I suppose only a true tax nerd like myself thinks tax returns make good non-fiction reading.  ;D  It’s particularly interesting to me to see where President Obama derived his 2011 income and what he did with it once he had it.

I went page by page through President Obama’s return because I wanted to learn a little bit more about him.  You can learn a LOT about someone by looking at their tax return.  It can give you insights into how they live, what their values are, how well prepared they are for the future, if they are living above or below their means, if they are good at managing money, and so on.

Following are some of the highlights from Obama’s 2011 income tax return as well as links to several recent years’ worth of his tax documents.

Obama’s Personal Income Breakdown: Presidential Salary, Writing Income & More

Here’s a breakdown of the $844,585 total income that Barack and Michelle Obama reported on their 2011 tax return (most amounts rounded to the nearest thousand):

• $395,000 in W-2 Income. This is presumably all from being President, as that pays approximately $400k per year.
• $441,000 in Writing Income. Obama filed a Schedule C as an “author,” claiming income from publishers Random House and Dystel & Goderich.
• $11,000 in Interest Income.
• $(3,000) Capital Loss. He actually had quite a bit more to claim, but the law only allows for a maximum of $3k in capital losses.
• $700 in Royalties. The source of these royalties is not clear.

After deductions and exemptions, President Obama’s taxable income was $496,376.  His final tax bill: $162,074.

More Details About President Obama’s 2011 Federal Income Tax Return

President Obama claimed a good bit of itemized deductions in 2011, and he donated a sizable portion of his income to charity.  Here is a breakdown of some interesting tidbits obtained from Obama’s 2011 tax return:

• He claimed $278,498 worth of itemized deductions. Of that, approximately $48k was mortgage interest, $27k was real estate taxes, $32k was state income taxes, and a whopping $172k was charitable contributions.
• He gave the most money ($117k) to the Fisher House Organization. This represents proceeds from the sale of his book, “Of Thee I Sing.”  You can read a little bit about the use of this donation and about the Fisher House organization in general at fisherhouse.org. The remainder of his charitable donations were smaller donations between $1k and $5k to over 35 different organizations.
• The Obama’s were subject to Alternative Minimum Tax. This added $12,491 to their overall tax bill.
• The President’s effective tax rate was 20.5% (that’s Adjusted Gross Income divided by Total Tax).

Presidential Income Tax Returns Available for Download Online

Anyone with internet access can download the President’s tax return for review or even printing. Here are links to the President’s three most recent federal income tax returns:

Barack Obama’s 2011 Tax Return

Barack Obama’s 2010 Tax Return

Barack Obama’s 2009 Tax Return

The biggest difference in the Obama’s returns year over year is the amount of writing income reported on Schedule C.  The 2009 tax year brought a huge influx, with over $5,000,000 in writing income; in 2010, this amount went down to $1,500,000.

Other Presidental Tax Returns: Bush, Clinton, Nixon, Roosevelt, Candidates & More

Want to see more presidential tax returns after reading this?  You can actually find historical tax returns as far back as the year 2000 for Barack Obama and many other past presidents the Tax Analysts’ website, taxhistory.org.  Mitt Romney’s most recent returns are also published there.

Note: Most presidents only publish returns for actual years in office. There you’ll find links to tax returns for Roosevelt, Nixon, Carter, Reagan, Clinton, Bush Sr., George W. Bush, some Vice Presidents, and recent presidential candidates.

For easy reference, here’s a link to Vice President Biden’s 2011 federal income tax return.

I learned a lot about our President from reviewing his latest tax return.  If you have a chance to do the same or simply have comments based on what I shared above, I’d love to hear your thoughts!

Happy Reading!!  :)

As you may have noticed lately, I’ve upped the frequency of my posts to Taxes and Stuff.  I’ve been testing myself to see how hard it would be to post two or more times per week.

I have two little ones at home and a third on the way any day now, but I think it’s gonna be doable! The more I post, the easier it is to write each one.

Today I Joined the Yakezie Challenge!

I would like to announce that I’ve officially joined the Yakezie Challenge. As a Yakezie Challenger, I’ll be networking with other personal finance bloggers to provide compelling content and stay at on top of frequent postings.

