Can you live on minimum wage?

We all go through life seeing things from our own perspective and this is a very normal thing to do.  But seldom do we acknowledge that this view is limited by our own experiences when we pass judgment on others.  Sometimes the decisions we make or at a minimum the views we hold collectively have far reaching consequence far beyond our dismissive nature on the path that others are travelling.   When voting we based on our needs personally, the things that affect us directly and not collective needs of the population as a whole.  Some of us participate in polls that politicians use to gauge popular trends before formulating policies.

 There is the old adage/proverb that you should not criticize anyone until you have “walked a mile” in their shoes.  I would like us all to stop for a minute and look at the guilty pleasures that we have.  Just how much does each one cost you?  Whether it is a night out once a week; or weekend getaway once a month.  For some it might be as simple as another pair of shoes in addition to the other "60 pairs.  Now I am not saying give it up – no I am just highlighting the importance these things in your life.  These guilty pleasures do go a long way in keeping us sane.

Now imagine you are earning $8.25 per hour and working 30 hours (weekly income of $247.50) because your employer is keeping your hours down as part of their strategy of keep costs down in these “uncertain economic times”.  Maybe you have two kids and spouse looking to you to make ends meet.  Those wages are nowhere near sufficient to feed a family of four as well as provide shelter.  $8.25/hour is by no means a “living wage” and the people in this income bracket are expected to shop in the shops where we all shop at. The rate stated above is for my home state of Illinois, the Federal rate is $7.25

I am ashamed to confess that on occasion I have uttered the words “I am feeling the hardship of the recession”.   And in truth I have because there were things that I did stream down when I was reviewing my personal budget.  I used the word ashamed because I do not have a family of four to feed.  Even though I consider myself “under-employed” my income is significantly higher than what is considered minimum wage and yet I shop in the same shops as people on minimum wage.  I still complain on just how hard things have become but I do remember to be grateful for I am well aware just how much worse it could all be.  

So next time you are giving your opinion on whether or not there should be an increase to the minimum wage think a little outside the box.  A better compensation for all ultimately means less people will need to turn to supplemental assistance such as the link card or Section 8 housing.  With a reduction in the number of those who use these programs there will be less of your tax dollars needed.

Upward mobility and the skills gap

In President Obama's 2014 State of the Union he spoke of putting in place policies that will increase jobs as well as an increase in the minimum wage.  Only some of the tools he intends on using will deal with problems of inequality, or as some prefer to call it "the income gap".  

There is a stark disparity between the packages CEO's negotiate for themselves and what the actual workers are being compensated.  Some get bonuses in the millions for cutting human resource expenses.   Most CEO's fight an increase 15-17% increase in minimum wage, claiming it is bad for business but feel their 50-70% increase is justified.  Which boggles the mind when it is the same CEO's that are looking for a market for their products.  Don’t the potential customers need to actually earning the money to spend somewhere.

To date, employers feel when a candidate has been out of work for a period of time, that employee has missed out on changes that might occur.  The corporate world is supposed to sign on, pledging to be more lenient on those who have been unemployed for extended periods.  In reality what is needed here is that the unemployed actively take steps to reduce those so called "gaps" on the resume to lessen the anxieties of future employers.  How does one stay current on industry regulations?  

In the financial and accounting industry there are regulatory continuing education courses that one is required to do that help keep you abreast of said changes.  If you are at home how do you keep up with the changes? With the economy having moved from manufacturing to service, technology has left a huge percentage of the population lacking relevant skills needed as to be viably employed.

Then there are those who are unemployed because their position no longer exists for a mired of reasons, from downsizing to some sort of automation. It can only mean your skills are no how longer marketable.  Does it then mean that the pledge from "C" suite will cover these shortfalls too?

Now I am not saying that I am grateful for all efforts the President is pushing.  I am just saying that the individual has a significant part to play here.  We are back to basics and there is a clear need for one to reinvent themselves by either going back to school (your degree attained 30 years ago is hardly relevant if changing careers altogether) or looking to see what self-employment might offer.  Americans need to take ownership of their lives and not wait for the right conditions to be put in place.

We brag so often about the greatness of America, whether Republican or Democrat we all have socialist tendencies.  Hiding behind a need for a smaller government in the hope of paying lower taxes without reducing your expectations accordingly is asking for a handout.  Continually expecting benefits when there is no revenue to cover the need is in itself expecting a handout.

