No matter who you are, at tax time it boils down to numbers on a 1040 form. Here are the tax returns of President Barack Obama and Vice President Joe Biden, two of the most powerful people in the free world. In preparation for a tax tips article that we are working on, CPA Magazine challenges you to offer suggestions on how to improve the treatment of the tax positions on these 1040 tax returns. These suggestion topics can range from alternative state residency decisions for President Obama or how to handle book royalties. We will then publish the best suggestions for the benefit of our nation’s tax professionals. You can provide these suggestions with your name attached or anonymously. Professionals with the best suggestions will receive a certificate suitable for framing indicating that they offered the “Best Presidential Tax Return Advice”.
The President’s 2012 federal income tax return reflects that he and the First Lady filed their income tax returns jointly and reported adjusted gross income of $608,611. The Obamas paid $112,214 in total tax and reported donating $150,034 to 33 different charities. Their effective tax rate is 18.4 percent. The President and First Lady also reveal an Illinois income tax return paying $29,450 in state income tax.
Vice President and Dr. Jill Biden provided their 2012 federal income tax return and state tax returns for Delaware and Virginia. The Biden s filed joint federal and combined Delaware income tax returns. Dr. Biden filed a separate non-resident tax return for the state of Virginia. They reported adjusted gross income of $385,072 and paid $87,851 in total federal tax for 2012, an effective tax rate of 22.8%. They paid $13,531 in Delaware income tax and $3,593 in Virginia income tax. The Bidens contributed $7,190 to charity in 2012.
While political candidates are sensitive about limiting deductions, it is expected that a valuable tax advisor will provide the necessary suggestions to maximize deductions and defer income that is allowable by the Internal Revenue Code. To that end it may make sense to take a two-dollar deduction for donating underwear to charity. Kudos to the tax professional that first discovers and submits which presidential candidate took that deduction.
If you want to further flex your tax muscle, take a look at Mitt Romney’s 1040 from 2011. On the 379-page tax return, the presidential candidate didn’t deduct $1.8 million in donations.
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