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Dear Family,

Whew! What a presidential campaign that just ended!

This was probably the most important political election within a century. With so much at stake - new Supreme Court Justice(s), a war on terrorism, and economy deeply in debt, jobs dribbling away to other countries, and our childrens' educations among the worst in the world.

And voters turned out in record numbers to speak their minds. I am SO proud of all of you for voting, for getting the vote out, for taking part in the whole political process. THREE BIG CHEERS for YOU!

President Bush shed the cloud over his first term. He got an undeniable mandate this time. In addition to the electoral vote, George Bush received the majority of the popular vote, too.

With a Republican legislature, and no more need to prove that he is the President, and no need to campaign again, Bush will be free to run the country as he sees fit. There will be no opposition. So, let's hope that he uses his powers for good.

Seriously, the President has started talking about Social Security, limiting malpractice awards and a host of other things. The President is upbeat and ambitious. http://seattlepi.nwsource.com/national/198384_bush05.html

So, everyone, whether your candidate won or not, it's time to celebrate. The campaign is over. We're not as polarized as the press would like you to think.  

Eva Rosenberg, EA Your TaxMama is watching...out for you.

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----------------------------------------------------------------- Pro Electoral College -----------------------------------------------------------------

After my comments last week about the E-College, some of you made some persuasive arguments about keeping it.

<Barry L. Pinsky, CFP, ChFC, CFM  of  Barry_Pinsky@ml.com says>

Hi Eva.

On a relatively non-political note, I would ask you to think carefully about your wish to eliminate our hoary Electoral College. 

Is it perfect?  No. 

Does it always exactly reflect the will of the majority of the people?  Obviously not.

(In fact, many elections result in a minority president.)

But imagine the chaos if in 2004 we had to contest election results in every county of every state, as we did in Florida in 2000, because the national electorate was split more evenly than the margin of error takes into account. 

Think of all the various balloting options that would be immediately dragged into the courts, from the absentees to the punch cards to the machines to . . .  Flying chads would look like a day in the park. 

The Electoral College system allows the results to be broken down into manageable packets while maintaining a relatively fair system in which everyone agrees on the rules.  Modifications could still be introduced such as the representational division of electors as some states are considering.  The results are still manageable within discreet jurisdictions.

Always enjoy your comments.  Have a Shabbat Shalom.

Regards,

Barry

<"Frank W Webster, EA  - Frank@acaringcall.com says>

Dear TaxMama,   I had thought that we should end the Electoral College, and go to a total popular vote since communication is not a problem as it was over two hundred years ago.   However, watching Bill O'Reilly on Fox Cable changed my mind. He pointed out that with a popular vote system, a candidate could concentrate on the 8 to 10 high density population areas and ignore the rest of the country for votes and thus their needs.

Colorado probably has the right idea by an amendment to split the electoral votes as to the popular vote, not winner take all. This would make all the states votes important, not just the large electoral vote ones.     Frank W Webster, EA

<TaxMama Replies>

Thanks, guys, for the excellent insights.

All right, my friends, let's look at what the Electoral College really does, shall we? Let's not just operate on heresay and assumptions.

What does the electoral college do? http://www.archives.gov/federal_register/electoral_college/

Here is one of my big objections to the system: http://www.archives.gov/federal_register/electoral_college/state_responsibilities.html#meeting

There is no Constitutional provision or Federal law requiring electors to vote in accordance with the popular vote in their States. 

Although some states' laws do require that the electors honor the will of the people, most states have no such laws. Can you just imagine some elector feeling contrary, and just voting for his/her favorite candidate? The electors don't cast their ballots until December 13th this year. Congress opens the ballots in January. So, we might not know that the electors decided, on their own, not to elect George Bush.

Some states, like Colorado have a better system. Winner doesn't take all. Their electors vote in proportion to the popular vote. That makes sense to me. After all, while Florida's votes all went to Bush, a large part of the population voted for Kerry.

So, OK, let's keep the college, but clean up the rules. Let's require that electors must vote the choice of the people. And let's apportion the electors' votes among the candidates selected by the voters.

We have computers. And we (except me) know how to use them.

SMALL BUSINESS TAXES MADE EASY - How to Increase Your Deductions, Reduce What You Owe, and Boost Your Profits

----------------------------------------------------------------- The Rich Don't Pay? -----------------------------------------------------------------

From: Boise, Idaho

Dear TaxMama,

Is it true that individuals with yearly incomes of $63,000+ aren't required to pay FICA, yet are eligible for Social Security benefits upon retirement, like those who have paid into it all their lives?

William

<TaxMama Replies>

Dear William.

Uh, no!

In fact, ALL employees have FICA (6.2%) deducted from their wages until they earn up to $87,000 (up to $90,000 in 2005). 

And yes, employees who pay in more will receive a higher  benefit. Your SS benefits are based on the amount you've contributed.

Also, all employees have Medicare (1.45%) deducted from their paychecks, no matter how much they earn. 

There is no limit.

So someone earning a million dollars will pay $14,500 in Medicare deductions, while someone earning $30,000 will pay under $500, but they'll get the same Medicare coverage.     

