Friday, October 2, 2015
* Tronald Dump revealed his tax proposal this week. It will not be referenced here for two reasons-
1. I do not consider the Dumpster a legitimate candidate, and certainly not one who should be taken seriously. I doubt very much he will last the entire campaign. I will never report on any of his campaign proposals, and will only reference him in the context of his buffoonery and inappropriateness as a Presidential candidate.
2. It is too early in the campaign to spend time on candidate proposals other than in passing – especially with so many candidates. I will report in more detail on the candidates’ tax proposals as we get closer to the actual primaries, and when the two final candidates are “crowned”.
If you are interested in comparing the current candidates’ tax proposals you can use the Tax Foundation’s interactive tool “Comparing the 2016 Presidential Tax Reform Proposals”.
* Are you looking for a tax professional to help you with year-end tax-planning? Before you begin your search check out my advice on “Choosing a Tax Professional” and “What to Ask a Preparer”.
* Over at ACCOUNTING TODAY Jeff Stimpson reports “IRS Offers Relief to Calif. Fire Victims” -
“Victims of the Valley and Butte fires that took place beginning on September 12 in parts of California may qualify for tax relief from the Internal Revenue Service.
Following recent FEMA disaster declarations for individual assistance and President Obama declaring Lake and Calaveras Counties a federal disaster area, individuals who reside or have a business in these counties may qualify for tax relief.”
* Gail Buckner of FOX BUSINESS suggests “For HUGE Tax Savings Marry Today, Divorce Tomorrow (Or Vice Versa)”. Very interesting.
THE LAST WORD –
Bring me the head of the dreaded Alternative Minimum Tax!
The dreaded AMT does NOT assure the rich do not avoid paying taxes. Its victims are the middle and upper middle class – especially those in highly taxed states like NJ, NY, CA, etc.
Any tax reform MUST include the repeal of the dreaded AMT.
Thursday, October 1, 2015
The IRS recently released the annual update of the special per diem rates, effective October 1, 2015 to September 30, 2016, taxpayers can use to claim a tax deduction for lodging, meals, and incidental expenses when traveling away from home for business.
These per diems can be used by employers to reimburse employees for business travel, and the per diems for meals and incidental expenses can be used by unreimbursed employees and the self-employed to claim a tax deduction for business travel.
Click here to find the per-diem rates for travel within the continental United States for any fiscal year
Under IRS Rev Proc 2007-63, self-employed taxpayers filing a Schedule C and employees who are not covered by an employer reimbursement plan cannot use the per diem method that includes lodging. To claim a deduction for lodging expenses these taxpayers must claim the actual cost. And corporations cannot use the per diem that includes lodging for owner-employees with more than 10% ownership, based on direct or indirect ownership.
Similar to how the Standard Mileage Allowance works for business use of your automobile, you can elect to deduct either the actual amount of your out of pocket expenses for meals and “incidental” expenses while away from home on business, or claim the appropriate federal per diem allowance determined by the location of the trip. If you claim the per diem allowance you do not have to save receipts for actual expenses.
The per diem rates are based on the city where you “lay your head” at night. If your business meetings are in New York City, but you stay overnight at a hotel in New Jersey to get a lower room rate, you would use the New Jersey location to determine the appropriate per diem amount.
On the first and last day of a business trip you claim 75% of the per diem amount, unless you can show you leave before breakfast on the first day and return after dinner on the last.
You can decide whether to deduct the per diem rate or actual expenses on a trip by trip basis, but you must use the same method for all days within any single business trip. You can use the actual expenses when attending a conference in New York City in May and the per diem rate for an August convention in Las Vegas.
The per-diem rates for FY 2016 (10/1/15 – 9/30/16) are slightly lower than those for FY 2015 (10/1/14 – 9/30/15). I did a check of the Meal and Incidental per-diems for Atlantic City NJ and Philadelphia PA. The rate for these cities for FY 2015 was $66, but the rate for FY 2016 is $64.
Incidental expenses include fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. The per-diem rate for the incidental-expenses-only deduction for FY 2016 remains unchanged at $5 per day for any locality of travel.
