* Monday’s USA Today had “dueling editorials” on the subject of extending the $8,000.00 First Time Home Buyer Credit, which will expire on November 30th.
The paper comes out against extending the credit in “Our View on Economic stimulus: It’s Time to Pull Plug on Tax Break for Home Buyers - Subsidies Drive Up Housing Prices, Helping Lobbies More Than Purchasers”.
The editorial tells us –
“For a variety of reasons, the credit should be allowed to expire. To begin with, the housing market is starting to recover. The National Association of Realtors has reported four straight months of increased sales of existing homes. Moreover, tax credits are just another form of government spending, and the government — which is running a $1.6 trillion deficit this year — doesn't have any money to spend. Extending the credit, which has already cost as much as $15 billion, would mean borrowing even more from future generations to aid today's home buyers.”
Presenting the opposing view is David G. Kittle, chairman of the Mortgage Bankers Association, with “Opposing View: Extend, Expand Tax Credit - Letting Incentive Expire Would Jeopardize the Housing Recovery”
Mr. Kittle says -
“This credit, along with lower mortgage rates, has helped to moderate the decline in home prices by stimulating demand. As many as 350,000 sales so far this year could be directly attributable to the tax credit, according to the National Association of Realtors.”
He believes that the credit should not only be extended but greatly expanded -
“Congress should extend it to all home buyers and increase the credit up to $15,000. In addition, Congress should make it available immediately, so that a borrower doesn't need to wait until his or her next tax return, but instead can use it to help make a down payment on the house or pay closing costs.”
I tend to agree with USA Today. While I would love for my clients to be able to get an $8,000, or even $15,000, gift from their Uncle Sam if they buy a home, I must ask, “Where is the money coming from?”
Besides, as you know, I am against “refundable” credits. They encourage and generate too much fraud. And, as I have discussed here before, it is way too easy to get the $8,000 credit. All you have to do is fill out an IRS form. No documentation or signed declaration required.
* Rob Teuber continues his series on Hobby Losses with the entries “Hobby Losses: Safe Harbor Presumption” and “Hobby Losses: How Does the IRS Decide If Your Business Is a Hobby?”.
* Who knew? Apparently there is a patron saint for Tax Geeks, or so TAX GIRL Kelly Phillips Erb tells us in “Happy Feast of St. Matthew, Patron Saint of Tax Geeks”.
* Oops! Forgot to include this item in Monday’s BUZZ.
On September 16th Senate Finance Chairman Max Baucus unveiled America's Health Future Act of 2009. Click here to download the committee’s 15-page summary of the bill.
Kay Bell discusses the “revenue items” in the bill in her post “The Cost of Health Care, Senate Style” at DON’T MESS WITH TAXES. She points out that the bill does not include a surtax on the wealth or any new “sin” taxes.
Howard Gleckman takes a look at the bill in two posts at TAXVOX, the blog of the Tax Policy Center – “The Baucus Health Bill and Taxes” and “Baucus-care: The Gift of the Magi”.
One item in the first TAXVOX post caught my eye immediately (as usual, the highlight is mine) –
“Premium Subsidy: The proposal would require everyone to have insurance, but recognizes that many low- and moderate-income people will need subsidies to afford the premiums. The proposal’s mechanism for providing that assistance is a Health Care Affordability Tax Credit. It would work like this: People who buy insurance through a state exchange would report their modified adjusted gross income for the prior tax year. If they are eligible for the credit—which is based on an income-related sliding scale—they’d pay their premium minus the credit to the insurance company and Treasury would pay the difference directly to the insurer.”
It looks like someone finally listened to me! Last September in my post “I Guess There Is Always An Exception”, which discussed Presidential candidate John McCain’s health insurance premium tax credit proposal, I said –
“ As I mentioned above the only alternative to using a refundable tax credit, with the downside that a person would have to pay the premiums first and wait until tax time to get the money, is for the government to send the money directly to the insurance company.
