Tuesday, April 22, 2014


BUZZ, BUZZ.  The BUZZ is back!

* Donald Rumsfield, Secretary of Defense from 1975 to 1977 under Gerald Ford and again from 2001 to 2006 under Dubya, agrees that the US Tax Code is a mucking fess.  He shares his frustration with the complexity of the Code in a letter to the IRS.  Click here to read the letter.
* Fellow tax-blogger Joe Kristan of THE ROTH AND COMPANY TAX UPDATE BLOG is interviewed by a local Iowa news station on a unique state tax credit.  Click here to see Joe on tv.

* Kay Bell of DON’T MESS WITH TAXES, the yellow rose of taxes, talks about the 2013 Form 1040s filed by BO and the Vice President at her BANKRATE.COM tax blog.

To see BO’s 2013 tax return click here.  And click here for the Bidens’ return.

* CCH has published a “2014 Post Filing Season Update” Tax Briefing.  Click here to download the report.

* MARKETWATCH.COM “Tax Guy” Bill Bischoff lists some resolutions to make that will help make 2014 less taxing in “5 Tax Mistakes You Should Never Make Again”.

I especially like his 5th - “Resolve to consult your tax pro before major transactions.”

Bill forgets two of the most important resolutions –

·  Resolve to become more informed on taxes, and

·   Resolve to keep better tax records.

* Is your state income tax too high?  MOTLEY FOOL identifies “These States Have No Income Tax”.  There are 7.  And 2 with “no income tax on wages but do tax interest and dividends”.  The item takes a look at each of these 9 states.

* ACCOUNTING TODAY tells us “IRS Audit Rate Hits New Low”.

The Internal Revenue Service is anticipating the chances of a tax return being audited to be the lowest in years.

The IRS audited less than 1 percent of individual tax returns in 2013, the lowest rate since 2005, and the number of individual returns that will be audited this year will decline even further, IRS commissioner John Koskinen told the Associated Press.”

The reason?  Why the idiots in Congress, of course.

Thanks to successive rounds of budget cuts at the hands of Congress, the IRS has been forced to cut back on its audits.”

The item “compare the combined federal, state and local income tax bill on a gross household income of $100,000 in” Queens NY, Topeka KS, and Seattle WA.

The Seattle family pays the least amount of overall income taxes, and the Topeka family pays the most federal income tax.  This is because (1) Seattle has no state income tax, and (2) Kansas has substantially less local real estate taxes than the other two locations, and a Kansas homeowner pays much less in mortgage interest, due to the price of homes, than homeowners in Queens and Seattle, which reduces the Topeka family’s Schedule A deductions

This example shows how the deductions for real estate taxes and mortgage interest can help to “geographically” equalize tax burdens.

Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for year.”

Why 3 days more?

Tax Freedom Day is three days later than last year due mainly to the country’s continued slow economic recovery, which is expected to boost tax revenue especially from the corporate, payroll, and individual income tax.”

What about the individual states? 

The total tax burden borne by residents of different states varies considerably due to differing state tax policies and because of the progressivity of the federal tax system.”

It is no surprise that NJ residents need to work until May 9th to cover its their excessive tax burden.  That is longer than any other state.  Connecticut has the same Tax Freedom day.  NY’s TFD is May 4th.  My new home state of PA celebrated on April 21st.  I certainly did better by moving (in a lot of ways).


Monday, April 21, 2014


43 down – 7 to go!

The 2014 tax filing season (for filing 2013 returns) once again got off to a late start – also once again caused by the actions of the idiots in Congress.  This time the delay was a result of the October 1 – 16, 2013 government shutdown.  The IRS needed “time to program and test tax processing systems following the 16-day federal government closure”.  The Service announced it “would start accepting and processing 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4”.

And, once again, the delay did not affect me one bit.  For the past 40+ years the tax filing season has always started for me on February 1st.  And, as you should know by now, I prepare all my federal returns manually, so delays in processing electronically-filed returns don’t mean anything to me.

There was not much new that affected the 2013 Form 1040.  Most of the few new wrinkles concerned taxpayers who are considered to be “wealthy”.  These included the higher capital gains and top tax rate, the return of PEP and PEASE (at much higher levels), and the new Obamacare surtaxes – the additional .009 Medicare surcharge and the 3.8% tax on net investment income.

The bulk of my clients can be classified as “average middle class taxpayers”.  However I did have 6 clients who were hit by one or more of the new punishments for ambition, success, and entrepreneurship.  While the cost was not what I would consider substantial – it did add over $2,000 to the tax bill of some of these clients.

A change on the Form 8949 was truly welcomed.  Some investors were able to enter “covered” sales directly on Schedule D and bypass reporting the details of specific transactions on Form 8949. 