The problems being experienced in the USA are replicated world over.  While the USA has an unemployment rate of 6.7% the Euro-zone is at approximately 12.1% - of course countries like Spain (26.3%) and Greece (27.7%) are the biggest contributors to the high rate.  Of course not being counted in there are those that have given up looking altogether.

Maybe the solution is that governments offer incentives to companies that opt of human workers instead of automation.  But there are the high and constant costs that come with HR whereas with equipment it is a given purchase and maintenance cost that no President can change with the stroke of a pen. 

99% vs Tom Perkins? Or Perkins just old man fighting for relevance

Is there something to be said about the disparity on income and wealth in the USA and world over?  The answer would be a resounding yes.  If the rich are feeling victimized then obviously the message must have been skewed at some point.  Hard to understand how one with so much could possibly feel anything but privileged.   One can confidently say Tom Perkins was hardly a choice that the 1% would have chosen to be their collective voice for he clearly does not speak for the majority of what he affectionately refers to as a "minority".

In an interview with Emily Chang of Bloomberg Tom Perkins is "Comparing the problem to the Holocaust".

The sheer absurdity of the term requires one not to get worked out about Perkins at all but to feel sorry for him.  He is an extremely accomplished millionaire.  Not a billionaire by his own admission but he brags of having personally facilitated others in becoming billionaires.  Clearly the wits he had to achieve this is no longer there in abundance. 

The debate is narrowly discussed and one has to choose a camp - either with the Democrats and be accused of income redistribution or Republicans and only desired to discuss cutting taxes.  Personally I do not want to be boxed into either camp.  I believe that opportunities need to be provided to allow people to work for a living.  I do not believe any person with self-pride would opt for handouts instead of a good steady job.  I sincerely believe good people apply for unemployment benefits because they genuinely need to feed their family.  But I do also believe that these benefits need to be streamline and better manage to avoid abuse.  Extending them was necessary during the Great Recession but at some point this too needs to stop.

What is missed in the discussion about income disparity is the mere fact that with so many slipping into poverty there is a significant decrease in the numbers to whom these extremely accomplished millionaires and billionaires can sell their products.  An intelligent business person would strive for a stronger middle class so that he can have someone to sell his products to.  Feeling victimized because you have more that you could possibly spend in your lifetime and comparing it to the Holocaust can only come from an old man experiencing adverse effects of aging.  For one to have achieved what he achieved and then to make irresponsible comments as he did in his interview with Emily Chang is beyond sad.  The man is crying out for help and we should all feel sorry for him rather than be angered.  But more important at least he has enough money to pay for the help he clearly needs and he is not being subjected to "death camps" either.

I really think we need to respect the horrific experiences of the Holocaust and not trivialize the memory of the lives lost nor the lives altered.  Making apologies after the fact is unacceptable.  It is simply uncouth to speak so irresponsibly and then think it is okay to offer apologies after the fact.  It is really so hard for one to think before one speaks? 

2013 TAX HIGHLIGHTS

Below are a few highlights for consideration as you prepare your tax documents before going to your tax preparer.  It is important to always remember that you are ultimately responsible for the tax returns that you efile or authorize a tax professional to file on your behalf.  If you feel you do not understand something ask.

More importantly the Internal Revenue Service is available for taxpayers with questions - IRS - Telephone-Assistance.  In addition H&R Block and Jackson Hewitt  are among companies that have walk-in offices that you can use.  For those who prefer to use online services Turbotax is an option. Depending on your income level some of the companies with online services do offer free tax preparation.  

1.     Parents must have social security numbers for dependents born before December 31, 2013 to claim an exemption on 2013 returns.

2.     Tax rates for 2013...10%, 15%, 25%, 28%, 33%,  35%, and 39.6%.  The top rate only has increased from 35% to 39.6% for Single/Head of Household filers with excess Modified Adjusted Gross Income (MAGI) over $400,000 & Joint filers over $450,000.

3.     Personal exemptions...2013 - $3,900; 2014 - $3,950.  Beginning in 2013, the personal exemption begins to phase out for taxpayers with adjusted gross income amounts over $300,000 for Joint filers, $250,000 for Single filers, and $275,000 for Head of Household.

