Saturday, December 31, 2011


Here it is – the last BUZZ of 2011!

+ If you have not already done so - check out the December issue of LOIS.

+ And check out my “9 Tax Breaks Set to Expire This Week-End slide show at MAINSTREET.COM.

+ Have you visited THE MISSOURI TAXGUY’s “Store” page yet.  There is an entire section of items “From Robert F”!

+ TAX PROF Paul Caron has an interesting video that tells us “Patriotic Millionaires Support Higher Taxes, But Won't Donate to Treasury”.

Clearly these fools are just looking for publicity and are not willing to put their money where their mouth is. 

+ Bill Bischoff teaches a brief course in “Tax Literacy 202”.

His post makes some good points –

On tax extenders:  If all these breaks are really such great ideas, Congress should make them permanent. That would mean taking their true long-term cost into account for federal budgeting purposes instead of continuing to conceal the true cost by extending them for a year or two at a time. If Congress is unwilling to embrace honest accounting for the extenders, they should eliminate them.”

He also explains why refundable credits and targeted tax breaks are bad tax policy.

For the basic tax course check out my “Taxes 101 for Politicians”.

+ STATELINE.ORG reports “Minimum Wage Set to Rise in Eight States” –

Workers in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington will see their salaries rise by anywhere from 28 to 37 cents an hour, according to the National Employment Law Project, which advocates for low-income employees and keeps track of minimum wages in all 50 states.”

+ Peter Reilly tries to catch-up at year-end by discussing “5 Neglected Tax Developments of 2011” at FORBES.COM.

When I say they were neglected, I mean neglected by me.”

+ Pete’s fellow FORBES.COM blogger Kelly Phillips Erb, aka THE TAX GIRL, is running a year-end contest, which she explains in “Congress Needs Some Advice in 2012”.

Clearly, {the idiots in Congress} need a little direction for 2012 so I thought I’d ask you, my readers, what you hope to see happen next year and we’ll make a contest out of it.”

What can you win?

So since Congress is so fond of pork… the prize is a small box of BBQ shipped directly to you.”

I told Kelly what I would like to see happen next year – every single idiot in Congress who runs for re-election in 2012 is voted out!

+ Over at OUR TAXING TIMES Trish McIntire talks about what to do “If Your Preparer Won't Do EITC".

In discussing the Earned Income Tax Credit she explains (highlight is mine) -

Unfortunately, it is a fraud magnet. According to TIGTA’s May 2011 report to the House Ways and Means committee (download), The IRS estimates between 23% and 28% of the EITC payments are improper. In 2009, this resulted in $11 to $13 billion in improper payments. As part of a program to reduce the bad EITC claims, the IRS has begun to put more pressure on the tax professional community. If a paid preparer doesn’t do adequate due diligence to make sure a client does qualify for EITC, they could face a $500 fine for each client they qualify but shouldn’t have.”

I do not accept new clients, but will “do” EITC if it applies to an existing client (I have less than a handful of EITC claims each year).  I can clearly understand why a tax pro would refuse to “do” an EITC claim if he/she questions whether a taxpayer qualifies – but if I were still accepting clients I would not refuse any EITC out of hand.

However I can understand why a preparer would not want to be involved with the additional agita and potential liability.  I have been a vocal opponent of having the EITC, and other refundable credits, in the Tax Code, and forcing tax preparers to add to their responsibilities the job of determining of a client qualifies for a federal welfare program.  We are tax preparers – not Social Workers!

+ Karen L Ryan EA exclaims that “We’re Number 1” – when it comes to tax cheats that is – in her post at YOUR TAX COACH.  (And Congress is Number Two - I couldn't resist)

A recent study by the Tax Justice Network, a British think-tank dedicated to transparency in international finance, shows the U.S. government lost $337 billion annually to tax evasion. We're followed by Brazil ($280 billion), Italy ($238 billion), Russia, Germany, France, Japan, China, U.K., and Spain. Overall, the study finds that worldwide tax evasion tops $3 trillion, or 5% of the world's economy.”  

