Point of View April 2, 2025 – Hour 2 : The Fair Tax Act

[00:00:07] Point of View, now Dr. Merrill Matthews. And welcome back to Point of View. I'm Merrill Matthews sitting in for Kirby Anderson today. And today is April the 2nd. We are two weeks out from the dreaded April 15th, Tax Day.

[00:00:32] When we are approaching Tax Day, Point of View always goes to Dan Pilla, our tax expert extraordinaire. Dan's been answering questions, Point of View listeners questions since the 1980s. So he has been around a long time. He's one of the nation's leaders in taxpayers rights and defense of IRS abuse prevention and cure. He is the author of 14 books, dozens of research papers.

[00:00:59] He appears on media time and again, often has a column in National Review talking about special tax issues. And we've got a lot of tax issues coming up. So Dan, thank you for joining us. Well, it's my pleasure, Merrill. How are you? I'm doing well. Good to have you back, my friend. It's good to be back. We always know when the tax season comes around, we've got to get listeners listening to you because you are the man with the answers on tax issues.

[00:01:26] So tell people we've got April 15th coming up. Some people have already sent in their stuff. Others are probably looking at it. What should people be thinking about this tax season that we're in right now? What should they be thinking about, be concerned about and be aware of? Well, a couple of things, Merrill. First of all, you've got until April 15th to file the tax return. I think we all know that. What people what some people don't realize is that if you can't get the return filed by April 15th,

[00:01:54] you can get an extension of time to file the return. That's IRS Form 4868, 4868. File that form on or before April 15th by the due date, and it will get you up to six additional months to file the tax return without any failure to file penalties and with no questions asked. You don't even need a reason. So the 4868 gets you the filing extension.

[00:02:19] But what blindsize people, Merrill, is they don't realize that you still have to pay the tax by April 15th. Even if you get the filing extension, you have to pay the tax by April 15th, which confuses a lot of people because folks say, well, Dan, it's not the filing that's the problem. It's the tax payment that's the problem. I don't have the money to pay. Yeah. Yeah. Well, they might not know what they have to pay. That's that's for one. That's that's one thing.

[00:02:45] But you can you can cover that by paying 100 percent of last year's tax. All right. So if you pay 100 percent of last year's tax by April 15th, we're talking about 2023 now. Right. You pay 100 percent of 2023 tax by April 15th. You'll be covered on the failure to file penalty. But a lot of people have that tax return sitting in front of them right now, Merrill, and they owe 10 or 12 or 15 or 20 grand and they don't have the money to pay the tax. And now what do you do?

[00:03:10] The filing extension is not going to help you with failure to pay the tax because they're still going to charge you with penalties and interest on the failure to pay. But there is a strategy that you can use that nobody knows about. I mean, nobody knows about this. And the IRS never talks about it. It's IRS form 1127 form one one two seven is called an application for an extension of time to pay the taxes.

[00:03:33] And if you submit that form by April 15th, you can get up to six additional months to pay the taxes without penalties. Okay. So that's that is good step. You know, I mentioned April 15 is a is a bad day for many people, but it's a good day for other people because many people overpay. They withhold too much money on the tax and they get a check back for from last year. But is that a good strategy to overpay your taxes and then get that check back?

[00:04:03] No, it really isn't. It's it's it's a poor strategy because what happens is the IRS is holding your money for over an year. Right. You've got a year's worth of withholding all through 2024, 12 months in 2024. Well, here we are three and a half months into 20. Well, three months into 2025 and they still hold in your money for 2024. Right. And so you've got you got what, 12, 15, 16 months of time that the IRS is holding your money and they're not paying you a nickel's worth of interest on that withholding.

[00:04:33] Nothing. Right. So it's the world's worst way to save money. You really you really need to you really need to adjust your withholding, Merrill, to match your tax liability. And this is a good time to do that. You know, if you're getting a big refund and the average refund these days about thirty five hundred bucks. So so that I mean, that's a lot of money. That's that's what three you know, it's three hundred dollars a month, month in and month out that you're paying to the government that you don't owe them.

[00:04:59] Right. You don't owe them the money. That's why you got the refund, because you overpaid. And so you're much better off using that money to save or invest somewhere to pay down other debt, mortgage debt or credit card debt or whatever. You're much better using that money to, you know, build a retirement plan. Any any strategy is better than letting the IRS hold it for, you know, 12, 15 months without paying any interest. You know, Dan, we just had we finished up with John Fund, National Review columnist, longtime political expert.