According to the Schedule D instructions –

You can report on line 1a (for short-term transactions) or line 8a (for long-term transactions) the aggregate totals from any transactions (except sales of collectibles) for which:

·  You received a Form 1099-B (or substitute statement) that shows basis was reported to the IRS and does not show a nondeductible wash sale loss in box 5, and

·  You do not need to make any adjustments to the basis or type of gain or loss (short term or long term) reported on Form 1099-B (or substitute statement) or to your gain or loss.”

This new procedure was a godsend – as I did not have to waste as much valuable time “cutting and pasting” dozens of pages of 1099 detail as supplements to multiple 8949s.  Unfortunately even as little as $1.00 in wash sale adjustments could void its use.  The IRS should allow this procedure to be used if the only adjustment to cost basis is a wash sale adjustment that has been reported to the IRS.

And brokerage houses should be allowed the option of reporting the cost basis of “non-covered” sales to the IRS on Form 1099B if the investment was purchased by the same firm that is reporting the sale, expanding the use of this great new procedure.

Generally I did find that overall 1099-B reporting by brokerage houses continued to be more consistent and easier to follow.

I have also found that, for me, the new due-diligence requirements for claiming the Earned Income Credit are merely a pain in the arse time waster (having to fill out another form) and not really increased work.  This is because I do not accept any new 1040 clients.  I only did 2 or 3 2013 returns that claimed the EIC, and they were for long-time clients whose situation I was familiar with.  I did not ask any additional questions or look at any documents.  I expect in a year or so I will no longer have any EIC returns.

On the state tax front, I continued to submit NJ-1040s via the online NJWebFile system whenever possible, unless the client specifically told me not to so do.  The print-out has slightly improved – it does not waste as much paper as in the past.  But the cafones in Trenton have still not properly updated the software to account for excess FLI (family Leave Insurance) withholding or include the new NJ-BUS procedures.  I was often forced to prepare manual NJ returns not because I wanted to, or because the client wanted me to, but because of the excessive limitations and restrictions of the system.

Like last year, there were no “technical difficulties” involving my computer or printer, my car, or the weather to contend with this tax season.  And I developed a system to reduce my time spent at the Post Office.

I did not find any special “themes” to this tax season.  In the past there have been years where it seemed every third client won something in the lottery, or refinanced the mortgage, or had something else in common.

Unfortunately I ended the season with 44 GD extensions.  A handful were requested by clients who either had not yet gotten their “stuff” together and to me or who were waiting for K-1s (which also could be appropriately preceded by the initials GD).  And I am sure there are some more filed directly by clients.  There were less than 40 that were required due to workload and time constraints. 

On the plus side this year I was much better in practicing the FIFO (first-in, first-out) system of return preparation that I preached.  All returns received in my hands in the month of February were dealt with.  No returns got lost between the cracks or in the shuffle.  All time constraint GDEs were received during the last three weeks of March.

My January client letter clearly stated that all returns not physically in my hands by March 22nd would be automatically extended, and that I could not guarantee that returns received after March 15th would be able to be completed in time for an April 15th filing.  The great majority of GDEs fell into these two date-related categories.  Only literally a handful were received before March 16th.

I did discover a problem with the Post Office.  Packages sent to me via regular first class mail occasionally took as long as two weeks to get from NJ to me here in the “boonies”.  I sent back all completed returns via Priority Mail, and charged clients for the cost, originally because of the free tracking component.  In next year’s January client letter I will instruct all clients to use Priority Mail to send me their “stuff”, to receive actual priority in delivery and for the free tracking.

I have thought about why there are so many mid-March mailings resulting in GDEs, and I do believe the main reason is because of the lateness of brokerage firms in sending out the Year-End Tax Reporting Statement.  The IRS now does not require delivery until mid-February, and many send out at least one corrected copy as late as mid-March.  Many clients, who a dozen years ago would send me their stuff in early or mid-February must now wait until March out of necessity.

This problem first began with the creation of the category of “qualified dividends”, which are taxed at a lower rate, back in, I believe, 2004.  This is because, as is their custom, the idiots in Congress had to complicate the requirements for dividends to be “qualified”.

Whatever the reason, 40 GDEs, or even 20 GDE, are too many.  Next season I truly need to find ways to aggressively “thin the herd” and to reduce the time I must spend away from my desk.

Of course the tax season ended for me not on April 15th but on April 14th.  Fellow tax-blogger Peter Reilly from Forbes.com explains why (click here).

So there it is.  That was the tax season that was.  Any questions?


Tuesday, April 15, 2014



Saturday, March 15, 2014


It has not gotten that bad yet . . .
Only one month to go and I have either completed, received, or heard from all but about a dozen clients (that I expect to attempt to file on time).  The "to be done" boxes are chock-a-block. 
Forget the corn - the pile of 1040s to do is as high as an elephant's eye!
I had at one point cleaned out the "red file" box (need more info), but it has grown again.  I am getting them done as the missing information arrives.
There are 14 returns received in February that must be done before I begin on packages received in March.  I expect to have these completed by this time next week (knock on wood).