I echo her bottom line -

The irony here is that there are so many legal ways to pay less tax that nobody needs to cheat. Proactive planning is the key to paying less tax without having to hide in the shadows.”   

A total of 331 inmates were serving prison terms when they got active or provisional tax preparer tax identification numbers from the IRS, according to an audit issued Thursday by the Treasury Inspector General for Tax Administration.”

We are also told –

Prisoner registration as tax preparers is a new twist in a long history of tax scams involving inmates.

For instance, USA TODAY reported in February that prisoners in three states — Florida, Georgia and California — led the nation's inmate population by using false or fraudulent tax returns to scam nearly $19 million in IRS refunds during 2009.

That total was part of $39.1 million in unmerited federal tax returns the IRS issued to jail and prison inmates nationwide, according to an IRS report to Congress that was included in a Treasury Inspector General for Tax Administration audit released in January.”

I can’t wait for Joe Kristan’s reaction!

+ Jim Wang gives the correct answer to the question Should I Take Money Out of My Retirement Account to Pay Off Credit Card Debt?” at the TURBO TAX BLOG.

Jim advises -

In many cases, taking money out of your retirement account has the potential to cost a great deal. Consider the viability of putting together a debt reduction plan before you withdraw money from your retirement account. If you do decide to take the money from your account, make sure you repay it as quickly as you can, and try to avoid penalties and taxes.”

Hey – just because I do not use flawed and expensive tax preparation software like Turbo Tax, or recommend the use of such software as an alternative to engaging the services of a competent tax professional, does not mean I don’t read their tax blog when they have something good to say.


Friday, December 30, 2011


Let me end 2011 with my annual tax year in review post.

2011 marked my 40th tax season in “the business”.  I have been preparing 1040s professionally since February of 1972.

And this summer I celebrated the 10th Anniversary of THE WANDERING TAX PRO blog.  My first blog posting was published on Sunday, July 22, 2001.

The year began with a surprise recognition – I was named as the National Association of Tax Professionals January 2011 “Member of the Month”.

Later in the year I was named the New Jersey chapter of NATP’s “2011 Chapter Member of the Year” - “in recognition of your years of dedication to the New Jersey Chapter of NATP and to your fellow tax practitioners”! 

As I stated in my annual April THAT WAS THE TAX SEASON THAT WAS post –

There was nothing special or significant about this tax season.

No new tax ‘gimmicks’ – just a repeat of last season’s refundable Making Work Pay credit; it continued to FU withholding, especially for those receiving pensions.”

And clients continued to receive one or more “corrected” Consolidated Year-End Tax Reporting Statements” from brokerage houses late in the season, which continued to cause delays.

This was the first year of the federal “e-file” mandate for tax professionals, but since IRS regulations equated “file” with “mail” I did not have to e-file the returns I prepared.  To cover my arse I had my clients sign a brief statement that I do not “file” their returns for them, I give them the finished return and they “file” the return themselves, and attached this to my file copy of the return. The IRS did not contact or penalize me for not e-filing.

I also avoided having to comply with a new New York State tax preparer e-file mandate because I do not use flawed and expensive tax return preparation software to prepare any of my returns, although I did have to make my annual $100 extortion payment to Albany, which I passed along to clients with NY returns.

And 2011 was the first year that only those individuals who registered with the IRS and received (or “refreshed”) a PTIN, as I did last fall, were permitted to prepare federal income tax returns for a fee under the new tax return preparer regulation regime – although I did not notice the IRS publicizing or emphasizing this fact very much.

The IRS pushed the beginning of the required annual 15 CPE in federal taxation for paid preparers to 2012, and also put off any decision on the need for registered preparers to be fingerprinted.  I did, however, take 32 hours of continuing professional education in federal taxation and 8 hours in NJ state taxation in 2011, sitting through at least 4 hours of ethics preaching. 

