. Have a neutral, unbiased, fiduciary adviser (like me) analyze the fees and expenses in your portfolio.  This is especially important in the later years when you should be conservatively allocated because taxes and fees from excessive turnover can consume your earnings. 

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RELAX, IRS has eliminated Fraud

Wish this was true, but it's yet another Financial Myth.  You can read the whole article here, or, my abridged version below.
http://www.irs.gov/uac/Newsroom/IRS-Warns-Taxpayers-to-Guard-Against-New-Tricks-by-Scam-Artists

It's good to know the 5 things IRS will not do:

• Angrily demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
• Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.

If someone attempts to fool you in this manner, immediately turn them in at http://apps.irs.gov/app/scripts/exit.jsp?dest=https://www.treasury.gov/tigta/contact_report_scam.shtml

Best Always,

Gary
Your Constructive Comments are Welcome!