Can the Yakezie Challenge Help Taxes and Stuff Become a Top Personal Finance Blog?

My goal is to post at least twice per week on Taxes and Stuff.  When I find myself with lots to say or just a little bit extra free time, I’ll post more.

Will Taxes and Stuff Become a Top Personal Finance Blog?  We’ll See!

Six months from now, I hope to have improved my blog significantly, gaining lots of readers and momentum in the process.  This should put Taxes and Stuff in a position of being a significant source of tax and related personal finance information going into next tax season.

Perhaps you’ll even see me on WiseBread’s List of the Top Personal Finance Blogs?  I hope so!  Wish me luck.

On the Road to Becoming a Top Personal Finance Blog – How Will I Track My Success?

By joining the Yakezie Challenge, I’ll be tracking my progress toward achieving an Alexa ranking of 200,000 or less.  If you’re not familiar with Alexa, it basically analyzes website traffic and reach to determine how you rank against other websites.  The lower your rank (1 being best), the more people you’ve reached with your writing.  Here’s a little more about how Alexa rank works. My current rank is 4,202,788. Going from 4.2M to 200k seems ambitious, but I think it can be done, considering I was at approximately 8,000,000 last week!  :)

In addition to Alexa rank, I’ll be tracking my Google Page Rank.  I don’t completely understand page rank, but I do know it’s important, and a way to measure my site’s authority and relevancy in Google’s eyes.  Page rank is measured on a scale of 0 to 10 with 10 being the best.  I’m currently at a PR of 3.

The United States government is on a mission to reduce costs.  Next on the chopping block: paper checks for Social Security and other federal benefit payments.

Effective March 1, 2013, anyone who receives federal benefit payments will be required to receive their payments electronically, either through direct deposit to a bank account or loaded onto a prepaid debit card.  This move will save the federal government millions each year in printing and mailing costs.

Who Do the New Rules Impact?

Major media outlets are reporting this as a Social Security recipient issue, when, in fact, it affects those who receive benefits from several government agencies.  Printed paper checks will eventually become non-existent for people who receive benefits from the following U.S. agencies:

• Office of Personnel Management
• Railroad Retirement Board
• Social Security Administration
• U.S. Department of Labor (Black Lung)
• U.S. Department of Veterans Affairs

How to Sign Up for Direct Deposit or Choose the Mastercard Debit Card Option – GoDirect.org

The United States federal government has created an information portal devoted specifically to this transition period at GoDirect.org.  Benefit recipients can sign up for electronic deposit online or may do so by mail.

To choose either option, you will need to know the amount of your last benefit check as well as the federal benefit check number.  Anyone who wants to sign up for direct deposit through a bank will need to know the bank’s routing and account numbers  and also be prepared to provide a Social Security number or claim number.

Facts About the New Requirements: Direct Express Prepaid Debit Cards & Bank Accounts

• Do you have to have a bank account? You don’t have to have a bank account to receive a Social Security or other benefit payment electronically.  Anyone without a bank account can get their money deposited onto a Direct Express Debit MasterCard.
• Are credit checks required for the prepaid debit cards? Anyone worried about this should know that Direct Express prepaid debit cards can be issued without a credit check.
• Can you get out of making an election? Unfortunately, no. Anyone who currently receives a Social Security or other benefit payment has until March 1, 2013 to make an election to receive direct deposit through a bank or credit union or have funds loaded onto a Direct Express MasterCard.  If you don’t choose one of those options, the government will choose the prepaid debit card on your behalf.
• What if you are a new applicant between now and March 1, 2013? To ward off any confusion, anyone who plans on applying for government benefits between now and the implementation date of March 1st will have to go ahead and designate an electronic payment method.  That way, no one new will be issued paper checks, only to be required to make another election within less than 12 months.

Savings from the Elimination of Paper Checks

The government claims that the move from paper checks to electronic delivery will save Americans $120 million.  It’s not clear whether that is an annual number or another frequency, but either way, that’s some good savings!  An added bonus of the move to electronic means – it will eliminate the issue of lost checks.