[00:05:28] And we were talking a bit about Elon Musk and Doge. And one of the things they've been doing is they've been laying off employees at the IRS. So I'm wondering if people will sometimes want to call the IRS and ask a question about this, that or the other. My sense is they're having trouble getting those calls. What what's happening there at the IRS? If I need help from the IRS, am I going to be able to get somebody?

[00:05:51] Well, you know, in my opinion, it's never been a good idea to call the IRS for help anyway, because, you know, particularly if you're calling for advice on what to do with the tax return and, you know, how to file this, you know, how to claim this or how to claim that. I mean, the answers to taxpayer questions historically have been inaccurate. So I never encourage anybody to call the IRS for help. But if you're calling about some other reason, you know, you've got a bill, you're trying to set up an installment payment, you know, any of those kinds of things, then, yeah, it can be a problem.

[00:06:18] But, Merrill, again, historically, it's always been the case because, frankly, the IRS spends too doggone much time on enforcement and too little time on taxpayer assistance and education.

[00:06:29] Now, that said, since the Inflation Adjustment Act was passed in 2020, I believe it was 2022 that the Inflation Reduction Act was passed, the IRS had the authority to hire up to 85,000 additional IRS employees. And they started that hiring, right? That was not 85,000 overnight. It was 85,000 over 10 years. And so they started that hiring.

[00:06:55] And so a lot of those employees are the ones that are getting furloughed right now, that are getting riffed. And so, you know, the IRS has lost. They're telling us about 12,000 or 14,000 employees here in the last, let's say, three or four, well, last two months since the Doge has been doing this. And I just can't believe, Merrill, that it's going to make things any worse than it's been because, you know, because these were all new employees to begin with, right? Yeah. And tell us about that.

[00:07:23] I think the IRS has a process now where if I want to just send my information to the IRS, they actually fill out my tax form for me, don't they? Well, it's not quite that. It's called a direct file system. And the direct file system is a free file program that operates off the IRS's website.

[00:07:43] It is a very limited program available in a limited number of states that allow people with simple situations, W-2 situations, 1099 situations that are simple, right? 1099 interest, that sort of thing, to free file their tax return. And basically, it's a government system that competes with the TurboTax free file system and the H&R Block has got their free file system as well.

[00:08:09] So it's government competition with the private sector on this filing system. Dan, we're going to take a break. When we come back, I want to see if you think that's a good idea. My guest for this hour, Dan Pilla. He is the tax expert extraordinaire. Been talking with Point of View people since the 80s, asking questions when we call them to find out about what's happening in taxes. A lot of things are happening in taxes right now and with the legislation that we were just talking about with John Fund. So stay with us.

[00:08:38] We'll be covering all of those issues when we come back on Point of View. This is Viewpoints with Kirby Anderson. Doubt is a perennial concern for Christians. Every Christian has feelings of doubt at one time or another.

[00:09:07] Unfortunately, many Christians assume that doubt is the opposite of faith. They assume that wandering among the hard questions of faith will lead us further from a belief in God. Travis Dickinson, a professor of philosophy at Dallas Baptist University, has his latest book, Wandering Toward God, Finding Faith Amid Doubts and Big Questions. He was in my radio studio recently to talk about his book and provide hope and guidance for Christians who have questions about their faith. Doubt is a natural phenomenon. He quotes from C.S. Lewis, who said,

[00:09:37] Now that I'm a Christian, I do have moods in which the whole thing looks very improbably. But when I was an atheist, I had moods in which Christianity looked terribly probable. Part of the problem with the way we see doubt is that we assume we must have certainty. But even prominent atheists reject the idea of certainty. Bertrand Russell observed, The demand for certainty is one which is natural to man, but nevertheless an intellectual vice. Voltaire concluded, Doubt is not a pleasant condition, but certainty is an absurd one.

[00:10:06] Travis Dickinson encourages us to ask big questions and look for answers. There are so many theologians and apologists who provide clear and cogent answers to the many questions Christians and non-Christians are asking today. In the concluding chapters, he gives reasons for God and reasons why we can trust the Bible. He also addresses a few of the common questions raised against the gospel and Christianity. Is the God of the Bible good and loving? And why is there so much pain and suffering? So if you know people struggling with doubt about their faith,

[00:10:36] this is a book that will take them on a journey back to a biblical foundation. I'm Kirby Anderson, and that's my point of view. For a free copy of Kirby's booklet, A Biblical View on Inflation, go to viewpoints.info.info.inflation. That's viewpoints.info.inflation. You're listening to Point of View, your listener-supported source for truth.