4.     Standard deductions (in lieu of itemizing deductions) - 2013:                                                                                                                                                                                                                                                                              Age 65+ or Blind

                                                    Standard Deduction                                    Each Spouse

        Married Filing Jointly /                                                                        

        Qualified Widower                                   $12,200                                                 $  1,200

        Single                                                      $  6,100                                                 $  1,500

        Head of Household                                  $  8,950                                                 $  1,500

5.     Investment income of children under age 18 or children under age 24, as long as they are full time students in excess of $2,000 is taxed at the parent’s marginal tax rate.

6.     Investment Income:  Beginning in 2013, all excess investment income for those with modified adjusted gross income over $200,000 for single filers; $250,000 for Joint filers will include an additional 3.8% Medicare tax liability.

7.     FICA wage ceiling: For 2013, the so-called payroll tax social security holiday ended and the base rate has returned to 6.2% of taxable wages each for both employee and employer contributions up to the wage ceiling of $113,700.  For 2014, the ceiling will be $117,000. .        Medicare: For 2013 the base rate is 1.45% of taxable wages for both employer and employee and has an unlimited wage ceiling.  Beginning in 2013, the employee share increases to 2.35% for taxable wages over $200,00 for Single filers, $250,000 for Joint filers.

9.     Ceiling on 401(k) and 403(b) contributions:                  Simple Contributions:

                        2013 - $17,500 ($23,000 if 50 or older)                      2013 - $12,000 ($14,500 if 50 or older)

                        2014 - $17,500 ($23,000 if 50 or older)                      2014 - $12,000 ($14,500 if 50 or older)

10.   2013 contributions for IRA and non-working spousal IRA:  $5,500; ($6,500 if 50 or older)

        2014 contributions for IRA and non-working spousal IRA:  $5,500; ($6,500 if 50 or older)

11.   Standard mileage rate: For 2013: Business is $.565 …for charity $.14 .. for medical and  moving $.24

      For 2014: Business is $.56 …for charity $.14 … for medical &  moving $.235

12.   Allowable Earnings for Social Security below full retirement age is $15,120 for 2013 and $15,480 for 2014…on or after full retirement age unlimited earnings.  $1 gets deducted for every $2 you earn over the allowable earnings limit.

13.   Annual gift tax exemption - $14,000 per individual for both 2013 and 2014.

14.   Penalty-free withdrawals from IRA can be made for medical expenses in excess of 10% of adjusted gross income

15.  Long term capital gain and qualified dividends rates are now graduated rates based on modified adjusted gross income (MAGI).  For 2013, Single filers with (MAGI) under $36,250 and Joint filers under $72,500 will pay 0%.  Single filers between $36,250 - $200,000 and Joint filers between $72,500 - $250,000 will pay 15%.  Single filers between $200,000 - $400,000 and Joint filers between $250,000 - $450,000 will pay 18.9%.  Single filers over $400,000 and Joint filers over $450,000 will pay 23.8%.

16.   Annual compensation limit for retirement plans is $255,000 in 2013; $260,000 in 2014.  Contribution limits are set at $51,000 in 2013 and $52,000 for 2014 for profit sharing and simplified employee pension plans, and $205,000 in 2013 and $210,000 for 2014 for defined benefit plans.

17.   IRA distributions. For 2013 taxpayers age 70 1/2 or older can continue to make tax-free distributions from IRAs for charitable purposes. 

NEW AND/OR REVISED TAX PROVISIONS INCLUDE:

·         The enhanced Code Sec 179 maximum dollar limitation and investment limitation respectively is $500,000 and $2,000,000 in 2013.

·         AMT exemption. The Alternative Minimum Tax (AMT) exemption for 2013 is $80,800 for married; $51,900 for singles and head of household; and $40,400 for married filing separate taxpayers  It will be indexed for inflation in 2014 and beyond.

·         Itemized deductions for medical expenses.  Beginning with the 2013 tax year, deductions for unreimbursed medical expenses must exceed 10% of your adjusted gross income to be deductible.  For individuals age 65 and older, the threshold remains at 7.5% until December 31, 2016.

·         Income for forgiveness of mortgage indebtedness. Principal-residence homeowners who have part of their mortgage debt forgiven have been spared having to pay income tax on the forgiven income for joint filers up to $2 million dollars. The Emergency Economic Stabilization Act of 2008 extends this benefit through 2013.