For more information about a specific type of benefit check, benefit recipients can follow up with their respective issuing agency.  Here are links to each of their contact pages:

Railroad Retirement Board

Social Security Administration

United States Department of Labor

United States Department of Veterans Affairs

U.S. Office of Personnel Management (OPM)

Each year, the IRS reviews retirement plan contribution limits with respect to cost of living increases.  For 2012, Roth IRA contribution limits remain unchanged from 2011.

2012 Roth IRA Contribution Limits

If you are under age 50, you can contribute $5,00o to a Roth IRA in 2012. If you are 50+ years old, you may make a $6,000 contribution.  That’s the $5,000 everyone else gets plus an additional $1,000 “catch-up” contribution.

A couple of things to keep in mind, though:

• If you didn’t make $5,000 in 2012, then you are limited to your taxable income.
• If you make too much money, the IRS will start to phase out your ability to contribute to a Roth IRA for the year.  For instance, if you file Married Filing Jointly and your Modified Adjusted Gross Income is between $173,000 – $183,000, your contribution will be reduced. Have $183,000 or more in modified AGI, and you are not allowed to make a contribution.  This chart on IRS.gov explains the phase outs in detail.

When Can You Make 2012 Roth IRA Contributions?

You are allowed to make Roth IRA contributions for 2012 during the tax year of January 1st – December 31st PLUS any time up to the 2012 tax return deadline of Monday, April 15, 2013.

If you make a contribution between January 1, 2013 and April 15, 2013, you should make sure to designate the contribution as a 2012 tax year contribution.  If you don’t, then it will likely default to being a 2013 Roth funding.

A special thanks to Kay Bell at Don’t Mess with Taxes for including this post in the May 2012 Tax Carnival: May Tax Flowers.

Every year, I find myself in the same predicament I’m sure thousands of other taxpayers face – waiting until the very last minute to contribute to a Roth IRA.  I know contributing to one is good for me, and I know investing sooner rather than later is good for me, but I can never seem to get myself to make an early Roth IRA contribution.

So, to salute my fellow late contributors, I wanted to cover a few burning question I’m sure many people will have as the deadline for 2011 Roth IRA contributions approaches.

When Exactly is the Deadline for 2011 Roth IRA Contributions?

You always have until the tax year’s original filing deadline to make a contribution.  So, for the 2011 tax year, you have until the 2011 tax return deadline of Tuesday, April 17, 2012 to make a 2011 Roth IRA contribution. Luckily for us late birds, the 2011 tax filing deadline is a little later than usual!

Is it Too Late to Make a 2011 Roth IRA Contribution?

If you already have a Roth IRA set up, you should have time (barely) to make a contribution by the deadline, assuming your brokerage can make bank transfers within two business days and you initiate the transaction no later than first thing Monday morning.

If that’s not the case, or if you haven’t even set up a Roth IRA account yet, you just might be out of luck for the 2011 tax year.  But don’t let that stop you from going ahead and setting up a Roth and making a contribution for the 2012 tax year.

What is the Max You Can Contribute to a 2011 Roth IRA?

The maximum contribution for someone under age 50 in 2011 is $5,000 (or the amount of taxable compensation for the year if you made less than $5,000).  If you are 50 years of age or older, you may make an additional $1,000 “catch-up” contribution for good measure, for a total of $6,000.  This neat chart on the IRS website illustrates these limits very nicely.

This post was inspired by the Roth IRA Movement started by Jeff Rose of GoodFinancialCents.com

United States taxpayers are getting a present from the IRS this year.  Because of a unique set of circumstances where April 15^th falls on a Sunday and the following day is a Washington, D.C. holiday, we get until Tuesday, April 17^th to file our individual income taxes.

When Are Taxes Due in 2012? How Washington D.C. Emancipation Day Affects the Tax Return Deadline

Normally, when an IRS due date falls on a Saturday or Sunday, personal income tax returns are simply due the next business day.  Same goes when the due date falls on a holiday.  No federal holidays fall on April 15^th, so this is usually not an issue for individual tax returns.  However, the Internal Revenue Code considers Washington D.C. holidays legal holidays for purposes of determining when tax returns are actually due.