[00:11:04] And we're back with Dan Pilla talking about all things taxes. And, Dan, when we took off for the break, we were talking about the free file system that the IRS has now. If you have a simple tax form and there's not much complicated there, is that a good thing for a person to do? Well, you know, I've got mixed feelings about the government program, Merrill. You know, on the one hand, we've got a tax code that consists of more than 4 million words

[00:11:30] that was changed more than 6,000 times just since 2001 alone. And I think the IRS has an affirmative obligation to provide as much assistance and education and outreach to citizens as they possibly can to help people comply. People will comply with the law, generally speaking, when they know what they're supposed to do and how to do it. Right? People don't want to be criminals.

[00:11:55] The vast majority of American citizens will screw themselves into the ground to stay current with the IRS because nobody wants to get sideways with the IRS. Right? And so, on the one hand, I think the IRS certainly has an affirmative duty to provide these tools. On the other hand, they're not that reliable. You know, you'd think the IRS would be able to answer questions on the phone that are accurate, you know, give accurate responses to people's questions about, you know, do I zig or zag with this particular transaction on my tax return?

[00:12:24] And the IRS historically has been very poor in terms of providing accurate information. And the reason for that is the reason we all struggle with it. There's 4 million words. How are you supposed to keep it all straight? And to make it worse, the IRS is changing the law, or not the IRS, but Congress is changing the law constantly. All right? Year after year after year, sometimes multiple times a year, they're changing the law. And it's impossible to keep up with it. So the IRS is not accurate in the information they provide.

[00:12:52] So now you say, well, okay, should this agency that's not accurate be providing information to citizens that, you know, that they need to comply with the law? Well, to me, it's a struggle, whereas the private sector has historically been better able to do these things more cheaply and more efficiently than government. My understanding is the IRS is working with very old hardware and very old software,

[00:13:20] slowing things down and just making it more difficult for them to be able to do their job. Is that a fair assessment? Well, it's not fair to say that the IRS's hardware and software across the board is this ancient stuff. There was a statement in one of the IRS's internal documents earlier that I saw, it might have been a year ago or so, where it says that the IRS is operating on Beatles-era technology, right? So 1960s technology.

[00:13:47] And there's no question, Meryl, that some of the systems that the IRS is using are old systems. Some of their legacy systems are old. But it's certainly not true that across the board their computers are antiquated. Because, I mean, let's just consider this for an example. In the 2024 filing season, a year ago, there were about 162 million individual income tax returns filed

[00:14:12] and another 110 million business tax returns filed, right? About 85% of those returns were filed electronically. Now, I don't know about you, Meryl, but I'm old enough to know that in the 1960s, you could not file your tax return with the IRS electronically. You couldn't even fill the tax return out on a computer like we do today, right? So, I mean, to say it's all Beatles-era technology, 1960s technology is not accurate.

[00:14:40] The other thing that's true is the Congress has appropriated billions, in fact, tens of billions of dollars to the IRS over the last 40 years to upgrade its computer systems. And every single year, we see a line item in the IRS's budget request for business systems modernization that's in the billions of dollars. It might be $2 or $3 billion. It might be $8 or $10 billion. But this has been going on for 40 years, right?

[00:15:07] So to say that they have no up-to-date technology is just not true. You are an expert on tax issues with small businesses, and I believe you have a book out that's available for small businesses to sort of go through their tax issues. The tariffs that are supposed to be announced today, those can affect small businesses. What are your thoughts about the tariffs and how small businesses are going to be able to respond to those? Well, a tariff is a tax, Merrill.

[00:15:37] You know that, and that's the simple fact. And unfortunately, the Trump administration, I'm going to agree with the Trump administration on a great many things, but I'm not going to agree with them on this. You know, they're taking the position that tariffs are paid by foreign producers and foreign governments, and, you know, why not have a foreign government pay the bills for the United States? Why should, you know, American producers pay the bills if the foreign country can do it? And that sounds great, but it's just simply not accurate.

