Something about free speach and tolerance…

Mozilla’s newly appointed CEO, Brendan Eich, resigned yesterday. Apparently, it is not always clear to people where the the freedom of speech and the tolerance end and acceptance begins.

Eich was definitely in his right to give $1000 to the Prop 8 campaign, and was definitely in his right to voice his opposition to other people having the same rights as him. After all, it wouldn’t be a free country otherwise.

What other people have is exactly the same – they have the right to voice their opinion, their opposition to Eich’s behavior and their desire not to use products developed by the company he’s the face of.

Boycotting companies for the opinions of their owners/CEO’s is not news. Some people decide to boycott companies because they’re owned/led by bigots, others decide to support these companies for that same reason. Check the Chick-Fil-A story – enough said.

But apparently, it is only allowed to use the power of the dollar when it is for the “right” cause. When the boycott of Mozilla drives Eich out, it is apparently bullying and intolerance that was the reason, not Eich’s own actions.

So let me educate you on the difference between “Free Speech“, “Tolerance” and “Acceptance“:

1. Free speech – you’re free to say as you like. No law can prevent you from saying whatever you want. Some laws may punish you if by saying things you’re causing significant damage (like, for example, exposing the NSA surveillance program…), but you’re still free to say it. You must accept the responsibility for what you say. That’s free speech.

2. Tolerance – people who’re tolerant will not try to actively preventing you from speaking out your mind. For example, you won’t see gays pushing laws to forbid preaching bigotry or forcing churches to discuss Darwinism and Creationalism as two equal theories. Gay people tolerate Eich’s opinions, even if his opinions (and actions) come to strip gay people of their equal rights. No-one demanded Eich to be put in prison. That’s tolerance.

3. Acceptance – accepting one’s opinion means living/acting by them. While Eich’s is free to say what he wants, and I’m tolerant to him saying that, I’m in no way obligated to accept what he’s saying. Thus, the fact that I oppose his opinions doesn’t mean that I’m against his free speech or not tolerant – it means I do not accept. That’s acceptance.

Same goes both ways – In California, and many other states, gay marriages are (now) legal. It is the gay people’s free speech right to get married (declare in public their love to their partner and willingness to share their lives together), it is everyone else tolerance not to interfere and let them live their lives as they want. But everyone else doesn’t have to accept that opinion and rush into gay marriage themselves. No-one was forcing Mr. Eich to marry another man when he was contributing money to Prop 8. He was not forced to accept anyone’s else opinion. He was merely asked to tolerate it. He was not willing to. He was willing to force his belief on others, force gay people to accept his way of life through law.

And now he’s paid the price for that. And its free market: if I don’t want to use Mozilla products – I won’t. Same as me never stepping foot at the neighborhood Chick-Fil-A.

Think about this,

Your Little Advisor.

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How to choose your tax preparer?

We’re at that time of the year again, where everyone is trying to get the most of their tax refunds. Many people are doing it on their own, and I wrote a couple of articles on how to choose the tax preparation software best for you.

For those of you doing it themselves, there’s an additional benefit this year: You can get an additional Amazon credit of 10% of your refund when using TurboTax Deluxe or TurboTax Premier bought through Amazon.

But if you’re looking to hire a professional to do your taxes – I’ve got some tips for you.

1. First and foremost: anyone giving you a tax advice must be properly licensed. If the advice is not given with regard to filling the tax forms, only people who hold the EA (Enrolled Agent) credentials from the IRS, or people licensed as CPA/PA (Certified Public Accountants) or an Attorney by your State are allowed to give you a tax advice. No-one else. Not even a tax preparer in your neighborhood H&R Block store (unless they’re licensed accordingly). You can verify the status and the credentials of the professional with your State (for CPA/Attorney) or the IRS (for EAs).

2. Some states also license people who prepare taxes. For example in California, such a person should have a CRTP designation, unless he or she is also a EA/CPA/Attorney – those are allowed to prepare taxes as part of their legal ability to provide tax advice in any matter. Employing a licensed/registered tax preparer ensures the person passed a certain process of ensuring his knowledge in tax matters. However, not all States license and regulate tax preparers, in fact – most don’t.

