Tax Lawyer's Blog

The President and First Lady filed their tax return on April 12, 2009.

The return is mainly unremarkable; however, I did notice a few potentially interesting things:

Self-Employment Income and Expenses

Mr. Obama received $2,603,448 in income from book publishers Dystel and Goderich and Random House for his books Dreams from My Father and Audacity of Hope.

This income is shown on Form Schedule C, Profit or Loss from Business (Sole Proprietorship).

Mr. Obama takes the following deductions against that income:

• Commissions and Fees    $123,324
• Supplies   $476

That’s it.

Is Something Missing (the Dog that didn’t Bark)?

The paucity of business deductions claimed on President Obama’s Schedule C raises the following questions:

• Didn’t Mr. Obama incur any travel expenses for promoting these books? 
• Did he write the book himself? If so, did he use a computer?
• What about a business deduction for computer software, internet service, cell phone usage (i.e. for the cost of talking to his agent and his publisher).
• Even the Commissions and Fees seem low. They come to only 4.7% of his total revenue.

If Obama did, in fact, incur additional expenses, he would be entitled to claim deductions for them (and, one would assume, would have taken those deductions).

This raises the question: Did someone else cover his expenses for him?

Was it his publishers?

His agent?

Or, heaven forfend, was it his campaign?

Shameless Pitch for Famous Client:

Mr. Obama, if you did pay additional expenses related to the generation of your book income and your tax preparer simply missed these deductions, I urge you to engage the services of my firm and we will, forthwith, file an amended return and get you a refund.

Be aware, however, that amended returns resulting in decreases in tax liability often get selected for audit.

Snide Aside:

Maybe the President should have had Tim Geithner review the return before he sent it in.

The “First” Marginal Rate

• The Obamas had taxable income of $2,346,051.
• Their income tax liability (before Foreign Tax Credit) was $ 792,693
• Mr. Obama also paid in self-employment taxes of $ 66,409
• And Household employment taxes of $ 1,966
• They paid in during the year $ 881,337
• They overpaid their taxes by $ 26,014 and will be applying that overpayment to their 2009 taxes.

The Obama’s marginal rate is calculated simply by dividing their tax liability by their taxable income as follows:

792,693/2,346,051 = 33.79%

What if Obama’s Tax Proposals Were in Effect in 2008

Had Obama’s proposed tax hikes on the rich been the law in 2008, he would have had a marginal rate of about 50% and, therefore, he would have had to pay $1,173,000 in taxes.

That’s $380,000 more than he actually paid in 2008.

But, alas, Mr. Obama was smart enough to have his break-out income year before he became President.

Excellent job of tax planning, Mr. President.

Charitable Deduction

The self-righteous and overly judgmental attention given to the amount of charitable contributions our elected officials claim on their tax returns is more annoying than the Ritalin-riddled 7 year old brat sitting in the seat directly behind you on a cross-continental flight.

Okay, not that annoying.

I have written about this before in Form 1040, Schedule A, Line 19: The Measure of a Man’s Compassion.

So I won’t spend more time here than I have to:

The Obama’s gave deductible donations in 2008 of $172,050 which comes to 6.5% of their Adjusted Gross Income.

We do not know how much in non-deductible donations they gave to charities and we do not know how much of their time (which is also not deductible) they invested in helping others.

Occupation – First Lady

This one doesn’t have any tax policy or other legal implications, I just found it interesting.

At the bottom of page 2 of the return are Barrack Obama and Michelle Obama’s signatures and their occupational titles.

Mr. Obama, of course, is the U.S. President. 

But Michelle lists her “occupation” as First Lady.

Occupation means paid job, doesn’t it?

This raises this question: Is “First Lady” a job or merely a title along the lines of, say, a British Knight?

And if it is a job, how much does it pay?

Here’s what Wikipedia says:

“First Lady” is not an elected position, carries no official duties, and receives no salary. Nonetheless, she attends many official ceremonies and functions of state either along with, or in place of, the President. There is a strong tradition against the First Lady holding outside employment while occupying the office.

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