[00:16:06] You know, as you know, a tariff is paid by the consumer in the host, in the country where the end product is sold. So when you bring a product into the United States from China or Mexico or pick a place, right, that product is taxed when it enters the country. That's when the tariff is paid, and so the importer pays the tariff. That cost is added on to the cost of the product, so when it ends up on the store shelf and the consumer buys it,

[00:16:34] the end price incorporates, includes the cost of that tariff. So American consumers are paying that tax. There's no question about it. And so you say, well, okay, well, why have an American consumer pay the tax if it's not the foreign government? Why have the American consumer do it? Well, Trump is arguing that he can use tariffs to replace the income tax.

[00:16:56] Well, I don't think that's all that feasible, Merrill, because, you know, right now the federal government is collecting roughly $5 trillion in revenue. About 65% of that money, 70% of that money is coming from the personal and corporate income tax. You know, another 20% of it's coming from the payroll tax to Social Security, Medicare. Only 2% of the revenue is coming from tariffs. So, you know, you've got $5 trillion in incoming revenue.

[00:17:24] They're spending $6.5 trillion, so we've got that deficit to make up. How are you going to do that with a system that's collecting 2% of the revenue? It doesn't seem feasible to me. It just doesn't. The better idea, Merrill, is to cut federal spending dramatically and to cut the personal income tax dramatically, I would argue, to eliminate the corporate income tax entirely. It's an economic falsehood anyway.

[00:17:52] And so I would eliminate that and radically reduce, drastically reduce the personal income tax and the payroll tax to reflect a cut in spending and do it that way. I guess my question is, if you're a small business and you've been importing various things and sometimes you have other countries are the only ones that make something that's not made here in the United States,

[00:18:16] are they going to have to – does this put an extra burden, just a time and process burden on small business if they're having to deal with these tariffs? Well, there's no question about that. Now, I don't know how it would affect the timing of a small business. No, I just mean taking time to do that, to sort of work through that. Oh, yeah. In terms of compliance time, no doubt about that. You know, the increased tariffs to the extent that you're taxing products that might not have been taxed before

[00:18:46] and now businesses are facing a new tax that they're not accustomed to dealing with, there's no question that that will involve compliance costs that were not prior – you know, that were not there previously, no doubt about that. And so, you know, that increases the cost of doing business, which, by the way, is passed down to the consumer as well. So, you know, the bottom line is the prices in the marketplace end up more expensive with tariffs than they otherwise would.

[00:19:14] You know, the Trump administration and the Congress are looking at a number of tax changes. I want to go through some of those things and what you think are the best tax changes and those that are not that good. So just – we've got a couple of minutes before the break, so get us started here on what you think are good in the proposed changes. Well, let's just talk very generally and then you can get specific after the break.

[00:19:39] Very generally, Merrill, I think the Congress has to renew the Tax Cuts and Jobs Act. The Tax Cuts and Jobs Act was Trump's first tax law that was effective in – 2017. Annual of 20 – yeah. It was passed in 2017, yeah. Yeah, passed in 2017, was effective in 2018, and that's what we've been operating under ever since. Now, that law, all 67 or 68 provisions of that law expire at the end of this year.

[00:20:08] And if that's the case, then you're going to see an across-the-board tax increase on every – just about every American, right? The Tax Cuts and Jobs Act substantially cuts taxes, particularly for middle-income and lower-income citizens in a lot of different ways. And if that expires, then you're going to see a remarkable tax increase across the board. So it has to be extended. There's no question about that.

[00:20:34] Now, as I stand here, I believe that Congress is going to do that. They're going to adopt – or I should say renew – the vast majority of the Tax Cuts and Jobs Act with some changes, which we can talk about. Okay. My guest for this hour, Dan Pilla, he is a tax expert. 1-800-351-1212.

[00:20:58] If you have a question for Dan about your taxes, about the tax system, if you're an individual, small business, and you have questions, give us a call. 1-800-351-1212. Dan can answer those questions. When we come back, we want to talk a little bit more about some of these new taxes that they're being – tax breaks they're looking at, tax changes in the law, and how that's going to affect us and business. Stay with us. We'll be back on Point of View.

[00:21:31] It almost seems like we live in a different world from many people in positions of authority. They say men can be women and women men. People are prosecuted differently or not at all, depending on their politics. Criminals are more valued and rewarded than law-abiding citizens. It's so overwhelming, so demoralizing. You feel like giving up. But we can't. We shouldn't. We must not.