The special meals and incidental expenses per-diem for transportation workers for FY 2016 is $63 for any locality of travel in the continental United States and $68 for any locality of travel outside the continental United States. These are up from the FY 2015 rates of $59 and $65. A transportation worker is an employee or self-employed taxpayer whose work directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and requires the taxpayer to travel away from home to areas with different federal per-diem rates during a single trip.
Of course only 50% of the per-diem for meals and incidental expenses are deductible. Taxpayers subject to the Department of Transportation hours of service rules can deduct 80%.
Wednesday, September 30, 2015
WON’T YOU TAKE THIS ADVICE I HAND YOU LIKE A BROTHER: MY BEST TAX ADVICE FROM OVER 40 YEARS’ EXPERIENCE PREPARING 1040s
It’s back – and it’s new and improved.
“The . . . pages of tax advice within the e-book (a pdf document) are full of good, common-sense advice . . . any individual who follows Robert’s advice will be far, far better off than those who don’t.”
Russ Fox, EA of Nevada – author of TAXABLE TALK
“I think your book is great. What I like most is that it is in plain English. You are not trying to appear like a ‘know-it-all’. It is simple enough for non-tax professionals to understand. However, it is informative enough to help tax preparers learn something new.”
Jamaal Solomon, EA of JS Tax Corporation
As a veteran tax professional who has been preparing 1040s for individuals in all walks of life since 1972 I am often asked by friends, family, clients, readers, and cocktail party guests, “What is your best tax advice?”
My answer was originally provided by MY BEST TAX ADVICE. I have updated and greatly expanded this compilation of wisdom accumulated from my 40+ years of preparing tax returns that I have re-titled WON’T YOU TAKE THIS ADVICE I HAND YOU LIKE A BROTHER: MY BEST TAX ADVICE FROM OVER 40 YEARS' EXPERIENCE PREPARING 1040s.
The advice in this report is not about specific tax deductions, credits, situations, or “loopholes”, and is not specific to 2015, 2016, or any other tax year. I talk about choosing a tax preparer, recordkeeping, record retention, tax planning concepts, and many other timeless tax topics.
It also includes the best tax advice of fellow tax bloggers and a listing of online tax planning and preparation resources.
The cost of this book is $7.95. Readers of TWTP, whose orders are postmarked by October 31st, can get a copy for only $5.95 – a 1/4 discount! And I will include my SCHEDULE A FORMS, SCHEDULES AND WORKSHEETS compilation as a free gift.
Companies, organizations, professionals, and publishers who would like to give this report as a “gift” or “benefit” to customers, clients, members, or subscribers can also purchase “reprint rights” for $100.00. If you think you may be interested in this, order and pay for a copy. If you do decide to purchase the reprint rights the $7.95 cost of the report will be deducted from the fee for these rights.
This book will be sent as a pdf email attachment. And the forms compilation will be sent as a word document attachment.
Send your email address and a check or money order for $5.95 payable to TAXES AND ACCOUNTING, INC to –
MY BEST TAX ADVICE
TAXES AND ACCOUNTING, INC
PO BOX A
HAWLEY, PA 18428
Tuesday, September 29, 2015
House Speaker John Boehner is resigning his Ohio House seat, and thus the U.S. House leadership post, at the end of October. No great loss. It is, however, very, very important that whoever replaces him as Speaker is NOT a member or supporter of or panderer to the Tea Party!
* Interesting. Paul Blair of AMERICANS FOR TAX REFORM tells us “Taxpayers Fleeing Democrat-Run States for Republican Ones” -
“In 2013, more than 200,000 people on net fled states with Democrat governors for ones run by Republicans, according to an analysis of newly released IRS data by Americans for Tax Reform.
'People move away from high tax states to low tax states. Every tax refugee is sending a powerful message to politicians," said ATR President Grover Norquist. "They are voting with their feet. Leaders in Texas and Florida are listening. New York and California are not.’"
* Years ago, when I was working in affluent suburban Summit NJ, I saw a pillow in a home that was embroidered with the statement “You Can Never Be Too Rich or Too Thin”.
A client recently asked Sterling Raskie of GETTING YOUR FINANCIAL DUCKS IN A ROW “Am I Saving Too Much?” Perhaps the pillow should have included “And You Can Never Save Too Much”.
