Monday, January 3, 2011


As 2011 begins let me take some time to look back on the year in taxes for 2010.

Perhaps the biggest tax story of 2010 was the total irresponsibility of the idiots in Congress (lately I have not referred to our elected representatives in Washington without including the word “idiots” – I will continue to do so until they can prove to me that they are not). Once again they waited until literally the last minute to pass needed tax legislation to extend expiring and expired tax breaks via The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (aka the 2010 Tax Relief Act and the Tax Hike Prevention Act of 2010), signed into law by BO on December 17, 2010.

The idiots have known for the past ten years that the so-called “Bush” tax cuts would “sunset” (i.e. disappear) on December 31, 2010. And they have known for more than two years that certain favored tax breaks, including the annual Alternative Minimum Tax (AMT) patch, expired on December 31, 2009.

While attempts were made to address the expiring and expired during the year, Congress could not get much of anything done during the first 50 weeks of 2010. As I pointed out in my post “Are They Smarter Than A Fifth Grader” -

Correct me if I am wrong, but it seems to me that lately Congress is more dangerously partisan than ever before. With only the most minimal of exceptions, Republicans will only vote for bills introduced by Republicans, and Democrats will only support legislation introduced by their party. A Republican could introduce a bill that would guarantee world peace, and the Democrats would vote against it because it was not introduced by a Democrat.”

When the idiots finally did decide to act they really did not act. While extending the tax breaks and AMT patch that had disappeared on December 31, 2009, Congress basically just postponed action on the “Bush” tax cuts for another two years.

The results of the irresponsibility of the idiots in Congress will be felt during the upcoming filing season, as many 2010 tax returns, including those containing itemized deductions, won’t be able to be processed until at least the middle of February.

During 2010 the idiots also proved that (1) they do not read in full the bills they are voting on, and (2) they cannot do anything simply.

Snuck in at the tale end of BO’s health care “reform” Act was a provision that requires nearly 40 million U.S. businesses to file 1099-MISC forms for every vendor that sells them more than $600 in goods beginning in 2011

As CNN MONEY explained back in May –

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.”

This new law is a potential nightmare creating tons more paperwork for small businesses. The biggest problem is not that they will have to issue many more 1099s each year, but that they will have to get the Tax ID numbers (Employer Identification Numbers) for every single vendor to whom they expect to pay more than $600.00 during the year.

A multitude of small business organizations, and many tax bloggers (myself included) came out against this nonsense, and the idiots realized that they had FU-ed. The Democrats and Republicans are united in their opposition to this new requirement – but they can’t simply write a bill that says in effect “the new 1099 filing requirements are repealed” and pass it. At least 3 attempts to do this have been unsuccessful. And, of course, the idiots were not smart enough to include the repeal in BO’s year-end compromise Tax Act.

The members of Congress are lazy, self-absorbed idiots incapable of independent thought or action whose main goal, motivation and function upon being elected is getting re-elected and not the proper representation of their constituents or administration of the government.

Before I leave the idiots who “represent” us in Washington, 2010 was the year that justice was finally meted out to long-term tax cheat Congressman Chuck Rangel, who used to chair the committee that wrote tax law. His punishment? He had to stand up in front of the “class” while “teacher” said he was a naughty boy. Wesley Snipes cheats on his taxes and he gets sentenced to jail. Charlie Rangel cheats on his taxes and is called a bad boy and told not to do it again.

The number two tax story for 2010, perhaps the number one story for us tax preparers, was the implementation of the new IRS regulation regime. All individuals who want to prepare federal income tax returns for a fee, or who will substantially contribute to the preparation of a return prepared for compensation, must now register with the IRS, pay a nominal fee, and be issued (or re-issued) a “PTIN” identification number. Beginning with the 2010 returns filed in 2011 only those who have registered with the IRS will be allowed to prepare federal income tax returns for a fee.

Eventually all registered tax return preparers, except for CPAs, attorneys and Enrolled Agents, must pass an initial competency test and attend at least 15 hours of IRS-approved continuing professional education (CPE) in federal taxation each year. 3 of the required 15 credit hours must be in “tax updates” and 2 must be in “ethics”.

I have been a vocal supporter of the regulation of tax return preparers, although I am very much against exempting CPAs and attorneys from testing and required CPE in taxation. I am also disappointed that some kind of “grandfathering” for long-time proven tax professionals, like me, was not included in the regime. I also think that making preparers sit through 2 hours of ethics each year is a waste.

The online PTIN enrollment at the IRS website began at the end of September. As with any new system expected to accommodate perhaps over 1 million applicants there were many problems with the process. I was unable to complete my application online and resorted to filing a paper application, which was eventually accepted. I do believe that most of the problems that applicants encountered with the online process have since been fixed.

Regulations for the various components of the new regime continue to be issued. Just last week the IRS provided details of Notice 2011-06, which will officially be released in mid-January.

While individuals who assist in the preparation of all or substantially all of a tax return will be required to register, pay the fee, and obtain a PTIN, they will be exempt from the testing and CPE under the following conditions -

• the individual is supervised by an attorney, CPA, Enrolled Agent, Enrolled Retirement Plan Agent, or Enrolled Actuary authorized to practice before the IRS under Circular 230,

• the supervising attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary signs the tax returns or claims for refund prepared by the individual,

• the individual is employed at the law firm, CPA firm, or other recognized firm of the tax return preparer who signs the tax return or claim for refund, and

• the individual passes the requisite tax compliance check and suitability check (when available).

to be continued . . . .


1 comment:

Florida Tax Professionals said...

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