It just so happens that the District of Columbia observes a holiday called Emancipation Day on April 16^th each year.  This affects tax return deadlines when the day Emancipation Day is observed conflicts with the day taxes are due.

2012 just happens to be one of those years.  Because April 15^th falls on a Sunday, the 2011 tax return due date automatically defaults to April 16^th; however, because Emancipation Day is observed that day in Washington, D.C., the IRS has moved the tax due date to April 17^th.

How Often Will Emancipation Day Affect the IRS Due Date?  When Taxes Might Be Due on April 16th,  April 17th, or April 18th

This exception doesn’t occur every year.  For this to happen, one of three scenarios must occur.  Keep in mind that Emancipation Day is April 16^th and tax day is April 15^th.  Also, keep in mind that both observances will shift to a weekday if the traditional day of observance occurs on a Saturday or Sunday.

• Scenario #1: When IRS tax returns are due on April 16^th because April 15^th happens to fall on a Sunday, the two dates will collide (as is the case in April 2012).  Any time this happens, taxes will be due on April 17^th.
• Scenario #2: When Emancipation Day is observed on April 15^th because April 16^th falls on a Saturday, tax day and Emancipation Day will coincide.  This would make taxes due on Monday, April 18^th.
• Scenario #3: When taxes should be due on April 17^th because the 15^th falls on a Saturday, but Emancipation Day is observed on April 17^th because April 16^th falls on a Sunday (will happen in April 2017).  Result: Taxes would be due on Tuesday, April 18^th.

This can get confusing to think about, but the easiest thing to remember is that the IRS won’t make taxes due early in order to avoid a weekend or holiday due date.  Taxes will always be due on the next available weekday.

Why Must Washington D.C. Emancipation Day Affect the 2011 Tax Return Deadline?

In IR 2007-15, the IRS discussed its rationale for changing the national income tax return due date in observance of Emancipation Day.  Although Emancipation Day isn’t an official federal holiday, it’s a legal holiday in the District of Columbia.  And because holidays in DC affect the rest of the nation (for obvious reasons), the IRS chooses to recognize the holiday as well.

The observance of Emancipation Day won’t make a difference for the millions of taxpayers who file their 2011 taxes early, but this unusual tax filing extension will surely come as a pleasant surprise to those who file at the last minute in April 2012.  :)

References:

IRS Notice 2011-17

Internal Revenue Code

Why Aren’t Taxes Due on April 15th?

Now that we are in the new year, many U.S. taxpayers are eager to get their 2011 tax returns out of the way.  Throughout the month of January, you should receive important tax documents related to income of all kinds.  Most American workers are waiting on IRS Form W-2.  In this article, learn when to expect this form and what to do if you’re missing your 2011 Form W-2 after a certain date.

When Should You Get Your 2011 Form W-2?

Unfortunately for anyone eager to file a 2011 tax return, the IRS gives employers until January 31, 2012 to give employees their 2011 W-2s.  Where they used to always be mailed or hand-delivered in the office, companies now have the option of making the forms available electronically by the January 31st deadline instead.

What if You’re Missing 2011 Form W-2 after January 31st?

If you haven’t received your W-2 by January 31^st, you have some options.  If you don’t think you ever received it, first call your employer to check on its status.  It’s very possible that your W-2 has been mailed, but you just haven’t received it yet.  It’s also possible the accountants goofed up or simply made a mistake by not sending you a W-2.  This, of course, is not allowable, but human error is always a possibility.  Another explanation is that your employer doesn’t have your current address on file.  Make sure that is correct.

You may also want to double-check that your W-2 isn’t being provided through a secure online portal.  Retrieving it could be as simple as logging on to the company website or other secure portal and downloading it to your computer.  Even if your company provided paper forms last year, the switch could have been made to electronic delivery, and you may have simply forgotten about the change (or perhaps an announcement was never made).

How to Get a Replacement W-2 Form for 2011

If you are sure you received your 2011 W-2, but have since lost it, the first place you should turn to is your company’s accounting department.  They should be able to issue you a replacement.