* MOTLEY FOOL brings up a good point in “How Much Tax Do I Have to Pay on Stocks If I Sell?” –
“Make sure you know what you'll pay before you sell your shares”.
I often put clients in shock when I tell them what they owe – mostly because of large capital gains. And they are sometimes subject to penalties because of underpayment of estimated tax or, because the final corrected brokerage statement frequently arrives late in the season, late payment of tax due to GD extensions.
Review your gains quarterly and make estimated taxes if necessary.
* Barbara Weltman lists CNN’s “Best Cities in the U.S. for Small Businesses” at BARBARA’S BLOG.
They are –
1. Manchester, NH
2. Dallas, TX
3. Richmond, VA
4. Austin, TX
5. Knoxville, TN
6. Nashville, TN
7. Houston, TX
8. Ft. Collins, CO
9. Boulder, CO
10. San Antonio, TX
The only city on the list I would even consider living in is San Antonio – and while I might consider it I would not move there.
* Jason Dinesen follows up on last week’s post on RMDs by explaining “How to Calculate an RMD” at DINESEN TAX TIMES.
As Jason points out –
“In almost all situations, your IRA provider (or employer/third-party administrator if it’s a 401(k) plan) will calculate the RMD for you.”
However, when you have multiple IRA accounts but want the RMD for all to come from one you must calculate the RMD yourself and advise the IRA trustees.
It is very important that if you are required to take an RMD that you do – the penalty for not taking an RMD is very high.
THE LAST WORD –
Hey, Tronald Dump. Just so you know.
Being “politically incorrect” is calling a native American an Indian, calling an African-American a black, or calling a disabled individual crippled.
Calling someone fat or ugly, or telling a women you want to see her on her knees, is NOT politically incorrect. It is rude, obnoxious, and offensive.
And calling you a buffoon is simply telling the truth!
Monday, September 28, 2015
I have often blogged about my obligations as a tax preparer. But what about the client? A 1040 client also has obligations, responsibilities and requirements regarding their return.
In the letter that I give to clients with their finished returns I state –
“There returns are subject to review and examination by the IRS and appropriate state tax agencies. We accept responsibility for the clerical and mathematical accuracy of all returns I have prepared. However, the burden of proving the facts reported on your tax return rests with you. You are responsible for keeping all of the necessary documentation of the income and deductions claimed on these returns for at least three (3) years.”
This letter also says -
“Please examine these returns carefully to be sure all items of income and deductions have been accounted for properly. You are responsible for all the information reported on the returns. If you find anything that is not in order, or that you do not understand, contact us immediately. It is extremely important that you verify the accuracy of all Social Security numbers on the returns before mailing.
As the NATP Standards of Professional Conduct says –
“The client is responsible for any decisions made when the tax return is prepared. When the client signs the tax return, it has the force of an affidavit.
A client should not take the finished returns from his/her tax professional and just sign and mail without actually looking at them. The client should carefully review all the forms and schedules that make up the returns before signing the return, and ask the preparer if there is something that he/she does not understand.
And, as I continue to point out, just because a client does not understand something on a tax return does not mean that there is an error. Never, never, never preface a question posed to your tax preparer, or a reference to a notice from the IRS or state agency, with the statement, “You made an error on my return”!
A client also has obligations to his/her tax preparer. The client has the obligation to provide to the preparer all the information necessary to properly prepare a complete and accurate tax return, to be honest with his/her preparer, and to provide any documentation of the information provided if requested.
My 1040 engagement letter includes a section of “Taxpayer Responsibilities”, which includes –
“ • You agree to provide us all income and deductible expense information. If you receive additional information after we begin working on your return, you will contact us immediately to ensure your completed tax returns contain all relevant information.
• You affirm that all expenses or other deduction amounts are accurate and that you have all required supporting written records.”
So if you do your job right I can do my job right.
Friday, September 25, 2015
* Year-end tax planning time is almost upon us. If you are looking for a tax professional to help with your planning you can begin your search at “Find A Tax Professional” – check out the advice and information section before starting the search.
And check out my “2015 Year-End Tax Planning Guide” for help with your year-end plan.
* Kelly Phillips Erb wonders “2015 Tax Season 'Miserable' For Many Taxpayers: Will It Get Better In 2016?” at FORBES.COM.