3. Make sure the preparer uses a professional software. It is illegal for a paid preparer to use “retail” personal-use software such as TurboTax or H&R Block At Home.

4. Make sure your preparer signs the return he/she prepared for you, in the designated area for the paid preparer signature. Also, make sure that the preparer’s PTIN (IRS identification number for all paid preparers, including EAs, CPAs and Attorneys) appears next to the preparer signature. The preparer signature designated area is at the bottom of the second page of the main form for your tax return – form 1040.

5. Make sure your return is e-filed. While it is not legally required to file your return electronically – it is beneficial for you: you save the money on sending it via certified mail, you save the paper needed to print it, and you save the time needed for the IRS to scan it, process it, and issue you the refund you’re entitled to. It also reduces the chances of identity theft somewhat, since the IRS gets your information faster and without a danger of someone snooping into the envelope on the way.

Paid preparers preparing more than 10 returns a year are required to e-file the returns they prepare. You will sign an authorization form, and will receive a confirmation that the return has been filed and accepted by the IRS, from your preparer. You can verify that yourself now using this system.

6. When selecting a preparer, check for reviews and references. Being licensed is not enough, as to pass the licensing requirements (even for the IRS EA designation, which is all about tax), the candidates need to be proficient only in the most basic applications of the tax law. Your average tax preparer will probably not know anything about international taxation and tax treaties (for those of you who are international students, H1B/L1 employees or US citizens living abroad). Not all the tax preparers are familiar with corporate taxation (for those of you working as self-employed and want to explore options of incorporating as a S-Corp or C-Corp). In short, check with people in a situation similar to yours if the preparer you’re thinking of is capable of doing the job.

7. Check the preparer’s history. You can find information about the person’s license at the appropriate regulating agency (IRS or the State), and see how long he/she has been in business. Check whether they were working in a larger firm were they could have been exposed to more complex and challenging cases, and see if there were any complaints and negative reviews against them, or if they’ve been cited by their oversight agencies.

8. Verify that your tax preparer will be there for you after the tax season is over. Many people prepare taxes as their hobby/second job during the tax season, but will not be available for you after that, until the next season starts. Sometimes its OK, especially if your tax situation is standard and no special tax advice or treatment is needed (for example – you’re a W2 employee without any unusual circumstances). But for some the ability to call their tax adviser throughout the year is critical.

This also related to the point #1 above – since issues arising during the year are not necessarily related to the tax return preparation, if this is relevant to you, you’d probably want your tax preparer to be a licensed tax adviser (EA/CPA/Attorney).

9. Make sure your tax preparer can deal with issues related to the tax return. For example – make sure the tax preparer will write his/her information as a contact person on the form 1040, and will be available to respond and deal with any IRS questions or audits. Only EA/CPA/Attorney can represent you in front of the IRS/State, so if your tax preparer is not licensed as such – ask who would be the professional representing you in case of an audit. Many “un-enrolled” (not licensed as EA/CPA/Attorney) preparers collaborate with the “enrolled” ones on the matter for their clients – check who that “enrolled” person is.

10. Get a copy of the return prepared for you, and go through it before signing and sending/e-filing it. Make sure you understand every number, and have your preparer explain to you everything you don’t understand. Make sure you agree to everything. The tax return is your responsibility, even if you paid someone else to prepare it. Remember that.

Happy Tax Season!

Your Little Advisor.

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Great new service from the IRS – get your account transcripts online!

That’s right – the IRS now provides online access to your account records!

This comes after last year the IRS discontinued an online system that allowed tax professionals (EAs, CPAs and attorneys) representing tax payers in various tax-related proceedings to get their clients’ account information on-line.

Now you no longer need to pay your CPA to check what is your status with the IRS and whether the IRS has received that return you sent two years ago without a tracking number. Now you can do it yourself. Your tax professional no longer needs to sign you up on an authorization form and fax it to the IRS just to get access to your account – you can print it out at home and bring it to your next meeting! It almost feels like the 2000s are here.

So how does it work?

You start from this IRS.GOV page: For your safety, copy it from the article to the address bar of your browser, or type it yourself. This way you’re sure that the page you’re getting is the one you want. Since it involves a lot of sensitive and personal information – this precaution seems to be in order here.