[00:21:58] As Winston Churchill said to Britain in the darkest days of World War II, never give in. Never give in. Never, never, never. Never yield to force. Never yield to the apparently overwhelming might of the enemy. And that's what we say to you today. This is not a time to give in, but to step up and join Point of View in providing clarity in the chaos.

[00:22:23] We can't do it alone, but together, with God's help, we will overcome the darkness. Invest in biblical clarity today at pointofview.net or call 1-800-347-5151. Pointofview.net and 800-347-5151. Point of View will continue after this.

[00:22:57] You are listening to Point of View. The opinions expressed on Point of View do not necessarily reflect the views of the management or staff of this station. And now, here again, Dr. Merrill Matthews. And welcome back to Point of View. My guest by phone, tax expert Dan Pella. And we're talking about all things taxes. 1-800-351-1212. If you'd like to give us a call and ask Dan a question,

[00:23:25] we've got Benjamin from Georgia, who is a part-time pastor, and he's got a question. Benjamin, you're on the phone. Go ahead. Hello, how are you doing? Merrill and Mr. Pella, I love the show. Thank you for having me. Thank you for joining us. Yes, sir. Yes, sir. I have a question. I am at my church. We're a medium-sized church, about 400 to 500 people. I'm an associate pastor, which I'm the family pastor.

[00:23:55] So I'm not full-time. I am retired military, so I have income. And I work a job that I work full-time. But I get a housing allowance from my church, which is about $500 a month. And I've asked, I'm like, well, this just started. I mean, I've been a pastor about seven years now, and this has just started in the last two years.

[00:24:22] But it makes it difficult when I claim this on my taxes because I asked for 1099, in which my church is pretty good with the numbers, but we haven't got any guidance. And I've asked, and it's hard because they're confused. And I'm like, what do I do with this extra $6,000 a year that I bring in? Also, another issue is I've traveled. Let me stop you right there, Benjamin. And let's talk about the housing allowance. The housing allowance is not taxable income. All right?

[00:24:51] You pay tax on whatever salary you earn from the church, but apparently you aren't getting a salary. You're getting a salary from your military pension. Well, not a salary, but you're getting your military pension plus wages from another job. Now, the wages from the other jobs certainly would be taxable. Not sure about your military pension. It would be depending on whether it's a medical pension, an injury pension or not. But the housing allowance is not taxable. They should not be issuing a 1099 to you on the housing allowance.

[00:25:22] That specifically is not taxable income. And they have, and I greatly appreciate that. And so that goes on top of my other question. Besides my tithe and offering, which me and my wife, we tithe and offer about. She's a nurse. I'm a bookkeeper by trade. And what we have is we pay above and beyond our tithe and offering.

[00:25:49] So about 15 of us, 20% a year into the church. But on top of that, I spend about $10,000 a year traveling, going to a general conference from Georgia to California, plane tickets. I just went to a ministry conference in Louisiana during Snowmageddon.

[00:26:09] But at the end of the year, when it's time to barely make enough to take the itemize currently, ever since 2017, I barely make enough over to be able to itemize as opposed to standard. But I'm spending like an additional $10,000 a year and just ministry expenses out of pocket, not asking a church for it, but just paying for like my own hotel when I go to places, things such as that.

[00:26:39] Well, those are itemized deductions, right? You say you're making enough to get over the itemized deduction. Okay, well, you need to be adding those things in. The charitable mileage is deductible. I don't know what the rate is off the top of my head. It's about $0.12 or $0.14 a mile for charitable miles. And then all of the expenses you incur out of pocket to carry out religious charitable activity are considered charitable contributions as well that would get deducted.

[00:27:06] So you need to count all that stuff, Benjamin, and add it to your Schedule C as a deduction. Schedule C as a deduction. Okay. I'm sorry. I said Schedule C. Wait a minute. Benjamin, stop. I said Schedule C. It's Schedule A. It's an itemized deduction on Schedule A for charitable contributions, not C, A. Yes, sir. Yes, sir. I think that helps a lot of the answers. I'm not as nervous. I got the claim.

[00:27:34] Last year I was sure I had to do an extension because I owed. And so, therefore, I just wanted to make sure I was correct before I complete all these and do this year's also. But I greatly appreciate it, sir. Thank you for your service. I appreciate it. All right. Thank you, Benjamin. And now we're going to go to Rebecca in California. She's a small business and has a question for you, Dan. Go ahead, Rebecca. Okay. Thank you so much, Dan, for taking my call.