While the 2015 filing season was certainly not “miserable” for me – no worse than any other – I did hear from more clients whose federal refunds were delayed, for the weirdest reasons (see my post “You Can’t Make This Stuff Up”), than any other filing season in my 40+ years in the business. With continued budget cuts I expect the 2016 season will also have many delayed refunds.
* WALLETHUB announces its list of “2015’s Most & Least Fair State Tax Systems”.
“WalletHub analyzed and ranked the 50 states based on the fairness of their state and local tax systems — including income taxes, sales and excise taxes, and property taxes. To rank the states, Wallethub used the results of a nationally representative online survey of 1,050 individuals to assess what Americans think a fair state and local tax system looks like. Our analysts then compared public perception to data on the real structure of tax systems in all 50 states.”
According to WalletHub Montana is the most fair and Washington state is the lease fair. I was truly surprised that New Jersey was the 18th “most fair” state. I expected it to be much lower on the list. My current home state of Pennsylvania is #35.
Methinks somehow a more progressive tax system is considered to be more fair. To me, a flatter tax system would be fairer.
* Russ Fox talks about a different take on state taxation in “Kiplinger’s Tax-Friendly and Least Tax-Friendly States: Bring Me (Mostly) the Usual Suspects” at Taxable Talk.
Delaware is the most tax-friendly state and California is the least tax-friendly. New Jersey is the 3rd least friendly – now that is more what I expected to see. PA is on neither the ten best nor ten worst lists.
* For those of you who are interested, Jeff Stimpson tell us that the IRS is providing “Tax Relief for Kentucky Storm Victims” at TAXPROTODAY.
“President Obama declared the Kentucky counties of Leslie, Breathitt, Fleming and Perry federal disaster areas following earlier similar declarations for Carter, Johnson, Rowan and Trimble Counties. The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.”
* Sharon Epperson of CNBC reminds us of a “Little Known Tax Credit to Help You Save” for retirement.
She is talking about the “Retirement Savings Contributions Credit” aka the “Saver’s Credit”.
I give details about this credit in my October 2014 post “The Saver’s Credit Numbers for 2015”.
* Peter J Reilly reports “Yogi Berra's Sayings Worked Their Way Into Tax Decisions” at FORBES.COM.
* Jason Dinesen explains “When Do I Have to Take My RMD?” at the DINESEN TAX TIMES.
* And Ray Martin of CBS NEWS’ “Marketwatch” answers the question “How Far Back Can the IRS Audit You?”
THE LAST WORD –
Many years ago I came across a small plaque, which I still have today, with some excellent advice.
If only someone had given this advice to Donald Trump early in his career.
What does the plaque say?
“It is better to remain silent and be thought a fool than to speak up and remove all doubt.”
Every time Trump speaks up he certainly removes all doubt!
Thursday, September 24, 2015
Good advice from Duke Ellington – especially for my 1040 clients when it comes to notices from the IRS or a state tax authority.
If you receive a balance due notice from the IRS or a state tax agency DO NOT AUTOMATICALLY PAY THE AMOUNT REQUESTED!
In my 40+ years of preparing tax returns I have found that more often than not (actually in my experience it is more like 75% of the time) a balance due notice from “Sam” or your state is wrong. And, again in my experience, notices from a state tax agency (at least when it comes to NJ and NY) are wrong more than ones from the IRS.
If you receive a balance due notice from any tax agency immediately mail, email, or give it to the tax professional who prepared the return, or your current tax professional if you have changed preparers since filing the return in question. If you “self-prepared” the return, perhaps relying on a “box”, seek out a tax professional for advice. You can start your search at FIND A TAX PROFESIONAL.
And DO NOTHING TILL YOU HEAR FROM YOUR TAX PRO.
Even if the notice is correct, if it includes a penalty assessment for late payment, late filing, or underpayment of estimated taxes your tax professional may be able to get the penalty completely or partially abated using the federal First Time Abatement program, reasonable cause, or annualizing your income for estimated tax purposes.
And – very, very, very important – when sending the notice to your tax professional DO NOT SAY TO HIM OR HER, “HEY, YOU MADE A MISTAKE ON MY RETURN.”!