Apologies

I need to apologize to reader Becky who sent me an email a few weeks back asking me if I had noticed any trends in my tax practice.

I didn't respond because I wasn't really sure how to.

See my little spot of Redville isn't exactly a trend setter. We're more of a lagger. So we're just now starting to feel the effects of the slow economy.

In any given year, we have about 15-20 people who get unemployment during the year. Last year was no exception.

This year, I already have 25 clients who have received unemployment.

Unlike the technology bust in 2000, almost every person who's received unemployment is a blue collar type. During the 2000/2001 tech bust I saw several $200k/year white collar types receive pink slips.

The one trend that's really wearing thin on me is the total lack of knowledge about how our tax system works.

Last week, I had a senior come in with a small retirement and interest income and a bag full of prescription receipts asking me what her refund would be.

Given that her income was so low, I told her she didn't need to file and that she would have no refund even if she did.

She got all indignant with me "well medical expenses are deductible right?"

Yes they are.

Then why can't I deduct them?

Maam, to begin with your income is already so low you pay no income tax. Secondly, you can only receive a refund if you actually pay something in (I didn't bother getting into earned income credit and the like with her).

It's like these people believe the IRS stands for Internal Reimbursement Service.

And really why wouldn't they?

They see neighbors with a pack load of kids getting $5,000 refunds from Earned Income Credit and refundable Child Tax Credit so certainly if they have a lot of medical expenses that's got to be good for something right?

Yesterday, I happened to run some numbers and depending on your lifestyle choices, if your household makes $60,000 a year you may have an $8,000 tax liability or zero (with a refund coming back) all depending upon choices you make in your life.

Where is the inherent "fairness" in that?

I'm a believer that everyone should have skin in the game. Unfortunately, we have way too many people who don't and that's creating a complete entitlement attitude for everyone.

If you wonder what's going on in Greece right now..... I'm starting to witness it here. That's the trend I'm seeing.