How would this work? I would go to the Horizon Blue Cross and Blue Shield website, for example, and apply for health insurance. After entering my information and choosing the coverage and deductible I would receive a quote. If I chose to enroll the annual premium would be reduced by the amount of the government credit ($2,500 or $5,000 proposed by McCain), and my monthly premium would be determined accordingly.”
However it looks like the credit does not be begin until 2013 – so that means three more years of no health coverage for many taxpayers.
* BLOOMBERG.COM reports that “IRS to Audit 6,000 Companies to Test Employment Tax Compliance”.
According to the item -
“The Internal Revenue Service will audit 6,000 U.S. companies to determine whether they pay all their required employment taxes to fund Social Security and Medicare benefits.
The IRS said the audits will provide data for its first statistical analysis since 1984 of how often companies misclassify workers to duck tax obligations, fail to pay taxes on fringe benefits such as personal use of company cars, and improperly pay taxes for company executives. The audits will begin in February, and the companies will be randomly chosen.”
* I think I touched on this topic in an earlier BUZZ entry. An LA TIMES item tells us that “Feds Plan to Tinker With Mortgage Interest Reporting”.
The article tells us that – “The Government Accountability Office wants lenders to add more details about mortgages on Form 1098, which would make it easier for the IRS to determine whether taxpayers are complying with the rules”.
So what does the GAO have in mind?
“Just a few revisions to Form 1098, the document that mortgage servicers send to both borrowers and the IRS that shows how much interest was paid during the year. The GAO said the one-page sheet should be expanded to include the address of the mortgaged property, the outstanding mortgage-debt balances, an indicator of whether the interest is on a loan refinanced during the year and an indicator of whether the interest was on an acquisition loan or a home-equity loan.”
As a preparer I would be happy with getting the additional info on the Form 1098, as most clients do not keep track of how their mortgage and equity proceeds are used (or at least never tell me).
* Jean Murray interviews Sheryl Schuff, a CPA, in her post “How To Find a CPA/Tax Adviser: Part One” at JEAN’S BUSINESS LAW/TAXES: US BLOG.
CPA Sheryl refreshingly “tells it like it is”. Here are some of her comments (any highlights are mine) –
“Business owners should understand that not all tax preparers are CPAs and not all CPAs do tax prep work. While you don’t necessarily need to hire a CPA to do your taxes (there are many competent non-CPA professional tax preparers), you do need to consider what other kinds of services you might need, like choosing accounting software, setting it up and getting trained, data entry tasks, and review of records for tax evaluation.”
“EAs are required to have 72 hours of continuing education every 3 years with a minimum of 16 hours every year. Like CPAs, they have to take an ethics course. Unlike CPAs (who can take accounting, management, technology, and personal development courses), EAs have to take all their courses in the area of Federal taxation.”
When asked by Jean, “As a CPA are you required to get updated on the tax laws every year?”, Sheryl properly answers –
“Nope. I’m not required to. I almost always take at least 16 hours every year of tax classes, but that’s strictly my personal preference.
As you can see, being a licensed CPA doesn’t guarantee that I know any more about taxes than when I originally passed my CPA exam (for me that was in 1974).”
*Stacie Clifford Kitts asks “Do You Suffer From Late Filing Syndrome” in a Busy Season Rerun at her STACIE’S MORE TAX TIPS blog.
As Stacie points out - “this syndrome appears to be a creative and possibly effective attempt by attorneys to protect their clients from criminal prosecution”. Any day now I expect to see it to be used as a murder defense on LAW AND ORDER.
* Over at Beancounter Ramblings Chad Bordeaux reminds us that “Technology Expenses are Now Eligible for Payment under 529 Plans”.
Chad tells us – “In addition to the cost of the equipment, these allowable expenses include Internet access and related services”.
* I know this has nothing to do with taxes – but I will end this installment of the BUZZ with a story told by Alfred Hitchcock on probably THE TONIGHT SHOW years ago, recounted by tax blogger Dan Shaviro of START MAKING SENSE in the post “The New Cat”. It gives you an idea of Mr Hitchcock’s sick mind.