Same-sex couples who have been legally married in a state or  jurisdiction that recognizes their marriage, must now be treated as married for federal tax purposes.  The ruling applies regardless of wherever the couple currently resides, using either the married filing jointly or married filing separately filing status.  Additionally, employees who purchased same-sex spousal health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as a non-taxable fringe benefit.  

I have a limited understanding of Unemployment Insurance – do you know more than I do?

Since I am so on the fence with Unemployment insurance I would like to find out people views on the issue – maybe, just maybe I might get educated.

1   1.     Should we have unemployment insurance in the first place?

     2.    If so then for how long and how much?

     3.   When you say you believe in it is it because you feel you have earned?

     4.   Or do you believe it is a right?

5   5.  When I lost my job was I partly to blame or was my employer supposed to keep on forever no matter what?

There are many views out there but none have me totally believing that it is either beneficial to the economy as a whole or that it is harmful in some way.  I guess I can to some extent believe that one does need something to live on while you are looking for another job.  But in today’s economic environment where the chances of you finding that job move from slim to none very quickly.  Should we not then revisit the merits of handing out said checks?

A more important question to those advocating for an extension of benefits how different are you from those receiving food stamps and Section 8?  Do we not all mooch off the government in one form or another but just call it different things to make it more palatable?

Year-end Planning Tips - 10/10 - New Year's resolutions

At this time of year everyone is consumed with reflections of 2013 and resolutions in an effort to make avoid past mistakes in the New Year.  And for others just simply trying to do better.  For those needing to get a better handle on their finances and taxes it is a good time to put your records in order to facilitate a less stressful tax time. 

Ensuring that you are not paying more in taxes than you need to is an essential part of wealth accumulation and wealth management.  To do this properly gathering all relevant documents is important.  Over the next month or two you will be receiving tax information in the mail detailing your income for 2013.  Having your prior year's tax return is a good guidance on what you need but if using the services of a new tax professional then giving copies of the last three years will be more beneficial for a thorough review.

Below is a checklist you can use for guidance when putting your information together.  You can use different files for each category. Envelopes or paperclips will work just as well in keeping each category separate for ease of review. While this may not cover everything you may need but it is a good start.

Tax Preparation for Personal Information
Depending on your filing status (single; married filing jointly; head of household)  the IRS requires you include the full details of all individual included in your tax return.  Dates of birth are also essential for certain credits and deductions.  To make this easy, they require:

• Your Social Security number
• Your spouse’s Social Security number (if married)
• Social Security numbers for any dependents

Tax Preparation for Income Information
The following documents will help you prepare all the income information that you need to file a federal tax return:

• W-2 Forms from all employers you (and your spouse, if filing a joint return) worked for during the past tax year.
• 1099 Forms if you (or your spouse) completed contract work and earned more than $600.
• Investment income information (including: interest income, dividend income, proceeds from the sale of bonds or stocks, and income from foreign investments).
• Income from local and state tax refunds from the prior year.
• Business income (accounting records for any business that you own)
• Unemployment income
• Rental property income
• Social Security benefits
• Miscellaneous income (including: jury duty, lottery and gambling winnings, Form 1099-MISC for prizes and awards, and Form 1099-MSA for distributions from medical savings accounts)

Tax Preparation for Income Adjustments
The following adjustments can help reduce how much you owe in taxes, and in turn, increase your chance of receiving a tax refund:

• Homebuyer tax credit
• Green energy credits
• IRA contributions
• Mortgage interest
• Student loan interest
• Medical Savings Account (MSA) contributions
• Self-employed health insurance
• Moving expenses

Tax Preparation for Credits and Deductions
There are many tax credits and tax deductions for various expenses, which are designed to help lower the amount of tax that an individual has to pay:

• Education costs
• Childcare costs
• Adoption costs
• Charitable contributions/donations
• Casualty and theft losses
• Qualified business expenses
• Medical expenses
• Job and moving expenses

Tax Preparation for Direct Deposit
Are you interested in having your tax refund directly deposited into your bank account? If so, you will need to provide two things:

• Your bank account number
• The bank’s routing number

This tax forms / preparation checklist should help you get organized before filing your next income tax return.