FYI - I have been locked behind closed doors, and my phone has been unplugged, since this past Wednesday.  This will continue through Monday (SPD).  Historically the office has always been closed on SPD - a carryover from my mentor's practice - although that does not mean I am not working away on 1040s.  Monday will be devoted to Irish clients.

The answering machine will be back on Tuesday - but I will be relatively inaccessible for the rest of the "season" and the machine will truly be for messages only.  You can leave an "our we there yet" message - but it will only be responded to if we are truly there.
To be honest - at this point I cannot guarantee that any returns not in my hands by the end of today will be able to be completed in time for an April 15th deadline - but there is still some hope.  I want to end the "season" with the absolute least amount of GDEs possible. 
Back to work - I will check in with you again with an update at the end of March.

Saturday, March 1, 2014


One month down - one and a half to go!

As I say good-bye to February I have either done, received, or made arrangements with 55% of my client list – a bit ahead of last year. 

I have completed 84 returns, the same number as last year at this time.  So I am not behind on that front.  However that is only an average of 3 per day.  I need to double that average! 

Receipt of tax preparation income is up 39.5% from last year.  The fees have not increased, but some returns cost more this year because of additional work.  That is certainly good (although some of the 2014 is from 2012 GDEs completed in January).

And there are only 7 red-files (need more information).  I have been keeping on top of them - and completing the returns as the information arrives. 

I have 34 packages in the "to be done" box.  None  have been there for more than 10 days – I am doing good at sticking to FIFO.  I will complete these 34 sets of returns, if all info is available, before starting on any packages received in March! 

Don't be surprised if I add some additional "locked behind closed doors" days - or even a full week - before mid-March to the regular LBCD Wednesdays (don’t call me on a Wednesday – you won’t get an answer). 

All in all – so far so good.

OK - now back to work!


Saturday, February 1, 2014


Now it is time for what you have been waiting a year for - the annual February 1st tradition here at THE WANDERING TAX PRO of posting “The Twelve Days of Tax Season” -
On the first day of tax season my client gave to me a Closing Statement for the purchase of a home.

On the second day of tax season my client gave to me 2 W-2 forms.

On the third day of tax season my client gave to me 3 mortgage statements.

On the fourth day of tax season my client gave to me 4 Salvation Army receipts.

On the fifth day of tax season my client gave to me 5 Form K-1s.

On the sixth day of tax season my client gave to me 6 1099s for dividends.

On the seventh day of tax season my client gave to me 7 cancelled checks.

On the eighth day of tax season my client gave to me 8 useless items.

On the ninth day of tax season my client gave to me 9 medical bills.

On the tenth day of tax season my client gave to me 10 stock sale confirms.

On the eleventh day of tax season my client gave to me 11 employee business expenses.

On the twelfth day of tax season my client got from me a finished tax return, 11 employee business expenses, 10 stock sale confirms, 9 medical bills, 8 useless items, 7 cancelled checks, 6 1099s for dividends, 5 Form K-1s, 4 Salvation Army receipts, 3 mortgage statements, 2 W-2 forms, and a Closing Statement for the purchase of a home.

And, of course, on the thirteenth day of tax season the client gave to me a corrected Consolidated 1099 from Wells Fargo Advisors!

Friday, January 31, 2014


Joy to the world - tax season’s here.
I’ll soon be flush with cash!
Let every client be organized,
and give me all I need, and give me all I need,
and give me all I need to prepare their returns!

My 43rd tax season will officially begin tomorrow - let the deluge begin!

As is my custom, due to the demands of the filing season I will be taking my annual “tax season hiatus” from posting to THE WANDERING TAX PRO.

Between now and April 15th I will barely have time to relieve myself let alone blog!  Nor will I have time to respond to comments. If a comment requires a response I will do so after April 15th.


I am NOT accepting any new 1040 clients (or any other kind of tax preparation clients). So don’t email me asking if I can prepare your 2013 tax returns.  THE ANSWER IS "NO". 

I will be publishing a WHERE THE FAKAWI post at least every other week here at TWTP to keep my clients up-to-date on my progress during the season and to report changes or additions to my tax season policies and procedures. Clients can also keep track of my tax season progress by following me at TWITTER (@rdftaxpro).

My Tax Tips will be appearing regularly at the MainStreet.com Tax Center throughout the season.  Be sure to check them out.

I realize that I am abandoning you at a time when you may need me the most – but I need to make a living!

I find it a bit amusing that the period of time when TWTP gets the most “hits” is during the tax filing season when I am not posting.

