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Thursday April 24, 2014

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Obama and Biden 2013 Tax Returns

Each year President Barack Obama and Vice-President Joe Biden release their tax returns. Both have done so for year 2013.

In 2013 President Barack and Michelle Obama had adjusted gross income of $481,098. This was lower by approximately 20% from the prior year due to reduced royalties from the sale of books written by the President. Most of their income came from his $394,796 salary as President.

The Obamas filed as a married couple with two added exemptions for daughters Malia and Natasha. Because the book income qualifies as self-employment earnings, the President was able to reduce taxes by funding a Simplified Employee Pension (SEP) with $20,681.

The Obamas itemized deductions were $147,769. The largest itemized deduction was for charitable gifts of $59,251. The major gifts by President and Mrs. Obama were to the Fisher House Foundation, the American Red Cross, One Fund Boston and CARE. Other gifts were made to 28 additional charities.

After taking their itemized deductions, the Obamas had taxable income of $333,329 and paid tax of $98,169. Their effective tax rate was 20.4% of their total income.

Vice-President Joe Biden and his spouse Jill Biden had an adjusted gross income of $409,009. This was primarily from his salary as Vice-President and her salary as a professor at Northern Virginia Community College. They paid tax of $96,378. This was an effective rate of 23.7%.

The Biden’s made charitable gifts of $20,523. The largest gifts were to the USO and the Annual Catholic Appeal of the Diocese of Wilmington, Delaware.

Both the President and Vice-President participated in a new experience for many upper-income taxpayers. Starting in 2013, the 3.8% Net Investment Income Tax (NIIT) under the Affordable Care Act (ACA) is applicable. Because both couples were over the $250,000 threshold for the tax, the Obamas paid NIIT of $2,310 and the Biden’s paid $933 of additional tax.

IRS Tax Filings Cost $170 Billion


By April 15 over 150 million American taxpayers had filed tax returns for 2013. The IRS viewed this as a very successful filing season. It published a statement explaining that belief.

“The IRS had delivered a strong, successful filing season for the nation’s taxpayers. As of April 11, 2014, the IRS had received almost 113 million tax returns, processing almost $235 billion in refunds. We anticipate that an additional 12 million estimated taxpayers requested an extension by the filing deadline giving them an extra 6 months to file.”

The American Action Forum reviewed the time and cost involved for Americans to comply with the IRS requirements. Due to a very complex Internal Revenue Code, the number of hours required were 7.7 billion. The average time per return was 12.2 hours.

Based on an assumed average rate for a civilian employee of $31.57 per hour, the American Action Forum estimates the annual cost of complying with IRS requirements to be $170.4 billion.

Part of the tax filing challenge is the great diversity of required forms. The personal IRS Form 1040 could include up to 198 other attached forms. Estate and Generation Skipping Transfer taxes require either an IRS Form 709 Gift Tax Return or IRS Form 706 Estate Tax Return. There can be 23 attached forms. Additional tax forms are IRS Form 990 for Charitable Organizations and IRS Form 1041 for Trusts and Estates. Subchapter S corporations, partnerships and corporations all have their own individual forms.

Editor’s Note: The complexity of the required paperwork for compliance with the IRS filing requirements is reflected in the increase in the estimated number of hours for preparation during the past four years. The total number of hours to comply with IRS requirements has increased from 6.2 billion hours in 2010 to 6.8 billion hours in 2011 and 7.7 billion hours in 2012 and 2013. The IRS Taxpayer Advocate Service is a watchdog agency within the government. It has noted that the single greatest problem with the tax code is the sheer complexity. It appears that this year there now are 7.7 billion reasons for major tax reform.

Published April 18, 2014

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