The “beta testing” of the required (except for EAs, CPAs, attorneys, and “supervised” employees thereof) initial competency test began in the late fall – but no preparers have yet to be awarded the RTRP designation (I do not think the IRS knows yet who has actually passed the test).  Many EAs, exempt from the test, have decided to sit for it anyway to be able to receive the RTRP designation.  I am waiting until the summer of 2013 to sit for the test, as I have until December 31, 2013 to pass.     

As CCH wrote in its year in review special report – “2011 had been predicted to be a quiet year in federal tax news – as it landed between major tax legislation in 2010 and expected tax reform in 2012”.

There were no major Tax Acts passed in 2011.  On April 14th the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011” (now that’s a mouthful) was (finally) signed into law.  The Act thankfully repealed excessive expanded Form 1099 reporting requirements that were included in earlier Acts.  This was further proof that the idiots in Congress do not read in full the bills they vote for.

On the next day the “Department of Defense and Full-Year Continuing Appropriations Act of 2011” became law, which repealed a provision of the so-called health-care reform bill that was to become effective in 2014. 

And, as has become a habit, the idiots in Congress once again waited until literally the last minute to pass an extension of a temporary tax break.  The 2% reduction in the employee’s share of Social Security tax withholding was extended for only two months (thru February of 2012).

But the fools did not address the multitude of other tax breaks that expired on December 31st – including the usual list of “extenders (i.e. the deductions for educator expenses, tuition and fees, state and local sales tax, and the AMT patch).  I expect that is what they will be extending, along with the “Bush” tax cuts, at the last minute next December.

Speaking of the idiots in Congress – what I considered the biggest tax story of 2010 (“the total irresponsibility of the idiots in Congress”) continued and exacerbated in 2011.  The current Congress has been called the most “vituperative and contentious” in recent history.  As Leonard Burman, a former Treasury Department official who teaches public affairs at Syracuse University in New York and frequently posts for the TAX VOX blog of the Tax Policy Center, observed about the idiots -

I’ve never seen such a high level of dysfunction in the 25 years or so that I’ve been paying attention to government.”

The American public has finally become fed up with their foolishness.  2011 polls by CBS and CBS/NY Times reported that only 9% of Americans approved of the actions of the current Congress, giving it a 83-84% disapproval rating.  A Rasmussen Reports national telephone survey found that just 9% of “Likely U.S. Voters” rate the job Congress is doing as good or excellent, while 63% view Congress’ job performance as poor.

The IRS, lawyers, Paris Hilton, the BP oil spill, and the idea of America turning Communist were all more popular than Congress, which was only slightly more popular than Fidel Castro. 

I spent a lot of time in 2011 posting about these idiots, and I am sick of writing about them.  They have certainly proven beyond any doubt that they are lazy, irresponsible, self-absorbed idiots that deserve nothing but contempt. 

There is not much more that can be said about their constant failures that have not already been voiced by me, my fellow tax bloggers, and other commentators and journalists.  I resolve to stop complaining about the idiots in 2012, other than to report on specific actions or legislation. 

Like the weather, everyone was talking about tax reform in 2011, but nobody did anything about it. 

As Kay Bell of DON’T MESS WITH TAXES said in her year-in-review post -

“Everyone agrees that our tax code has gotten out of control.

And everyone agrees that big changes need to be made.

But no one can agree on just how to do that.”

Much of the talk was a result of the Presidential election campaign, with the multitude of Republican wannabes presenting their tax proposals.

It began with Herman Cain’s “9-9-9” plan – a 9% personal income tax, a 9% national sales tax, and a 9% corporate tax.  It was said that this plan was based on the fact that the cost of a Godfather’s pizza was $9.99.

Several candidates proposed a simple flat tax system, although a couple suggested the ridiculous idea that taxpayers be given a choice between the current mucking fess and the flat tax.  The simpler systems started by doing away with all “tax expenditures”, adding back only deductions for contributions, mortgage interest, and taxes.  Other candidates merely proposed making the “Bush” tax cuts permanent.  Many wanted to eliminate the dreaded AMT, the so-called “death tax”, and the tax on capital gains and dividends.   