[00:27:59] I agree with you that the IRS is not always accurate when they give directions or when they tell you how to do this, how to do that, or anything that defines the difference between the different kinds of text forms. And I'm in the dilemma. I think I'm a professor of literature, so I know what to look for when it comes to defining. Long story short. Long story short.

[00:28:28] I have written letters after letters after letters explaining that I am not. My organization is 501c3. It's a charitable organization, not a private foundation. And I'm sitting here right now with a letter that I received from them saying, oh, Dr. Lindsay, your organization is a private foundation.

[00:28:52] You'll need to now pay $600 if you want to change it back over to a charitable organization on the paperwork. Well, the problem is they did not define it accurately. Tell me what the difference is between a charitable organization and a private foundation. They did not do that. So I'm in a dilemma. And I don't know whether to go ahead this year and fill out the 990-PF or just dissolve the organization.

[00:29:21] I would not fill out a tax return that you know is incorrect. If you are not a private foundation, but you are a 501c3 tax-exempt organization, charitable, religious, educational, that sort of thing, then file the regular 990 form. And if the IRS challenges the form, then appeal the decision that they've made with respect to the challenge. Now, the other thing you might do is contact the Office of the Taxpayer Advocate.

[00:29:47] If you've got an ongoing problem with their misdefining who you are, the Office of the Taxpayer Advocate can get you in touch with the people in the IRS that can sort this out. I can tell you that just calling them on the phone is not going to do you any good. You've got to do this in writing. You've got to get in touch with the Taxpayer Advocate. And as I said, don't file a return that you know is inaccurate based on the facts of your case. Okay. I'm on it. Thank you so much. Thank you so much. I'm glad I heard you giving me this suggestion. I will follow through with that. Thank you.

[00:30:17] All right. You're welcome. Thank you, Rebecca. Okay, Dan, let's talk about some of the tax proposals, the new tax breaks. They're looking at no taxes paid on tips, no taxes on your Social Security retirement check, and no taxes on overtime. I think those are the only three. There may be something else. But what do you think about those tax breaks? Well, there are some other things, Merrill. But to start with those things first, I like the idea of no tax on Social Security.

[00:30:45] That, to me, is a no-brainer. I think the no tax on tips and the no tax on overtime, you and I have talked about this before. And I think that those two proposals raise substantial administrative questions. In other words, how is it going to be enforced? If we're not going to tax tips, does that mean that there's no longer going to be an American citizen working for wages, that every American citizen out there is going to be working for tips? What am I going to do with my employees?

[00:31:12] Am I going to stop calling their compensation wages and salary and just give them tips? Hey, you did a good job this week, so here's your tip. And now it's not taxable. What kind of definitions are we going to have? And what kind of audits are going to arise as a result of employers doing what I just said, not paying wages anymore, but paying tips? And the other thing is how is that going to affect minimum wage laws, Merrill?

[00:31:39] What are America's unions going to do when all these companies stop paying minimum wage on the idea that they're all getting tips? I think that raises a lot of questions. And I think we have precisely the same problem with overtime. We're considered, what, 35 or 40 hours a week is considered full-time. Well, you know, now every employer in the country is going to go to five hours a week full-time,

[00:32:08] and everything after that is overtime, right? And so now all that's not taxable. It just creates, in my mind, creates too many enforcement and administrative problems that are going to lead to difficult challenges for American businesses. The better idea is reduce the tax liabilities overall for people. And that is just much simpler. I have to agree with you on Social Security as well.

[00:32:34] I mean, Social Security is a tax, a tax we've paid in, and then you bring it, if you take it, if you make some income, you're liable to pay a tax on Social Security depending upon your income. And that seems like we're taxing a tax that I paid in years ago. Yeah, you're exactly right. Social Security is a tax. It's exactly what it is. It's a flat tax on wage income. It applies to the $401st of wage income up to the cap, whatever the earned income, I should say,

[00:33:03] up to the cap, whatever it is, you know, about $200,000, not $200,000, but about $130,000 or $40,000 these days. So you're paying an additional income tax on that money that Washington pretends goes into a savings account with your name on it, but, of course, you and I know it doesn't. It just goes into general revenue, and it's spent by the government out through general revenue. Basically, current Social Security recipients get the money that current wage earners are paying into Social Security, so it's kind of a Ponzi scheme in that sense.