On that page you have an option to chose whether you’ll get the requested information on-line or via email. I suggest on-line – you never know who might peek inside the official envelope bearing the IRS logo.

Once you click the button, you continue to a secured web site. Check your browser’s identification that the site is indeed secured. In most browsers it would be an image of a locked lock appearing in the status bar or in the address bar.

Next step would be to provide your name and email. The IRS then will send a random pair of numbers to that email which you’ll be required to enter. This ensures that you’re a real person, with a real email address, which you can access and read.

Next step would be filling some personal information that is expected to match your recent tax return. If you didn’t file a tax return in the last 7 years – there’s a special procedure which you must follow. At this step you can chose whether you want to create a permanent username, or repeat the same authentication procedure next time you get to this page.

After that your identity will be verified through several random questions based on your credit report.

Once your identity is verified – you get to the page which specifies all the transcripts available. There are several “standard” reasons for people to want these transcripts, and when you chose the reason most closely related to yours – the transcripts most likely needed will be highlighted. But you can chose whatever you want.

Please make sure to enable popups, and to have Adobe Acrobat Reader (free PDF reader software) installed. The transcripts will appear as popups in PDF format. You can then save them on your own computer or print them out. They’ll appear exactly the same as if they were mailed by the IRS.

Voila. What all the banks and credit companies have been doing for the last 15-20 years is now available at the IRS as well!

For those of you in California, the CA FTB has a similar service at Check your State taxing agency for more information.

Happy Tax Season!

Your Little Adviser

Posted in Taxes - General | Tagged , , | 1 Comment

Its that time of the year again, and once again I appeal to your generousity

At the end of the year, many Americans remember that they can reduce their tax bill by donating some money or property.

While reducing the tax bill is a worthy cause, charity is a cause on its own.

So this year I suggest you donate, and donate generously. Keep in mind that due to the bad economy, many charities have been struggling in the last few years, and need your help more than ever.

Please remember to verify that your charity is a registered 501(c)3 organization if you want to use the charitable donation for tax deduction purposes, and make sure to receive a confirmation from your charity that will include an attestation that no goods or services were provided to you. Without that attestation your donation may not be deductible. Please verify with your tax adviser on what exactly the wording should be and make sure your charitable organization is aware of this condition.

This year, as always, I suggest my readers to donate to Wikimedia Foundation – the foundation behind the Wikipedia. You can donate to the Wikimedia Foundation by going to this page. We all use Wikipedia, and always take it for granted, but its not. This site requires vast resources and can only pay for them through your generosity.

Many employers will match your donations, so check with your employers on how you can donate for your donation to be eligible for matching. By complying with the rules set by your employer, you can donate significantly more to the charity of your choosing.

Happy holidays and happy new year!

Your Little Advisor

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The Roth IRA loophole – retirement planning for high earners!

It is a very well known truth that in the US you have no-one to rely on but yourself when it comes to retirement.

Sure, you accumulate some Social Security benefits, but they’re nowhere near to bringing you to a comfortable retirement (check this page to calculate the estimate).

So what can you do? The usual: employer’s pension (if you’re lucky, not many left providing it), 401k and the IRA.

So lets look at the IRA: there are 2 kinds – Roth and Traditional. The difference is in tax treatment: for Roth you deposit after-tax money, and all the income is free when you’re retired. For traditional – you deposit money that may or may not be deductible on your tax return, and the amounts in excess of what you didn’t deduct on your taxes now will be taxable to you when you’re retired.

What does it mean? It means that with Traditional IRA, your account will provide you taxable income on retirement. With Roth – it will be non-taxable.

If you expect your retirement tax rates be lower than current, traditional IRA makes more sense to you. But there’s a problem: you can only deduct the contributions up to a certain (and fairly low) AGI limit. Especially if you also have a 401k at work.

There are additional benefits for having Roth IRA, for example – you’re not required to have distributions from them when you’re old (from a traditional IRA you’d be required to start distributing at the age of 70 and 1/2, whether you want it or not). So if you expect to not need the IRA distributions at all and just want to leave tax-free income for emergencies or as inheritance, Roth IRA is definitely better for you.