“Talk” to you when it is all over!


BTW – be sure to stop by tomorrow for the annual posting of my TWELVE DAYS OF TAX SEASON!


This will be the last BUZZ until after the end of the tax filing season.   

* Over at the MainStreet.com TAX CENTER I tell you “What to Do If You Do Not Receive a W-2”, “Why You May Not Have to File A Tax Return This Year”, and “These Are the Most Important Numbers on Your Tax Return”.

* Kay Bell mentions a certain veteran tax pro some might consider eccentric in her post "Are You Ready to e-file Your Federal Return? Here's How" at DON'T MESS WITH TAXES.

Wait - it's me!

* ACCOUNTING DEGREE has a new infographic on “Obamacare and Your Taxes”.

* Joe Kristan tells us “IRS Gives Mulligan to Elect Portability for $5 Million Estate Exclusion” at the ROTH AND COMPANY TAX UPDATE BLOG.

While I am on “hiatus” you can get some BUZZ from Joe’s daily “Tax Roundup”.

* The FISCAL TIMES lists “The 10 Worst States for Taxes in 2014”.  It is no surprise that New Jersey is number two (NJ is often referred to as “Number Two”) – the second worst state behind New York.

New Jersey’s per capita property tax is the most onerous in the country.”

The picture “identifying” NJ has absolutely nothing to do with NJ – it is the brain dead sluts and skanks of THE JERSEY SHORE, who are from NY.

* The TAX RESOLUTION BLOG explains the “Nuts and Bolts of an Offer in Compromise”.

* A client just emailed me to say that he could not afford health coverage in 2013 and to ask how much would he be penalized.  My answer was “nothing” – the penalty does not apply to 2013.  It begins this year – 2014.

Tax Guy Bill Bischoff discusses the Obamacare penalty in “Owe the IRS Money? Good News - The Obamacare penalty only applies to those who get a tax refund” at MARKET WATCH.  

* Here is a legislative proposal reported by ACCOUNTING TODAY that is along the lines of something I had thought about a while back – “Congressman Introduces Bill to End Tax Write-off for Lavish Executive Bonuses”.

My proposal would have also included the requirement that any such excessive bonus must come from current earnings and profits – so CEOs of companies with current losses could not give themselves eventually deductible ridiculous and unjustified salary payments.

* Barbara Weltman’s thoughts on the “State of the Union Address and Small Businesses” at BARBARA’S BLOG are similar to mine.  Like -

My problem with a corporate tax rate reduction is the need to simultaneously reduce tax rates on small businesses in which owners of pass-through entities pay tax on their share of business profits on their personal returns. It makes no sense to me to lower the top corporate rate from 35% to say 25% or so while retaining the top individual income tax rate paid by some small business owners of 39.6%.”

And -

The proposals on automatic retirement savings for the middle-class sound fine. By making savings easy it likely will help this group increase retirement savings (something I thought was intentioned by the retirement savers credit). Paying for this by taking away retirement savings tax breaks for wealthy individuals doesn’t make sense to me.”

And –

Overall, the old expressions—the devil is in the details—makes all the difference on whether or not the proposals are worthy of support. We’ll all just have to see!”

Some of the details of the “myRA” account are provided in a White House issued “Fact Sheet”.

ü  It would be a ROTH account – no deduction going in but no tax coming out. 

ü  Initial investments could be as low as $25 and contributions that are as low as $5 could be made through easy-to-use payroll deductions.  Savers have the option of keeping the same account when they change jobs and can roll the balance into a private-sector retirement account at any time.

ü  Savers will earn interest at the same variable interest rate as the federal employees’ Thrift Savings Plan (TSP) Government Securities Investment Fund.”  This rate is nothing to write home about.
ü  This saving opportunity would be available to the millions of low- and middle-income households earning up to $191,000 a year.  These accounts will be offered through an initial pilot program to employees of employers who choose to participate by the end of 2014.  The accounts are little to no cost and easy for employers to use, since employers will neither administer the accounts nor contribute to them.

Any retirement savings is better than no retirement savings.  It would be good as a starting point, with the account balance being transferred to a “regular” ROTH account and invested in a mutual fund once it reaches perhaps $2,000.

* “Hate Doing your Taxes? Blame Congress, Not the IRS”!  Right on, Allison Linn of CNBC.

The item quotes the spot on assessment of Michael Graetz, a professor of tax law at Columbia Law School and a proponent of major tax reform -

"We have come to use the tax system as if it is a cure for every social and economic problem the country faces.”

But -

That's not necessarily what the federal tax system was intended for when it was introduced about 100 years ago.”

* Let’s end with what bloggers love most – another list.  This one, from Shana Norris at MODEST MONEY, is “10 Things A Parent Should Know About 529 Plans”.