Money Blue Book

Well it’s the long Memorial Day weekend again. Not only is this annual occasion significant to me because it always occurs around the same time as my birthday, it’s also one of the important federal holidays set aside by our United States government to honor those men and women of past and present who laid down their lives during the course of their great service to our country. As the grand puba of all knowledge, the great Wikipedia notes that Memorial Day was originally enacted to honor the northern Union soldiers after the American Civil War but has been enlarged to cover all American military casualties of any war or military action.

This post today is not meant to be a political statement. In fact, I hold rather neutral opinions about the U.S. government’s positions and the U.S. military’s actions in the ongoing war in the Middle East. I’m neither supportive, nor am I really against it. I’m not a military strategist, nor am I a foreign policy buff. While I watch and follow CNN, MSNBC, and Fox News, and have developed my own viewpoints like any other guy, I don’t claim to know the answers. So I leave the big foreign policy and homeland defense decisions to the elected bigwigs in Washington D.C. While my foreign policy views are both non committal and neutral, when it comes to supporting our patriotic troops, I’m in it 100%. I think they deserve our full support and admiration, and that includes past veterans, present troops coming back home, and future military personnel who have yet to enter the line of duty.

Our Military Soldiers Are Real People With Real Stories - And Not Just Faceless Statistics

Shortly after law school and my judicial clerkship with a trial court judge, I obtained a job to work as an appellate attorney at the U.S. Department of Veteran Affairs in Washington D.C. While I was there I was exposed to the countless stories and lives of the many men and women who fought and sacrificed for our country during her times of need. Because I handled appeals stemming from military service connection and disability rating claims for veterans, I spent my working days reading and becoming intimately aware of war time realities and shared tragedies of our past veterans. While not all injuries or medical ailments sustained by military disability claimants were during the course of an armed conflict overseas, many were. For those who think the current soldiers fighting in the Iraqi and Afghanistan conflict today are sustaining significant casualties or massive injuries, the numbers pale in comparison to the devastating number of lives and limbs lost during past major wars - most notably during the Vietnam War.

The Vietnam War era was a terrible time in our history. Many of the soldiers came back with not only physical bodily damage from lost limbs, impaired sensory organs, or Agent Orange herbicide related diseases, a large number developed post traumatic stress syndrome after having witnessed all sorts of psychologically disturbing wartime brutality overseas. Much of today’s neighborhood to neighborhood close quarters combat experiences in the troubled areas of the Middle East are censored and filtered out by our sanitized television, print, and governmental media so that much of the information never reaches the American public. But as someone who has worked closely with such personal stories and accounts of battles and military engagements during my time of processing veteran disability claims, I’ve learned to greatly appreciate the sacrifices our fighting forces have made for our great nation.

While due to the backlogged and procedural nature of veteran disability cases, and due to the way past injuries and diseases tend to deteriorate over time, many of the appeals cases I handled arose from veterans who served honorably in wars as far back as the Vietnam War and World War II. At the time I was working at the Department of Veteran Affairs in Washington D.C., the war against terrorist forces in Afghanistan and later the invasion and occupation/liberation of Iraq (depending on how you look at it) had not resulted in a significant influx of wartime injuries or casualties yet. But since I’ve left the agency, I know the federal department is now facing a huge rush of returning soldiers from this new war our country is fighting. I can only hope we all continue to throw our admiration and support for our American military men and women as they dutifully do their part in helping to keep this country safe and protect our interests worldwide.

Supporting Our Troops and Veterans Is Not A Political Statement, But A Show Of Respect For The Honorable Sacrifices Made By Those Who Came and Served Before Us

I think many people and anti-war supporters seem to adopt the suggestive notion that somehow acknowledging verbal or written support for our fighting troops and veterans equates to an agreement or condonement of the current George W. Bush foreign policy or political decisions made regarding the nation’s fight against terrorism in the Middle East. Far from it. I support our troops and want to honor their actions because they are putting their lives in harms way for citizens and even non citizens living in the United States like you and I. While some of the soldiers had a choice, others had their choices made for them. I doubt most of the Army, Navy, Air Force, and soldiers from the Marines really wanted to fight abroad, but they made a noble commitment to serve their country should they be called upon to do so. They are simply doing their job and trying to do it the best they can, amidst the political maneuverings in Congress and the White House, the election season wrangling between the Democrats and Republicans, and amidst the dangerous sectarian violence that still plagues the Middle East.