If you cannot deduct your IRA contribution – there’s no sense in having a traditional IRA. Roth is much better then. But, you cannot contribute to Roth IRA if you’re a high earner, especially if you’re covered by a 401k plan at work.

So what to do?
Utilize the loophole.

You can always contribute to a traditional IRA, with after-tax money in a non-deductible contribution. And, you can always convert a traditional IRA to a Roth IRA. So what’s the loophole? Simple: contribute to a traditional IRA and convert it to Roth IRA. This way you can maximize your retirement income while minimizing taxes on it.

There’s a catch: when you convert your traditional IRA to a Roth IRA, you’re taxed on the untaxed portion. If you have a traditional IRA balance in excess of your current non-deductible contribution (for example, you rolled over an old 401k into an IRA), it will be taxed proportionally to your contribution. So for the loophole to work best, you should not have any other Traditional/Rollover IRA other than the one you’re converting.

Here’s an example:

1. You don’t have any Traditional/Rollover IRA at all.

2. You deposit up to the yearly maximum (currently $5500) into a traditional IRA

3. You convert your traditional IRA to become Roth IRA ($5500 change designation from Traditional IRA to Roth IRA).

4. You fill IRS form 8606 and attach it to your yearly tax return, no tax due. You have  a fully funded Roth IRA account.

Another example shows why it is important not to have any other pre-tax IRA when utilizing this scheme:

1. You have $55000 in your rollover IRA (traditional) from an old 401k.

2. You deposit $5500 (current yearly maximum) to a traditional IRA.

3. You convert the $5500 from step 2 to a Roth IRA.

4. You end up with $5500 in Roth IRA and the old $55000 in your rollover IRA.

5. You fill IRS form 8606 and attach it to your tax return, but there’s a tax due.

Because you had a pre-tax IRA ($0 basis), your tax is calculated like this: ($55000)*($5500/($55000+$5500)) = $5000 taxable. You’re calculating, in essence, what is the pre-tax portion of your total traditional IRA balance that you converted to Roth IRA, and how much of the total has been post-tax (i.e.: tax already paid). The proportion in this example is ~9.1%. Note that it doesn’t matter if the accounts are with the same custodian or not, you still have to count all of them together.

That makes ~91% of your conversion (in this example) taxable – $5000 out of the $5500.

To report Traditional IRA to Roth conversions, and non-deductible contributions, you should use IRS form 8606.

Always talk to your tax adviser before making any tax-related decisions. I’m not a tax adviser and this is not a tax advice. Always discuss your tax planning with a EA or CPA licensed in your State.

Happy Retirement,

Your Little Advisor

Posted in Savings Accounts, Taxes - General | Tagged , , , | Leave a comment

Why those who support republicans on ACA are wrong.

Following the (undoubtedly sponsored) comments I received on my previous article criticizing the Republican Speaker of the House of Representatives behavior, I wanted to debunk some of the myths.

“The majority of employees (people of the US) do not want to pay for a new soda machine, they already have one.” - meaning the commenter claims that the majority of the US population already have medical insurance and are not interested in changes.

Well, this one is easy: the problem is not the majority who have insurance, its the minority who don’t. What do we do about those who are unemployed, and thus cannot get insurance through employers? Those who are employed but whose employers don’t provide insurance? Those who are students? Those who have pre-existing conditions? Those who’ve exceeded their lifetime caps because they become sick with diseases like cancer, or got into an accident, or were born with some health issues, etc?

What do we do about all these? Do we, those who have insurance, let them just die untreated? This was a question asked in one of the Republican primary debates, and there were people in the crowd shouting “Yes”! I was horrified by that. None of the Republican candidates spoke against these shouters then. That was even more horrifying. Other than “Yes, kill them all”, Republicans do not provide any answer.