If, for some reason, you cannot get a replacement 2011 W-2 from your company in a timely manner, you can contact the IRS as a last resort.  The IRS suggests waiting until mid-February to do so.  That’s because the information your employer can be provide will be the most accurate information available and your W-2 may simply be delayed for some of the reasons mentioned above.

Form 4852 – Substitute for Form W-2, Wage and Tax Statement (or for Form 1099-R)

There is a substitute form (IRS Form 4852) you can file along with your personal tax return instead of an actual W-2.  Before you file Form 4852, you should call the IRS at 1-800-829-1040.  Be prepared to provide quite a bit of personal identifying information as well as mailing information for your employer.  The IRS will send a letter to your employer.

Want to File a Personal Tax Return, but Still Missing Your 2011 Form W-2?

You should continue to request a replacement W-2 from your employer until you get one; however, if you cannot get one before it’s time to file your federal tax return, then use Form 4852 as a replacement, filling it in to the best of your knowledge, using check stubs or other paycheck information to gather totals.  If you actually receive the official W-2 from your employer at a later date, make sure to compare it to what you reported on your return.  If the amounts don’t match, you will need to file an amended individual return to correct the error(s).

Related Video:

Want a quicker explanation of everything covered in this article?  Check out the IRS YouTube video on the subject.

In 2011, American taxpayers enjoyed a temporary reduction in Social Security taxes.  For what was supposed to be one year only, taxpayers only paid 4.2% in payroll taxes, a 2% reduction from the normal 6.2% rate. 

But just before that tax break was about to expire, Congress passed a last-minute short-term extension.  The payroll tax cut no longer expires on December 31, 2011 – it is now good through February 29, 2012.  It is estimated that approximately 160 million United States taxpayers will benefit from this stimulus measure.    

Extended Payroll Tax Holiday – Who Qualifies for Lower Social Security Taxes?  And Exactly How Much?

Everyone who pays Social Security taxes is eligible for this tax break.  In IRS Newswire Issue Number IR-2011-124, the IRS included confusing language about a “recapture” provision for high income taxpayers included in the extender bill.  I won’t go into that here, but if you are so inclined, you might want to read about in my post Confused by the “Recapture” Provision of the Temporary Payroll Tax Cut Continuation Act of 2011?  Me, Too! 

In a nutshell, if you make less than $110,100 in 2012, you will receive the Social Security tax cut.  As noted on the White House blog, this equates to roughly $40 bi-weekly for someone making $50,000 per year. 

In other words, you would get to keep an extra $1,000 on a salary of $50,000 per year ($50,000 x 2% = $1,000).  This means an extra $19.23 per week.  Someone making $75,000 per year would keep an extra $1,500 total, and someone making $100,000 per year would keep an extra $2,000 total.    

2012 Temporary Social Security Tax Cut Details – Actual Text of the Bill

The 2% Social Security tax cut extension is included in the Temporary Payroll Tax Cut Continuation Act of 2011, or H.R. 3765.  The actual text of H.R. 3765 can be retrieved from the Library of Congress (see preceding link).

2012 Employee Payroll Taxes – Lower Social Security Tax Withholding, Not a Tax Credit

The responsibility of implementing (or continuing) the 2012 payroll tax holiday falls on employers.  Instead of withholding 6.2% for Social Security, employers should only withhold 4.2% from employee paychecks.  As such, employees should keep in mind that this tax break will come in the form of more take-home pay, not a tax credit on a 2012 tax return. 

Due to the last-minute nature of this extender bill, employers have until January 31, 2012 to implement the necessary system changes to withhold the proper amount of payroll taxes.  However, any incorrectly withheld taxes due to late implementation must be corrected by March 31, 2012. 

Employees need not do anything to effect the change unless they suspect the incorrect is being withheld from their paychecks, keeping in mind that companies have until January 31, 2012 to implement the changes and until March 31, 2012 to credit back any incorrect withholding.

Obama to Congress: Don’t Let Social Security Tax Rates Revert Back in March 2012

Because the payroll tax holiday is only temporarily extended through the end of February 2012, the American public can expect another debate to ensue shortly over whether the extension should be continued through the end of 2012.  President Obama is pushing for the full year extension, but in an election year, things like this aren’t very predictable. 