So as we all sit within the comforts, shelter, and protection of our own nation’s borders, let’s not forget the fighting men and women who are still out there doing their jobs, putting their futures and lives on stake for you and I. While we all worry about less life threatening and comparatively petty matters closer to home such as rising gas prices, savings accounts, Roth IRA’s, credit scores, and credit card bills, there are young and old committed military families out there who just want their fathers, sons, and even moms and daughters to come back home in one piece. You don’t have to support the war to support our troops. You don’t even have to wave an American flag high or wear an American flag pin on your suit collar to support our troops. All you have to do is honor the sacrifices made by our past and present veterans in your hearts, and give them all the courtesy, admiration, and respect deserved by those who have served their country dutifully in a time of need. So while we all take this three day Memorial Day weekend to go on a road trip to visit the beach, or see our friends and family, remember, someone out there needs your thoughts and prayers.

As I may have mentioned before, I’m a recovering attorney - and a fairly young one at that (I’m in my late 20’s). Right now I’m in the process of working at home on my online blog and business ventures for a few months before returning back to my full time work as a contract attorney.

So how did I end up doing this type of work instead of using my law degree to pursue a so-called real legal career? Sometimes I ponder about what my dream job might have been had I not gone to law school, since it wasn’t my passion in life to begin with. My decision to attend graduate school was more due to process of elimination. I started out college on the pre-med track to become a doctor, did well in my studies, got bored with chemistry and biology, and eventually shifted gears into computer science. I loved taking programming theory and practice courses and did very well, but after a few semesters, I decided that I couldn’t see myself stuck as a computer programming nerd - so I moved on (how ironic, now that I’ve come full circle again). So then I decided to go the business route and major in finance. After a few more semesters during which I did pretty well, I pondered what else was out there. However, by then I had enough college credits to graduate and my parents were beginning to wave the tuition baton, “encouraging” me to move onto bigger and better things. After looking around, I decided I wasn’t ready to financially support myself just yet. So I took the LSAT exam and sent in my application to a few top tier law schools. Before I knew it, I was attending the state law school and working my way through civil procedure, contracts, and criminal law classes.

Going The Law School Route - But Still Not Sure Where I Wanted To Go Professionally

One thing that I noticed during law school was how incredibly math-adverse law students are. I suppose that’s why they all chose to attend law school to begin with - to avoid having to deal with mathematics or anything related to numbers. However, it just so happened most of my law school friends were of the opposite persuasion - they were mostly into tax law, a legal field riddled with numbers and statistics. I wasn’t particularly fond of all the math involved, but I went with the herd and ended up taking most of the tax law courses available - everything from individual tax planning and corporate tax, to the most difficult law school course I ever took - partnership tax.

After law school I worked for a trial judge and later when on to work for the federal government as an associate attorney for a year or two. After another very short stint working for a crazy female cougar attorney (I’ll share that story one day, as it was a very eye opening experience, but for all the wrong reasons), I ended up choosing to work for myself. After starting up a few profitable blogs such as the personal finance blog you are reading right now and another law related one, I now work as a contract attorney on the side when I’m not working from home. I receive most of my contract attorney assignments from staffing agencies that place me on legal projects that last anywhere from a few weeks to several months. The job description usually entails very simple duties such as legal document review and mindless legal tag coding. Many dread performing contract lawyer work, but the work provides very lucrative pay without the heavy responsibilities (I often refer to it as my “stripper pay”). It’s perfect for my lifestyle at the moment since I don’t want my full time job to hinder the time and effort I devote to my personal small business operations.

The great thing about contract attorney work is that it is extremely stress-free and unlike a traditional lawyer job, my responsibilities and duties end at the end of the day. I never have to run into the office after work or cut a weekend short to file a legal brief or prepare a memo. However there are long term drawbacks to this line of short term work. The biggest downside is that the work is only temporary and isn’t career track oriented. With temping, while meals and transportation are frequently reimbursed, you usually don’t receive any health benefits or job security. But then again, in this day and age as well as economy, do any of us truly have solid job security anymore, or even guaranteed health benefits? The other downside with legal temping is the lack of professional development. However, I simply cannot see myself pursuing the traditional attorney path anyway. Lawyers notoriously burn out fast and work tremendous hours that ultimately take a terrible toll on their health, family wellbeing, and lifespan. Plus, legal employment prospects for attorneys isn’t what it used to be as the market has become extremely saturated. Almost anyone with half a functioning brain can go to law school these days as there are no significant barriers to entry or pre-requisites that need to be overcome to apply. Especially in a major city like Washington DC, you can’t walk in any direction without bumping into a lawyer. It’s utter and complete saturation.

Looking To the Future - Sacrificing Some Income Now To Build Up My Online Blog Businesses and Incubate My Other Real World Ventures

Thus, I’ve come to realize that the key to building wealth and reaching financial prosperity is to build up multiple streams of alternative and passive income, apart from your primary full time employment. Otherwise, you simply run the risk of living your entire life trading hours for dollars. Passive income generation through methods such as blog income or stock market investing help to get around the finite time problem by allowing you to generate income even when you are not actively sitting and working at your office desk.

