What Is The World’s Happiest, Most Productive Country?

The U.S.?

I have to admit, I was surprised.  Just yesterday I read that Norway, for the fifth year in a row has the highest standard of living. So I thought … Norway. Nope. It’s us. Although we work fewer hours than many, we have the largest GDP.

Of course, you may remember the old saying, figures don’t lie, but liars can figure.

From Forbes …

Human resources people worry a lot about worker productivity and “engagement,” a.k.a. happiness. But are the world’s happy workers the most productive? Do they work a lot or a little?

The circles, representing countries, are larger where workers are happier. The horizontal axis shows productivity (GDP per hour worked); the vertical, hours worked per year.

The U.S. is happiest, with 30% of its workforce engaged, while its GDP per hour is a high $63. Outside the U.S. two of the happiest nations–Colombia and Brazil–are not all that productive. The French and the Dutch put in short workdays and boast high GDP per hour, yet fewer than 10% of them are happy. 

 www.elliscpafirm.com

Got this from a client

This isn’t political. Whatever your political leanings you’re probably opposed to paying taxes for a big company like J.P. Morgan.  This news item is about a petition to make sure J.P. Morgan pays their taxes without being allowed to flaunt the law.

http://petitions.moveon.org/sign/no-4-billion-tax-break-1?source=s.em.mt&r_by=9391940

J.P. Morgan was recently penalized many billions for mortgage lending abuses by the U.S. government. Normally, penalties and fines are not tax deductible.  But apparently very big corporations generally deduct their penalties as tax deductions. If you and I did that, it wouldn’t fly. But, apparently some people and companies can get away with it. This is a petition to Congress to prevent J.P. Morgan deducting this penalty.  Whatever taxes they escape will eventually come out of your pockets.

Take a look.

UNEMPLOYMENT TAX

Just so everyone knows.

Payments to subcontractors can be subject to unemployment tax. Just as if you paid them a W-2.

Businesses are several times more likely to be audited by the employment tax people than by the IRS, and the employment tax auditors are generally smarter because most of them are real people.  If you’re issuing 1099s to businesses, no big deal. If you are making a few pretty small payments and issuing 1099s to individuals, again, no big deal. You’re liable for the tax but they’re more likely to brush it off as incidental.  Besides it isn’t going to break the bank.

But if you are paying a large number of people for their services and issuing them 1099s instead of paychecks, the auditors will assert unemployment tax. They’re so hungry for money, they aren’t real particular about the law. 

Just saying …

A client ran into this situation earlier this year and decided not to fight it.

I personally think it could be defended relatively easily.  This is not difficult to mount a defense to. But, when things go to court, you never know …  I don’t make those decisions. You do.

In fact I don’t make any of these decisions. I just think out loud.

Four things I’d like to think out loud about.

1.       If it’s industry practice, it helps a lot.  If your competitors are doing the same thing, it would put you at a competitive disadvantage to pay tax when your competitors aren’t. If you end up in a controversy you have to fight, this is a strong defense as an addendum to everything else you will be using to defend yourself.  This is a very strong issue. Many IRS regulations and court cases have hinged on this particular issue. In fact, when you scan the cases you will see this pop up time and time again. Industry Practice.

2.       If you make payments directly to corporations (i.e., Bill Jones Operating Company, Inc.) it helps because you don’t have to issue 1099s to corporations. One of the targets of one of these audits is 1099s.  

3.       All these corporate or LLC businesses you’re paying have business tax deductions.  Mileage, supplies, whatever. This is another very strong defense because, the tax is supposed to be on payments for labor (personal services). If the company has any deductions, then the entire payment is obviously not for labor.  Part of it is to cover the business’ expenses.

4.       This is a practical consideration. The account to which you’re coding these payments can either attract or escape the attention of the auditors . You should all know that accounting is an art, not a science. There is no “right” account.  If you choose an account that’s realistic that won’t attract the attention of the unemployment auditors, you’ll be better off. You are under no obligation to stick your head in the noose.

Hope this helps.

Pardon any typos. I have a feeling there are some. I’m famous for my typos.

Stealing your 401(k)?

This old issue is raising its head again.  

Stealing your IRA’s and  401(k)s. I have reported on this issue from time to time over the past few years.  The headline on the link this time is “Obama’s Plan to Snatch Your Savings”.

First of all … this issue predates Obama.

But not by much.

A reminder … the first time I reported on this stuff was when I discovered that there was a bill sitting in committee in the Senate that would do this. I reported that information in a newsletter. In response I got two letters from sitting Senators confirming that fact, but telling me they would certainly not vote for such a bill – one a Democrat and on a Republican.

Remember the old saying … “where there’s smoke, there’s fire” …. Or is it “where there’s fire, there’s smoke”?   Or perhaps it’s just cloudy outside. Whatever the case, this just won’t die. It’s either a rumor people like, or there’s more to it than is generally assumed.

http://www.americanthinker.com/2013/12/obamas_plan_to_snatch_your_savings.html

As many of you already know, I'm strongly against investing in tax advantaged products such as IRAs or 401(k)s, unless your employer is paying part of the loading cost. What you are doing, at least in a pre- 2008 world, is converting capital gain assets to ordinary assets … doubling your tax rate from 20% to 39.6%.  If you are in a net loss world, as we seem to be right now, then you are just pushing your investment off into a higher tax rate world. There doesn’t seem to be any end in sight for rising tax rates. I once had a client in Tennessee, who may be deceased by now, God rest his soul, who refused to pay tax on the millions of dollars on his 401(k) and donated the entire thing to his church instead.

Tax advantaged retirement vehicles are not tax advantaged at all, they’re just a marketing tool that was created a long time ago, possibly with the intent to drive excess funds into tax “advantaged” vehicles in the first place. Who knows. I do know they are staples in the hands of unscrupulous tax advisors. And they are far and away the most common tax planning tool out there. I don’t think there’s a physician on the face of the earth who hasn’t invested significant amounts in tax advantaged vehicles.

At the very best, in my opinion, in the real world, there is no tax savings associated with IRA’s or 401(k)s.

I’m not taking a position on this. I’m not in the position of making predictions. I believe in another old saying … “If you’re going to live by the crystal ball, you’d better learn how to eat glass.” Which is the reason I don’t give investment advice either.

Thanks to a Silicon Valley client for the link.

Hello

Welcome to the first post to my irreverent blog ... strategy factory. To be sure, I will post numerous strategies and observations that are well worth the price of admission ... which we should all note is nothing. But I've been around the block a few times, probably more than you, and I've made a few observations. Most of them are relatively astute, some of them aren't. Sorting them out is up to you.

Topics will run the gamut from operating a successful cash flow business to tax strategies to political bromides. 

My firm is known as the Strategy Factory, also known as ELLIS CPA. You can find us on the web at www.elliscpa.us or www.strategyfactory.us.

Today's post is intuition. My faculties have proven generally reliable. My favorite saying is ... "I can see all the way into your soul. I can slice it and dice it and shuffle it like a deck of cards." But, in the political realm, it has proven less than stellar. Probably because we're not dealing with actual humans. 

Just saying ... 

This is a political bromide, so be aware.

"Obamacare is the last gasp of Marxist progressivism. "

From here on it's all downhill.

www.elliscpa.us