A few chuckles before Tax Prep Weekend

I was saving this 1979 Shoe, which was over my desk for ages, for Monday, April 15, but a couple of other tax cartoons hit today, so let's go. If, like me, you owe money, this weekend is when you bite the bullet, right?

Yes, life is deductible, though -- as my then-wife used to point out as she was doing our taxes for which she had a nice W-2 while I had a shoebox full of little pieces of paper -- before you can deduct expenses from your income, you need to have an income from which to deduct them.

Excellent point, dear.

And if you want to know why reporters and cartoonists tend to be liberals while publishers tend to be conservatives, just pull up a few 1040s and see if you can figure it out.

Ed Stein's "Freshly Squeezed" is based on the economic downturn, so it's not surprising he takes a view based more on the general lack of funds rather than the unfairness of deductions and such, which we'll get to in a minute.

Meanwhile, I would only observe that Sam and Liz are doing pretty damn well to be that close to the half-million mark, even on gross income, much less taxable income, which is where such things have impact. I think he could have added another $50,000 to that punchline and been just fine, considering Sam is under-employed and Liz is still looking for work.

(UPDATE: Ed writes to note that the cut is at $450,000, making their income $75,000, which, oddly enough, squares with my suggestion of him being $50K off. Well, one of us was, anyway.)

That's aside from the argument I made, even back when Obama wanted to set that higher bracket at $250,000 rather than the $500,000 compromise level, which is that anybody who makes that much money and doesn't get advice on how to shelter some of it is too silly to be worth that much and deserves to pay a little fool tax. 

But let's not get into that right now. I'd rather talk about Professor Fishhawk's contention that "Life is deductible" for them as comments upon it.

Close to Home's John McPherson, like most cartoonists, is self-employed, and so his take here is informed by his own experience. Of course, the robber is also self-employed, which makes the gag work.

One of the distressing, but perfectly logical, aspects of being self-employed is that you have to pay for your own Social Security and a few other things. That is, while wage earners are used to seeing deductions on their pay stubs, what they don't see is that the employer is also paying a share of those required expenditures.

Which means that, if your gross pay is $50,000 and you work for The Man, you'll bring home more of that money than if you gross $50k working for yourself, because then all those things come out of it.

Except unemployment. That's what all your lavish savings are for.

Which, as I say, makes perfect sense, but is not much fun, because not only do you have to pay it, but you get to see it come out.

I'm not sure Bill Amend considered that when he penned this Foxtrot, which ran today but comes from 2002. That was, of course, before TurboTax and suchlike did away with "mailing" things to the IRS, but I don't know why someone who works in an office, as Roger does, should be generating that much paper anyway.

Yes, you have to have the paper. But you only have to send in a few forms, unless you get audited (we'll get to that).

I know: Comic exaggeration. But when I went from freelancer to wage slave in 1987, the first thing I noticed was how nice it was that, every two weeks, I got paid, without having to remind anyone, badger anyone, threaten anyone and without being told about their "pay cycle."

But another bonus was very simplified filing. Never mind not having to pay the extra payroll taxes -- it was a blessing not to have to document them. And, while I missed my darlings awfully once the nest was empty, things got even easier when I lost them as deductions, because then I could do the 1040-EZ.

By contrast, the incredible hassle of filing as self-employed is why your workplace probably has a whole roomful of people who are good at that sort of thing and probably even kind of enjoy doing it. 

(Parenthetically, if you go in there, you will notice that their desks are very neat and well-organized, because that's how they roll. I once had a Shoe from roughly the same era as the one above, in which Cosmo explained that everything on his haymow of a desk was filed "in strict archaeological order." Amen, brother.)

Meanwhile, Brewster Rockit taps into yet another tax issue of the self-employed.

Should you take a home office deduction? It depends on two factors:

1. Do you have a place in your house that is absolutely, positively an office and nothing else?

2. How likely are you to be audited?

Here's the deal: First of all, strictly speaking, you can't deduct the percentage of your diningroom where you've parked your desk, your filing cabinet and, from 9 to 5 each day, your ass. Ditto with your man-cave. Even if you have a separate room where you work, if it's also where you watch football or where you send the kids to play video games in the evening, it's not, according to the rules, an office anymore.

Second, if you ever sell your house, you are also selling your workplace. Now, some of this will have changed with the change in recent years of rules about capital gains on sale of primary residence, but that spare bedroom or finished basement or whatever is not part of your primary residence. It's your workplace. That part of the sale comes under different rules, and welcome to Paperwork Hell. 

Of course, none of this matters as long as you don't get audited. It used to be said that claiming a home office was a red flag inviting an audit, but, if it ever was, it probably isn't anymore, because, thanks to funding cuts, the IRS doesn't have enough field agents to bother auditing much of anybody anymore. 

And I don't hear anyone in Congress proposing to fix THAT problem in order to close the revenue gap.

I do remember the good old days when people like salesmen got audited regularly. Salesmen aren't self-employed, but they are among the category of employees who tend to take a lot of work-related deductions and so who used to tend to get audited.

Back in 1976, a salesman friend got pulled in for an audit, and discovered to his chagrin that, in order to claim mileage, you have to record, for each deductible trip, (A) the date, (B) the purpose of the trip, (C) the start and stop locations and (D) your odometer readings.

Which might happen if you are deducting travel expenses for attending a conference in another state, but is pretty unlikely if you are tooling around town dropping in on businesses. (Strictly speaking, they want documentation of each stop, not just that you were tooling around that day making sales calls.)

All he had was his date book with various appointments and how far they were from the office, and the auditor explained that he had to disallow it.  But he said, since Jim had been honest about it, that he'd only hit him for the disallowed deduction, with no fine or interest. 

And then he told him a chilling tale: He had done an audit about a year earlier, in which a salesman blithely assured him that, why, yes, indeed, he could document his mileage claim, and, at their next session a week later, the fellow came in a small booklet in which he had written down every stop he had made in 1974, with odometer readings and all.

It was way too perfect. The entries were in a couple of different ink colors, and some of the pages were smeared or had dirt on them, and there were a few coffee stains, but there were only a couple of ink colors, not a whole year's worth of variance, and it just seemed ... fishy.

The auditor looked through the booklet again -- one of those little saddle-stitched blank, lined notebooks with a floral pattern that you can buy at a drugstore -- and, as he pondered it, he noticed something on the back: The floral patterned cover was copyright 1975.

He told Jim that he never let the salesman know that he had discovered the fraud.

He let him have his mileage deduction.

Then he went all Homey-don't-play-dat on the rest of the guy's tax return and picked out every petty little flaw and disallowed each one and then hit him up for the maximum fines and penalties and interest on each one and nailed his lying ass to the outhouse door.

Anyway, they don't have nearly so many audits anymore.

The odds are, you'll probably never be called it.

Very unlikely.

Enjoy the weekend.

Comments

[Mark Jackson]

I suspect it's a lead-time issue - Stein drew the comic during the brief period when the White House Compromise-o-Matic was moving the top bracket threshold through $400,000.

[Mark Jackson]

I suspect it's a matter of lead time - Stein drew his cartoon during the brief period when the White House Compromise-o-Matic was moving the top bracket threshold through $400,000.

[Mike Peterson]

No, he just paid closer attention. See the update!

[Mark Jackson]

$450,000? Darn - now I have to redo my tax planning for 2013. . . .