However, I don’t regret going to law school at all. I was prudent to have attended a state school with relatively lower in-state tuition, and I was very fortunate to have been able to consolidate my student loans at a very low fixed interest rate. My college loans are all paid up and my graduate school loan payments are thankfully quite manageable. Other than tuition issues, law school prepared me for the future by teaching me how to more aggressively and confidently combat conflicts in the legal and business world. Overall my finance, tax, and legal background has helped me to better improve my personal finance blogging tasks, as well as enhance my non traditional legal pursuits. I knew after law school that I didn’t want to pursue the traditional law firm job path since I had a passion for entrepreneurship and running my own business. When I discovered blogging and developed the ability to tap into the limitless potential of online business income, I knew I had found my calling. It’s a key component part of my solution to end the 9-5 workweek cycle, and the reason why I’m currently sitting at home right now tinkering on the computer instead of collecting a steady paycheck at a stressful full time lawyer position or even at a contract attorney gig.

For now, I plan to only take a short time off to work on my ventures full time as I currently am not yet able to live off of my online income alone. Perhaps that day will someday come, but for now, I plan to return to my legal contracting job after a month or two off. Obviously I don’t see contract attorney work as the future for me since the profession is inherently unstable, unpredictable, and projects do tend to dry up during recessions and slow economic periods. I merely see it as a necessary means to an end for now. Meanwhile, I also realize that by taking a few months off I am forfeiting a substantial amount of contract attorney pay to spend time building my passive income businesses, but I think in the long run and even in a few years from now, the short term financial sacrifice will pay off. The amount of money I am losing by not working full time is quite substantial however. Contract attorneys in my area get top wage rates of $35 an hour with time and a half of $52.50 per overtime hour worked past 40 hours. My contract projects usually require that I bill around 50 or so hours, which comes to a weekly income of $1925.00. I’ve worked at least one extremely time demanding project before in the recent past, during which I worked and billed 96 hours a week for a span of one month. The work was a simple breeze, but the hours were brutal. Of course during that time, I earned $4,340.00 per week before tax. I guess it speaks highly of how much potential I see in online and passive income businesses that I would forsake that wage income now.

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands: Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.“

- Honorable Learned Hand, U.S. Appeals Court Judge, Helvering v. Gregory, 69 F.2d 809 (1934).

The above quote is one of my favorite tax quotes from law school and one that I concur with wholeheartedly. It was a historical statement from a well known and respected former United States Appeals Court Judge regarding the minimalist extent of our obligation as citizens to pay taxes. The opinion reflects the view that we have no ethical or even patriotic duty to pay taxes beyond what has been legally assessed upon us. Thus, as the message advocates, it is within our compete given right to do everything within legal boundaries to minimize our personal tax liability exposure. If society deems the income and tax bracket disparity to be unfair or unjust, it is our duty as voters to ensure the government legislates fairly, rather than evade individual tax obligations out of protest.

Difference and Distinction Between Tax Avoidance and Tax Evasion

The practice of tax avoidance is essentially the credo of most tax attorneys and tax preparers. It is completely legal and there should be no moral or patriotic implications as it is in complete compliance with the law. Tax avoidance is simply the practice of working within the legal confines of tax law and regulations to maximize tax deductions while minimizing tax liability. In contrast, tax evasion works outside the rules by trying to duck legal obligations by hiding income through nondisclosure, or improperly taking deductions that one is not qualified for. There is a clear distinction between the two.

However, many people seem to inaccurately equate legal tax avoidance with the same type of immorality implications of those who practice tax evasion. For example, there are some who point out that wealthier people, through clever tax manipulation and deductions are able to drastically keep their tax liability very low. Even the Oracle of Omaha himself, Billionaire Warren Buffet noted that he only paid a 17.7% tax rate on his $46 million of taxable income in 2006, while his own employees paid an average 32.9% tax rate. His own receptionist reportedly paid a 30% tax rate.

This might not seem fair in my eyes or yours, but none of these moral questions obligate Warren Buffet or anyone else from having to pay more taxes than they are required to do so, as long as they fully comply with all existing tax regulations. If there was truly an injustice or immoral component or dichotomy to the current tax structure, it is the obligation of the federal government to implement a fair taxation policy, and ours as voters to ensure that the government do so.