[00:33:32] And it shouldn't be taxed twice, no doubt about it. 1-800-351-1212 if you want to contact us for our final segment with Dan Pilla. We'll be right back. You're listening to Point of View, your listener-supported source for truth.

[00:34:01] Back in our final segment with tax expert Dan Pilla. He has been able to help Benjamin and Rebecca, and now we're going to go to Tom in California who has a very interesting question. Tom, you are on the air. Okay, great. Thank you for taking my call. I'm on a financial committee at my church, and we recently got $170-something thousand from the federal government,

[00:34:26] which is part of this Employee Retention Credits, or ERC. We applied for it about two years ago, and we just got it. And I'm wondering, is this all legitimate money? Assuming we've filled out our forms, right? It seems like it's too good to be true. Well, it does seem like it's too good to be true, Tom. And as a matter of fact, there's been a real problem with bogus ERC claims that were being made over the last couple years

[00:34:54] to the point where in September of 2023, the IRS actually shut down the processing of ERC claims until they could sort out the process of screening these things before they grant them. So I have to assume that if you – well, I won't assume anything. Assuming that your forms were filled out correctly and that the supporting documents were provided with the forms

[00:35:20] when you sent them in, that would have been an amended 941X is what you filed to get that claim. Then that is legitimate money, no doubt about it. Now, the federal government – this is one of the giveaway COVID programs that started in March of 2020. And, Merrill, you know that there was about, what, $7 or $8, maybe $9 trillion

[00:35:44] with these giveaway programs that they started, the paycheck protection loans, the employee retention credits, all of these – the EIDL loans through the Department of Labor, through the Small Business Administration. There was trillions of dollars that was given away, and that's what it is. It's just giveaway money. But, again, Tom, assuming your forms are correct and your supporting documents are in order, it's your money, man. No tax on that form? No, no, and it's no tax. It's actually a refund of taxes that were paid in.

[00:36:16] Plus some. Plus some. Okay. All right, great. Well, thank you very much for the call. All right. Well, you're welcome. And thank you, Tom. Well, you've been able to help some people there today, Dan. So we talked a little bit about some of the other – some of the tax breaks they're considering. Tell us some of the other things you mentioned. Yeah. One of the things that's on the table here now is a change to the state and local tax deduction. Oh, yeah, the SALT tax. Yeah, the so-called SALT.

[00:36:42] And that is – Merrill, that's your state income taxes, your real estate taxes, state sales taxes, and so on, that you have historically been allowed to write off on your 1040 form as an itemized deduction. Well, with the Tax Cuts and Jobs Act, that was limited to just $10,000. So people in high-tax states like Minnesota, where I live, and California, New York, and so on, these people have been hit hard because, you know,

[00:37:09] some of these people pay double or triple that much in state and local taxes. And they were able to write them off, and now they're not. So one of the things that has happened in the last six weeks here is Republican representatives from these high-tax states have been pressuring the Trump administration to either substantially increase the cap or eliminate it altogether. All right? So there have been a number of proposals out there. One is on the table now to go to $25,000 on the cap from $10,000 to $25,000.

[00:37:37] Of course, a lot of representatives are pushing for complete elimination. Another alternative has been a $100,000 cap. So, you know, what comes out the other end in the wash, you know, just remains to be seen. But I will tell you this, Merrill, there's going to be a change to the SALT cap, right? It's not going to be $10,000 anymore. Probably isn't going to be $25,000. Might be as high as $100,000. Are we thinking it'll be that high? I think it could be, yeah.

[00:38:04] So the problem that the Republicans have right now is paying for this because they've got – we have the issue of the CBO. And for our listeners, the way the CBO works is it scores tax bills. It scored the 2017 bill, but that ends next year – I guess the end of this year. And so the way the CBO scores this is it goes back to the current law, which means there wouldn't be a tax bill.

[00:38:30] And that means if you pass the tax bill, essentially the 2017 with a few adjustments to it, they're going to start with something like a $2 trillion deficit because they're saying, well, it was going to go back. We're going to have all these new taxes, which nobody really believed we were going to go that way anyway. So what do we do about this? How do you do this and try to get these deficits down? Well, Merrill, you know this better than I do. There's only one way to do it, and that's cut spending.

