We just finished up our taxes today, and I have taxes on the brain. It seems everyone else does too.
It’s theft. Taxation is theft. God damn the god-damned government, stealing all that money. Somebody should call the police and report them.
Oh, wait. . .
But then, on the heels of “taxation is theft,” we get this.
What Nicole is talking about (getting money back) is called the earned income credit. She and Joe not only don’t owe taxes because they have so many dependents, they get a nice fat refund. They don’t actually pay taxes at all. They get tax money.
Here’s why and here’s what it means.
First, they have to file. Here’s why.
The IRS does not care, for filing guidelines, if you have no dependents or nineteen of them. If you have a gross income of at least that amount, you have to file a return. I am going to assume that regardless of how busy or not busy Nicole is, she had a gross income of $20, 800.
But all that really doesn’t make any difference, because of this.
If you make a net income of $400 from self-employment, you have to file.
So, they’re filing. And here’s the form. They get to the part called Exemptions and they first check two boxes for themselves. Then they start listing kids. Notice that if you have more than four dependents, you’re told to see the instructions and check the little box. All the instructions say is if you check the box, just include a sheet of paper with all the other kids listed on it.
So they fill that in.
And here comes the rub.
One would think that they would fill in ten dependents, right? That’s what we would think.
So let’s do that.
That means that the total number of dependents (including the two boxes for Joe and Nicole themselves) would total 12.
Well, when you get to the next page, you see this.
Above the highlighted line, there is a line for itemized deductions (or the standard). I have no way of knowing which one Nicole did. She has a small business and because it’s an LLC, it’s folded into her personal federal return, so perhaps (almost surely) she itemized. But I can’t know that, so I am going to assume that she took the standard. It won’t make any difference at all for the point I’m making here.
The standard deduction for her situation (married filing jointly in ordinary circumstances) is $12,700. So whop, that comes right off her income right out of the gate.
But then comes the kicker.
The number of boxes checked on the front page was 12, remember. She can multiply that 12 by $4050. That’s $48,600.
Then you add those two together.
You get $61,300.
Nicole and Joe can gross $61,300 without paying a single dime in federal income taxes.
Well, provided that they have 10 qualified dependents.
They have ten minor children, yes. But according to Nicole, most of those kids don’t have social security numbers or birth certificates, and you have to list their SS number on the form. No SS number, no dependent.
I don’t think those kids have SS numbers. I believe Nicole when she says they don’t. I don’t think that the state forced SS numbers on them. Here’s why.
Nicole tells us that they owed zero taxes. Their taxable income was zero. But then she tells us specifically that they got $3000 “more than she paid in.” She paid in zero, so she got $3k.
That’s the earned income credit. With most tax credits, you can reduce your tax down to zero and then if there’s any credit left over, you either have to carry it forward to the next tax year or forfeit it. But the earned income credit actually gives the filer cash.
I checked about this because I’ve never qualified for the EIC and so wasn’t sure, but you can’t not do it. Most of the time, on your tax return, if you fuck up and make a big error and end up paying in more tax (or getting a smaller refund) than you were due, the IRS is strangely silent. They happily accept the overage. Screw up in the other direction, though, and they aren’t so happy about it.
So I wondered if you could just omit the EIC and the IRS wouldn’t say anything.
Turns out that is not the case.
If you qualify for the EIC and don’t claim it, the IRS fills it in for you and sends you a check. The computers do it by magic.
And Nicole got $3000.
Here’s the chart for the earned income credit.
Nicole got $3K.
Nicole didn’t have very many qualifying children, or she would have gotten a whole lot more money. I mean, her adjusted gross income couldn’t have been very much, not with all those deductions, certainly not over any of those limits, so she would have qualified for the max, if she’d listed all her kids, if they all had SS numbers.
See, this stuff works in tandem. If she has the qualifying dependents, they have to be listed. To be listed, they have to have SS numbers. If they’re listed, then she has a boatload of boxes checked and her exemptions get big, and thus, her taxable income shrinks. She can’t get out of the EIC. The IRS does it for her. The computer just figures out how many qualifying dependents she has, and does the math and cuts her a check.
So, to get that eensy low EIC amount, she couldn’t have listed very many kids.
That means that she didn’t have that boatload of exemptions. That means that to have a taxable income of zero (which is what she claims), she didn’t make very much money. She didn’t make “six figures.” Either that, or her shop has so many deductible expenses that she’s either overextended terribly, or a very poor money-manager. If your service business grosses in excess of $100,000 and you are netting about $30,000, you really are doing something wrong.
But hey, she didn’t even do her tax return, did she?
Her accountant did. Her accountant handles stuff like that for her.
But here’s what is in the screen shot above.
On the left is a receipt from a mail order from the actual Blessed Little Grooming Company LLC for some soap and a tee-shirt. The customer lives in Kentucky. You can see that Deb and Lisa collected Kentucky sales tax, which will be duly sent to the Kentucky Department of Revenue.
On the right is an order from the same person, this time for some bows from the defunct Blessed Little Grooming Company. No sales tax.
Nicole’s explanation for this is that she embeds the sales tax in the purchase price, that her accountant handles that for her. Her accountant doesn’t embed the shipping, but embeds the sales tax.
In the first place, I’ll make a big fat donation to the Ranch if Nicole even has an accountant at all. Does she mean one of the kids?
In the second place, no accountant on the face of the earth would do that (embed taxes in a purchase price). There are several reasons. One is that the money needs to be accounted for separately and embedding it is just making double work for whoever does the books. But there’s a second, more important reason.
The customer, in Kentucky, is responsible for paying to the state any taxes owed on any online purchases made for which no sales tax was collected. That is Kentucky law. That customer is liable for those taxes. So what is the customer supposed to do here? No tax is listed, therefore the customer has to assume that none were paid, therefore the customer has to assume that she owes the money. Does Nicole want her to pay twice? Is she seriously, actually shitting on her customers like that?
Sometimes online retailers will embed the shipping costs in the purchase price. That’s reasonable, easily accounted for and done frequently. And you can bet, of course, that any place that offers “free shipping” is doing exactly that.
But you don’t embed sales tax.
Then for no discernible reason Nicole did this, except for “I don’t want a record of how I am not collecting sales tax in Kentucky.”
There is a solution for all of this, though.
I don’t want poor Nicole to be a whore of the state, and that’s exactly what she is at the moment. She got $3K from the federal government. It was not her money. It was stolen from me, from you, from all of us.
Nicole didn’t want the money. She’s said so a bajillion times. It’s theft. She’s not a whore of the state. She’s so above all that.
I know she has to feel really bad about this. I also do not expect her to give it away to just anyone, because how can she possibly know whose money it was in the first place?
Here you go, Nicole. Give it back. Just sent it back. I promise they’ll accept it with thanks.