We Should Not Confuse the Government’s Duty To Create A Fair Universal Tax System As Our Own

It’s been said that there are certain things in life that are simply inevitable, including death and taxes. Society needs taxes to function and requires an empowered government to execute the uniform exaction. Making the tax system voluntary would obviously never work because individuals would not be able to effectively enforce the collection without resorting to vigilante tactics. Thus it’s a necessity to have a strong government that can legislate and enforce tax codes, and mandate obligatory payments based on whatever sliding scale system it deems in the best interest of society. We have expressly given the government this power to legislate fair marginal tax brackets and to create an equitable system of tax deductions and tax credits to promote certain values and interests for the betterment of society.

It is not our own individual duty to draft our own federal tax returns to what we personally think will benefit the government. That duty has already been delegated away. Our responsibility as citizens is to operate in good faith within that tax framework to ensure we legally abide by the rules. If the day comes when we deem change is necessary, then our role is to change the individuals to whom we have delegated this legislative power to. However, our framed roles as taxpayers never expands beyond mere compliance.

So Long As We Abide By All Legal Tax Codes, We Are Free To Maximize Opportunities

Because our tax system is universally applied with every single income producing resident subject to it, we should not feel any moral, ethical, or patriotic duty to pay extra beyond what is demanded of us. So the next time you sit at your desk to prepare your tax return, you should not feel guilty about being able to cleverly duck certain tax obligations through legal manipulation. So long as you are fully abiding by the tax code, you are fully in the right. Our duty is to put the right people in power to make these difficult social and moral choices for the betterment of society. Once the universal tax codes have been laid in place, we are perfectly within our right to use every legal trick, tax loophole and strategy to minimize our own tax assessment to the betterment of ourselves.

As the taxpayer, we are under no obligation to provide any more to the government than we are required to. The tax code and our tax obligation is not in the nature of church tithing that we voluntarily offer out of altruistic feelings or charitable obligation. It’s a regulated and systematic way for the government to mandate fairness and to ensure equality of its citizenry. There is no tip that needs to be paid to the government. This is not a restaurant and the servers are not being paid minimum wage and dependent on our generosity. So long as we abide by legal regulations and aren’t resorting to the illegal practice of tax evasion, we are within our legal and moral right to try to reduce our own tax liability down to zero (if possible).

Thus the next time you feel guilty about being able to successfully and properly claim a whole slew of deductions, don’t be. There is nothing inherently wrong with the legal practice of tax avoidance. Thus, pay what you owe and nothing more. That’s the most responsible thing we can all do.

Updated - The IRS has released the official Economic Stimulus Payment Schedule.

Based on the substantial traffic and comments I’ve been receiving for the article I wrote explaining and breaking down the details of the 2008 Stimulus Rebate Package, it’s clear that everyone in the United States is concerned about their rebate checks. Everybody wants to know how large their own tax rebate check will be and when they can expect to receive it.

There are many questions to be answered and I’ve been trying my best to respond to them all. While most questions have been straightforward, others have been slightly more complicated with issues relating to Chapter 7 and 13 bankruptcy filings, or issues relating to wage garnishment and student loan liens. But I will continue to do my best to answer your flurry of tax rebate comments and e-mails.

Visit The IRS Website For The Official Source Of Tax Rebate News and Updates

While I can’t necessarily state that all answers that I provide are definitive, I do try my best to answer accurately based on research and reasonable information. One thing I have noticed is the vast amount of misinformation and speculation that is available on the internet. There seems to be much conjecture and rumors surrounding the tax rebate, particularly as it relates to timetable and the order that the checks will be sent out. I wish to remind readers that the only definitive source for tax rebate news and updates is the official IRS Economic Stimulus Payments Information Center (official website). There, they’ve done a pretty decent job of addressing the seemingly endless stream of tax rebate inquiries, even providing answers to popular tax rebate questions (Tax Rebate FAQ). The IRS tax rebate website provides stimulus check payment hypotheticals and answers questions pertaining to Social Security recipients and veterans living on disability. They post updates regularly and understandably so. Here’s a quick link to some of the official tax rebate questions and answers for various filing scenarios:

1. Single without children
2. Head of Household, with children
3. Married, with children
4. Married, without children
5. Married Filing Separately, with or without children

Here’s the official information release for recipients of alternative types of income:

1. Recipients of Social Security Retirement Income or Disability
2. Recipients of VA Benefits, Disability, or Survivor Benefits

If you still have unanswered questions, please continue to post comment questions to my original Bush Tax Rebate article. I will try my best to diligently answer each one as best as I can. Keep in mind that while I do have a legal and financial background, you will be best served asking your own tax professional or hired attorney the more substantive tax and legal questions, particularly when it relates to more delicate legal issues surrounding bankruptcy and liens. My informal opinions should only be viewed and regarded as general background information rather than seen as authoritative financial advice.