Halcro printed the stuff:
A fairly standard tax planning technique is to set up a pass-thru entity to separate income into two types. Salaries are earned income and subject to payroll taxes at 15.3% on the first 106,000+, and non-earned income like rents or the distributions of profit which are free of the payroll taxes.
This works fine as long as a reasonable salary is paid to the owner/employee. It is a major audit issue if too low a salary, or no salary is paid at all.
It looks to me like Joe is scamming the system here. Two things stood out to me in his disclosure report.
The first was on page 4, which lists non-publicly traded assets along with associated income.
He lists his Law Office valued at $50-$100k, which pays him rent of $50-$100k per year. That is 100-200% rate of return. That can't be right!
I thought there was an error in value, so checked out the FNSB tax assessor site to find the only commercial property in his name. The FNSB values 250 Cushman Ste. 2A (which Joe bought in 2005), at $24,090. The image of a deed describes the office at 703 square feet.
That equates to $5.92 to $11.85 a sq ft in monthly rents while my quick research indicates fair rental value would not be more than $2-$2.50 per sq ft.
So why does this matter? If he is paying himself unreasonably high rents,it is a sign he is paying himself an unreasonably low salary. (Which means he is not paying the US Treasury what he should be.)
The second disclosure issue is that on page 2, earned income, he lists "Salary/distributions" at $59,348.
Salary and distributions are different types of income. These numbers would not normally be combined on a financial statement, or on his tax returns. If they are combined, we are left to wonder what his salary is, if there is any salary at all.
If his salary is unreasonably low, IRS would be interested, and I can think of no reason to combine these numbers except to hide that his salary is low or non-existent.
Questions to his campaign would be:Are the rent income and property value ranges correct?
Is the rental property really only 703 sq ft?
What was his salary?
It sort of went to the back burner over the weekend, as Miller jumped the shark Sunday and Monday. The story is now erupting nationally.
Here's from the Daily Kos story, written by Bonsai66, who has read my accountant's info, posted at Halcro's blog:
Joe Miller has a new problem.Check out the hundreds of comments at the Daily Kos article.
That didn't take long, did it?
Based on a quick analysis done by a reader at Andrew Halco's blog, (Andrew is a 45 year resident and former President of Avis Alaska), it looks like Joe Miller is gaming the system in order to avoid paying payroll taxes on his income as an attorney.
And he hasn't been fudging his finances just a little bit. It's by a huge amount...and the IRS will surely be paying Joe Miller a visit in the future.
Earned income is subject to payroll taxes up the 2010 tax year cap, which is currently set at a bit over $100K. Any other income, (like dividends, capital gains and rental income), is still subject to income taxes, but not payroll taxes.
Now, these payroll taxes are used to fund what program?
You got it!
If we look the first left oval on the page, we can see that Joe is listing the value of his law office, (which he owns), at between $50,000 - $100,000. Looking at the middle oval, we see that Joe also collects rent on that office. And the far right oval shows that the annual income from that rent is between $50,000 - $100,000.
Joe owns his law office and pays rent to himself. There is nothing wrong with doing this, by the way. It's legal. However, it would appear that the annual rent he is paying to himself on that office, roughly equals the value of the property.
He must be one bastard of a landlord. I wonder how he treats his tenant.
At any rate, this isn't even the entire story about the value of this property.
So, the assessed value of his law office is actually closer to $25,000. What this means is this: Joe Miller pays an annual rent to himself, (on an office that he owns), on the order of 2 to 4 times the assessed value of that office...EVERY YEAR!
Why does this matter?
According to page 2 of Joe's form, he declares the "Salary/Distributions" from his law office in the amount $59,348.
Remember, his also declares on page 4 of his form that he collects an annual rent of $50,000 - $100,000 from that same law office.
Now let's use the lower end of that range, (since we want to give Joe the benefit of the doubt here), to calculate the maximum amount of earned income that he could have subjected himself to, from the standpoint of payroll taxes.$59,348That's right! Under the scenario listed in Joe's disclosure forms, the maximum amount of income that Joe would have declared subject to payroll taxes from his job as an attorney, is less than $10,000.
Total $ 9,348
While paying himself an annual rent on that property on the order of 2x to 4x of it's assessed value.
It is becoming increasingly obvious to me that Miller will come in third in this race, probably at around 27%. If McAdams can stay within 2,000 votes of Lisa, Scott will win from the trash getting thrown out of Lisa's stuff. She admitted last night that she expects to lose about 8% of those who vote for her in the hand count vetting. The Alaska and National Democratic Parties need to prepare now to fight for every vote for Scott in what promises to be a long, long recount.