- Days left

IRS reveals millionaires claiming unemployment benefits

×
For most taxpayers, 2008 wasn't a year to remember. As a whole, incomes and profits tumbled while foreclosures and job losses soared. We saw the anecdotal evidence in the headlines and photos splashed across the media. (Meanwhile, unscrupulous Wall Street types took greed and avarice to a whole new level.)

Hard data from the IRS backs up what we knew to be the case: The recession hit the country hard. But the numbers also tell a shocking, much lesser-known story: Quite a few millionaires were claiming unemployment benefits, too. So while millions of Americans with struggled to keep their homes and feed their kids, a few thousand millionaires, though in not nearly as bad shape, were on the dole, too.

Giving some super-rich folks the benefit of the doubt, if you will, it appears some of them didn't have such a spectacular 2008. Seventeen of those 13,480 taxpayers who reported income of more than $10 million found themselves standing in the unemployment lines alongside nearly 9.5 million other Americans in 2008. Unemployment benefits for those taxpayers averaged $5,765. The number claiming unemployment benefits increased to nearly 3,000 for those taxpayers who reported overall income of more than $1 million.

Of course, unemployment benefits were up across the board -- nearly 25% -- at all income levels. The super poor to the super rich reported a collective total of $43.7 billion in unemployment benefits.

While those statistics may stand out merely because of the staggering amount of income involved, it's interesting that the overwhelming share of income in the top tax bracket isn't related to wages or salary. Less than 20% of the income at the top is attributable to actually working. The lion's share of income for those taxpayers at the top comes in the form of capital gains income -- even in a down economy. Lucky for those taxpayers, capital gains is generally tax favorable.

As Congress struggled this year with whether to extend benefits for those who are unemployed, questions about who should be able to claim benefits (and under what circumstances) took center stage. These taxpayer stats -- the first time the IRS has provided this level of detail on taxpayers in higher tax brackets -- will likely raise those questions again. Specifically, the discussions will revolve around whether it is fair for the super rich to claim unemployment benefits.

The rules for collecting unemployment are surprisingly easy in most states. To qualify, you generally have to earn sufficient wages (yup, the millionaires did that), suffer a job loss through no fault of your own, and meet certain criteria moving forward (usually making yourself available for work). There's no upper limit on the amount of money you can make to otherwise claim unemployment. In other words, you can't make too much money to collect; ironically, you can make too little money to claim unemployment.

The numbers of those unemployed taxpayers added to the overall grim economic picture for 2008. The IRS statistics show that total income reported on tax returns for 2008 was $8.3 trillion, a decline of nearly 5% from 2007. Factoring in the cost of inflation, the real drop was 8.4% -- the biggest dip in income in 20 years.

Even those in the top tax bracket took a hit -- there were fewer super-millionaires in 2008. Those reporting income of more than $10 million tumbled 25% to just 13,480.

The number of taxpayers reporting at least $1 million in income also dropped. Overall, the number of millionaire wage earners took a tumble of nearly 22%. The total income reported by those millionaires was a whopping $1.08 trillion, or about 13% of all income.

Even as millionaires garnered unemployment, they also reaped Social Security benefits, too. Nearly 57,000 taxpayers who reported more than $1 million in income in 2008 also collected Social Security payments. Taxpayers who pay into the Social Security system are entitled to payouts at certain ages. As the trust fund depletes (with concerns that it will run out at some point between 2040 and 2080), many believe that Social Security distributions should be income dependent.

All this makes me wonder: Should any government benefits be income dependent? Or should you be allowed to receive benefits irrespective of your income level?

For more information about income levels and classes of income, check out the Tax Statistics page on the IRS website.

Increase your money and finance knowledge from home

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

TurboTax Articles

What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

Add a Comment

*0 / 3000 Character Maximum