The government granted this tax relief with the promise that future Social Security won’t be impacted as a result; however, the 2% break comes directly from the funds that would have otherwise been collected to fund Social Security.  If this tax cut is continually extended, it will add to an already contentious debate over what to do about the future of Social Security. 

Keeping that in mind, and weighing it against the fact that 2012 is an election year, it really is anyone’s guess as to whether this tax cut will be extended again.     

Sources:

• Congress Passes Two-Month U.S. Payroll Tax Cut Extension by Laura Litvan and Greg Giroux. Retrieved from Bloomberg.com on 12.23.11.
• Obama Signs Payroll Tax Cut Extension by Alan Silverlieb. Retrieved from cnn.com on 12.23.11.
• Payroll Tax Cut Temporarily Extended into 2012 (IR-2011-124).  Retrieved from irs.gov on 12.23.11.
• The Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765). 

Pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 (or H.R. 3765), American taxpayers will receive continued tax relief in the form of lower Social Security tax withholding for the first two months of 2012.  This is an extension of a temporary tax law that was in effect throughout 2011.

The Confusing “Recapture” Provision

The extension bill, however, includes a confusing provision about the implementation of the tax break with regard to higher income taxpayers.  Furthermore, IRS Newswire Issue Number IR-2011-124, included an equally confusing explanation of the ”recapture” provision included in the extender bill.  This is how it reads:

“Under the terms negotiated by Congress, the law also includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount.).  This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).”

What the heck?!!  I read tax laws all the time, but even I thought this explanation was especially confusing.  It sounds like high income taxpayers have to pay a 2% penalty on any income over $110,100 for the year.  But that doesn’t make sense unless that’s how Congress expects to fund the tax break for everyone else.   That paragraph was worded so oddly, I had to go elsewhere for further clarification.

Luckily, I found an explanation on the Journal of Accountancy website (a reputable source of information) that matches my own interpretation.  So, in plain terms, here is what I think that confusing paragraph above really says, along with background info to put it all in perspective.

2012 Social Security Income Cap and the Recapture Provision

A little background:  United States Social Security taxes are only imposed up to a certain level of income.  For 2012, the cap is $110,100.   This means that Americans only pay Social Security taxes on income up to $110,100 in 2012.

Knowing that, the “recapture” provision must be Congress’ way of saying “anyone who makes over $110,100 per year (or $18,350 over the course of two months) doesn’t get a Social Security tax cut on wages exceeding those amounts because they wouldn’t have to pay Social Security taxes on the excess anyway.”  In other words, high income taxpayers must pay back any excess benefit received due to the payroll tax cut.

According to the Journal of Accountancy, the law was written this way to keep things simple for employers – they simply apply the tax cut across the board and the burden of reimbursing the federal government for any excess tax benefit falls on the high income employees’ shoulders.  It actually seems more complicated to me this way, but I have never been asked to draft a tax bill before.  ;)

Sources:

• Congress Passes Temporary Payroll Tax Cut Extension.  Retrieved from journalofaccountancy.com on December 24, 2011.
• Payroll Tax Cut Temporarily Extended into 2012 (IR-2011-124).  Retrieved from irs.gov on December 23, 2011.
• The Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765).

I get random questions throughout tax season that don’t necessarily warrant a lengthy explanation, so instead of writing separate posts to address each one, I am going to post the questions and simple answers on this page.

Questions about Personal Income Tax Returns and Related Issues

Q: I lost my W-2.  How do I get a replacement?

A: Your employer issued your original W-2, so that’s where you should look for a replacement form.  You may have more than one option for recovering a lost w-2.  The first should be to call your company’s payroll or tax department and ask that a replacement W-2 form be sent to you.  In the meantime, if you are trying to prepare your initial return and simply want a particular amount off the form (like total wages reported in box 1 or federal income tax withheld), then your company representative may be able to give you that information over the phone.  Your second option could be downloading a replacement W-2 from the company website.  These days, tax forms are often provided for your convenience through a secure online portal, and you may be able to pull up the necessary information that way.