“If employees do not purchase sodas from the machine they will be fined 1% of their salary this year and 2.5% of their salary next year.” (Tax penalty for not signing up for Obamacare)

This is supposed to be a negative thing? Apparently the commenter thinks so. I think that 2.5% is not enough. Those who are not getting insurance will undoubtedly go to the ER when they actually need emergency care. Who is going to pay for that? The answer is the taxpayer. So for those people it is wrong to have others force them taking responsibility, but its perfectly fine to force others to pay their bills when its convenient? Conservative hypocrisy at its best. I would say they should pay even larger fines. 2.5% is not enough to cover their ER expenses when they actually do break a leg or have stage 4 cancer because it wasn’t diagnosed during the first 3 stages having them being too cheap to have coverage.

“Management will confiscate part of the employees paychecks regardless of the situation and use part of that money to pay for 75% of management’s sodas.” (Congress gets 75% of their costs for Obamacare paid for according to OMB)

Actually, my employer pays even more than 75%. But I do get the point – we’re the employers of the Congressmen. What I think is that the terms of their employment shouldn’t be set by them, but someone independent, as it is done in other countries. But ACA has really nothing to do with that, does it?

But the most ridiculous argument was this:

The employees are the people and did not get to vote on Obamacare (this was entirely left out of the original allegory). The managers (congress) are the ones who voted and did not represent the will of the majority of the people (employees).

Well, I’ve got news to you Aaron: people don’t vote on Federal laws. AT ALL. So claiming that ACA is bad because people didn’t get to vote on it is moot – people don’t get to vote on any Federal law. Ironically, people didn’t also get to vote on the recent government shutdown. Where are the polls on that? Where are the polls on all the wars the US went to? Where are the polls on the handouts to the corporations and the tax loopholes allowing the rich to pay 13% tax while the middle class is paying 25%-30%? Didn’t see anyone shouting that the people didn’t get to vote on that. Oh, wait, I did… Occupy Wall-Street movement… Where were the Republicans then? Did anyone ask the people when the Republican House of Representatives spent millions defending the unconstitutional discrimination?

No. I don’t think so.

So don’t try to defend Republicans here. No excuses for them

Your Little Advisor.

Posted in News and Politics | Tagged , , , , | 2 Comments

Government shutdown – workplace allegory

I was trying to figure out how to write what I feel about this stupid government shutdown, but I couldn’t really without getting into some nasty words. But then I saw this post a friend shared on his Facebook page. I copy-pasted it here, but these are neither my words nor my friend’s, I don’t know who the author is. I just think it represents what I think really well.

Edit: Initially posted as anonymous quote, this post has been re-tweeted (thanks, folks!), and the author of the allegory contacted me and asked to put a link to the original post. So here it is: Brian’s Original Post – Hilarious Allegory to the Current ACA aka ObamaCare Hoopla.

- hilarious allegory to the current ACA aka Obamacare hoopla -

So, Imagine that the company you work for held a poll, and asked everyone if they thought it would be a good idea to put a soda machine in the break room. The poll came back, and the majority of your colleagues said “Yes”, indicating that they would like a soda machine. Some said no, but the majority said yes. So, a week later, there’s a soda machine.

Now imagine that Bill in accounting voted against the soda machine. He has a strong hatred for caffeinated soft drinks, thinks they are bad you you, whatever. He campaigns throughout the office to get the machine removed. Well, management decides “OK, we’ll ask again” and again, the majority of people say “Yes, lets keep the soda machine.”

Bill continues to campaign, and management continues to ask the employees, and every time, the answer is in favor of the soda machine. This happens, lets say… 35 times. Eventually, Bill says “OK, I’M NOT PROCESSING PAYROLL ANYMORE UNTIL THE SODA MACHINE IS REMOVED”, so nobody will get paid unless management removes the machine.

What should we do???

Answer: Fire Bill and get someone who will do the fucking job.

Bonus: Bill tells everyone that he was willing to “Negotiate”, to come to a solution where everyone got their payroll checks, but only so long as that negotiation capitulated to his demand to remove the soda machine.

Bill is a fucking jackass.


- Brian K

They can agree or disagree about ACA all they want, but blackmail and extortion are not the way laws should be enacted.

ACA comes into effect now, and they’re afraid that all these horrible things they promised us because of it will never happen. Remember the “death panels“?

Your Little Adviser.

Posted in News and Politics | Tagged , , | 5 Comments