[00:38:58] And the question is who in Washington has the courage to cut the spending to the level it needs to be cut to get this under control? If everything stays the same the way it is right now, we're still talking about a $1.3 or $1.4 trillion deficit, never mind all of these additional tax cuts that are on the table. All right, how are they going to deal with that?

[00:39:19] We have gotten to the point, Merrill, where no one seems to care anymore about what the level of debt and deficit year-to-year deficit and total debt is anymore. We're at, what, $36, $38 trillion of total debt that's gone up astronomically here in the last 10 years, and now we're not talking about, you know, in the early 1990s we were talking about, you know, $200 and $300 billion deficits, and that was causing people to pull their hair out.

[00:39:47] Well, now we're at $1.2, $1.5 trillion in deficits, and, you know, people just shrug their shoulders. It's just unbelievable how far we've come with the level of irresponsibility in Washington toward the spending. It's about the spending. It's never about revenue. It's always about the spending. And the only way you think we're going to be able to do that is cut the spending? Are you hopeful? I'm hopeful. I like some of the things that Doge is coming up with, but even that, Merrill, you know,

[00:40:16] the administrative portion of the federal government is only about 3% or 4% of the budget. You know, as you know, the largest single items, plural items, in federal spending are Medicare, Medicaid, and Social Security. Those three things are responsible for, what, about 70% of total federal spending, right? Now you add in the military. You add in the interest on the debt, which is – is that approaching a trillion dollars yet, Merrill, the interest on the debt? I think so. Are we at that point yet? Yeah, I think so.

[00:40:46] I think we're getting close to that. You add those things in, man. That's what's eating up the budget. And, yeah, okay, we need to cut fraud in the Medicare system. We need to cut fraud in the Social Security system, no doubt about that. We need to cut waste, fraud, duplication, all these various agencies, all right? There shouldn't be an extra dollar spent that shouldn't be spent. I agree with that. The vast majority of the American people agree with that. But you aren't going to fix the problem by dealing with this. Now, not that we shouldn't address this.

[00:41:14] We need to, but that doesn't solve the problem. It's the transfer payments, the giveaway programs that are causing the problems. Dan, take about 30 seconds to tell people how they can get in touch with you and what they can find. Yeah, the best way to get in touch with me is go to my website, which is TaxHelpOnline.com. That's all one word, TaxHelpOnline.com. You buy any book off my website at any price point. My latest book is called Dan Pillow's Small Business Tax Guide.

[00:41:41] Get any book off the website, and you get a free 15-minute consultation directly with me. So if you're a small business, you need help with your tax compliance, you want to avoid the 16 or 17 most common problems that small businesses have with the IRS, get the book, Dan Pillow's Small Business Tax Guide. You'll get a free 15-minute consultation with me. Go straight to my website, TaxHelpOnline.com, to order. And you help individuals as well, don't you? Oh, yeah. Individuals and small businesses, that's where I focus. Yes, sir.

[00:42:08] And what's the biggest problem people have out there when they're facing the IRS? Well, the single biggest problem is ignorance, not knowing what their options are, not knowing what's coming down the pike, not understanding how to respond to the IRS and how to deal with them and how to negotiate with them. That's the problem is ignorance, Merrill. People are afraid and fear immobilizes people, and it gets them into a position where they end up getting run over. Dan Pillow, thank you for joining us. Always excellent having you on the program to talk about the tax issues

[00:42:37] and provide a little clarity in a very murky situation. Thank you. All right. It's always my pleasure, Merrill. Thanks for having me. And if you want to find out more about Dan Pillow, you can go to pointofview.net. We have that information there for you, so you can reach out to him if you want to and see what you can find through his services. He's been around here on Point of View for decades now. So I want to thank you for joining, Megan for doing the engineering, Steve for doing the production, and we will be back on Point of View tomorrow.

[00:43:06] In 19th century London, two towering historical figures did battle, not with guns and bombs, but words and ideas. London was home to Karl Marx, the father of communism, and legendary Baptist preacher Charles Spurgeon. London was in many ways the center of the world economically, militarily, and intellectually.

[00:43:35] Marx sought to destroy religion, the family, and everything the Bible supports, Spurgeon stood against him, warning of socialism's dangers. Spurgeon understood Christianity is not just religious truth. It is truth for all of life. Where do you find men with that kind of wisdom to stand against darkness today? Get the light you need on today's most pressing issues delivered to your inbox

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