So don't think the Social Security Administration is giving away money for free.

Best wishes,

Eva Rosenberg, MBA, EA

----------------------------------------------------------------- Rebates to Sellers -----------------------------------------------------------------

From: Diamond Springs, CA

Dear TaxMama,

I am a new Realtor(tm) about to do my 1st deal of the year.

My question is, I am rebating my seller 1% of the sales price, $4,900.

I need this as a business deduction and wanted to put it on a 1099 form at end of year. Is this the best way to be able to claim it as a business expense?

If not what would you suggest?

Thank You

Phoebie

<TaxMama Replies>

Dear Phoebie,

WOW! Congratulations.  How wonderful for you.

If you can, arrange to give them the rebate IN ESCROW.

That way, your net check will be lower and you won't be reporting the income at all.

If you take the money and THEN pay them, you're going to have to issue them a 1099-MISC for each rebate that's over $600 in order to be able to use the deduction.

And that, my friend will open up a whole can of worms you don't even want to start opening.

Remember, tax considerations aside, it will look like a commission, and California RE license law says you can't pay commissions to anyone who isn't licensed.

And tax law says you must issue 1099s, or you could be penalized, lose the deduction or both.

Other than that, you're just fine....

I know, you're trying to show your commissions at the highest level possible. But it won't work from this angle.

However, you may want to sit down with a good, local tax pro and do some brainstorming on the best way to make this work for you.

Good luck!

Best wishes,

Eva Rosenberg Your TaxMama

----------------------------------------------------------------- Class Action -----------------------------------------------------------------

From: Texas

Dear TaxMama,

Are proceeds, although small, from class action asbestos lawsuits taxable? 

My husband has been diagnosed with bad lung symptoms.

Sylvia

<TaxMama Replies>

Dear Sylvia,

How horrible for you both!

You better believe Bill's judgement for the asbestos suit is not taxable. That is payment for tangible, physical symptoms.

I hope it helps, and pray there's some way to reduce the effect on his lungs.

Best wishes,

Eva Rosenberg, MBA, EA

---------------------------------------------------------------- Because We Care ----------------------------------------------------------------

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==========

A.N.G.E.L.S. DAY

==========

The Jeremiah Society asks "Who Will Care for the Children?"

Today, many of these people outlive their parents. And therein lies the problem. Once their loving caregivers are gone, who will care for them? And will they be able to care for themselves?

The Jeremiah Society, is working to help enhance and enrich the lives of developmentally disabled teens and adults in the Jewish Community Please Call Rose Lacher, (714) 997-8193

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----------------------------------------------------------------- MONEY FUNNIES -----------------------------------------------------------------

If Your Candidate Lost

Kerry fought the good fight. And, amazingly, a man few outside his own had ever heard of, won the votes of nearly half the country his first time up for president. That's one of those things I find astonishing about this country - how we can warm up to people so quickly and become so passionate.

But...his 15 minutes are up. And while you worked hard on Kerry's behalf, or for your other failed candidates, do you really want to remind yourself and others that you're a loser every time you look at your car? NO?

Then, get that bumper sticker off!

Here are some ways that may or may not work:

Popular Mechanics offers up some tips including sun, blow dryers, citrus-based cleaners...and more.

eHow talks about rubbing alcoholand alcohol-based products like nail polish remover.

Does anyone talk about peanut butter? Well, while it may work on tar, they don't mention  bumper stickers. But hey, spreading chunky peanut butter on may encourage the squirrels to eat the sticker off.

----

Courtesy of your TaxMama

----------------------------------------------------------------- IRS NEWS -----------------------------------------------------------------

Social Security & Medicare Changes for 2005

The Social Security Administration and Department of Health & Human Services have announced the new amounts for 2005.

Social Security benefits increase 2.7% for 2005.

The amount of earnings subject to Social Security taxes increases from $87,900 in 2004 to $90,000 for 2005.

The amount of earnings required in order to receive a quarter of coverage increases from $900 in 2004 to $920 for 2005.

Earnings limitations for taxpayers who have not reached full retirement age (before having to repay Social Security benefits) increases from $11,640 ($970/month) in 2004 to $12,000 ($1,000/month) for 2005.

Earnings limitations for taxpayers who reach full retirement age in the current year (before having to repay Social Security benefits) increases from $31,080 ($2,590/month) in 2004 to $31,800 ($2,650/month) for 2005.

The maximum Social Security benefits increase from  $1,825 in 2004 to $1,825 for 2005.

The amount of the SSI Federal Payment Standard increases for individuals from $564/month in 2004 to $579/month for 2005.  For a married couple this increases from $846 in 2004 to $869 for 2005.  The SSI Resource limits of $2,000 for individuals and $3,000 for couples do not change.

The Medicare Part B premiums increase 17.4% from $66.60/month in 2004 to $78.20/month for 2005. Or from $799.20 to $938.40 per year

These New Releases can be found at www.socialsecurity.gov (for Social Security news) and  www.hhs.gov (for Medicare news).

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