As I said in my recent review of the Republican candidates’ tax proposals –

So no candidate gets a perfect score from me.  No candidate’s tax reform proposal is acceptable in full as offered.” 

BO called for a “millionaires' tax”, which would create a new tax bracket for high-earners.  A group called the Patriotic Millionaires also lobbied for an increase in the tax rates for high-income Americans.  This call was based on Warren Buffett’s oft-quoted, but misleading, statement that he paid less income tax than his secretary. 

My response to this was - “if certain millionaires, probably guilty about the source of their wealth, want to pay more to the federal, or state, government they can always make a contribution”.

So that was the year 2011 in taxes.  Did I miss anything?

As 2012 is an election year it is expected that nothing of any consequence will be accomplished in the tax arena (or any other arena).  Next February the idiots in Congress will probably extend the payroll tax cut for the rest of the year, and, as I suggested above, next December they will pass the usual year-end extenders bill and also continue the “Bush” tax cuts for another year or two.


Thursday, December 29, 2011


I have been enjoying watching “Judge John Deed” via my Netflix subscription.  It is a British legal television drama about a High Court judge produced by the BBC and starring Martin Shaw as the judge and Jenny Seagrove as a barrister that ran from January 2001 to January 2007.

The most recent episode I watched, titled “Popular Appeal”, involved something I predicted would happen years ago - an angry contestant in a British “Reality TV” show called “The Dungeon” kills another competitor on camera, and the show's producers face charges of manslaughter in Deed's court. The prosecution contends that they acted recklessly and engineered conflict in order to get higher ratings.

While some of the legal aspects of the series may be questionable, it is a great show, good tv drama.  This was a good episode and certainly hit the nail on the head when it comes to the steaming pile of excrement known as reality tv (which began in England and Europe before infecting American airwaves).

A psychiatrist working for the station that airs the show testifies that the producers purposely look for psychologically flawed “contestants” who can be easily manipulated and angered (no news there).   

Judge Deed, speaking to the producer of a reality TV show after the jury has returned its verdict, provides one of the best descriptions ever of so-called “reality tv”, and the making of its pathetic “stars” into “celebrities” (the highlight is mine) –

Celebrity: the pursuit of the talentless by the mindless. It's a common disease of the twenty-first century. It pollutes our society, and diminishes all who seek it and all who worship it, and you must bear part of the responsibility for foisting this empty nonsense onto a gullible public.”

What ever happened to broadcast stations’ “Standards and Practices”?  These station functions tried to censure political protest on THE SMOTHERS BROTHERS SHOW and were shocked with the Super Bowl halftime “wardrobe malfunction” of a few years ago – yet they allow this much more potentially dangerous garbage to air unchecked!


Wednesday, December 28, 2011


+ If you have not already done so - check out the December issue of LOIS.

+ It’s that time of year again - “Nominees Due for Tax Offender of the Year” over at Russ Fox’s TAXABLE TALK.  

With just one week left in 2011, it’s time again for anyone to submit a nominee for the Tax Offender of the Year. To be considered for the Tax Offender of the Year award, the individual must do more than cheat on his or her taxes. It has to be special; it really needs to be a Bozo-like action or actions.”

Nominations are due by tomorrow (Thursday) night.

I do believe that they have come in a close 2nd in the past – but I think this year the idiots in Congress have certainly earned the title.

+ Over at FORBES.COM Kelly Phillips Erb, the TAX GIRL, tells us “What You Can Buy With Your Payroll Tax Cut From Congress”. 

Since, as she explained, “The payroll tax cut was extended for two months, saving the average taxpayer a grand total of $166”, she asked her fellow twits what they would do with an extra $166.

One respondant pointed out that, “It could cost the small business owner more than $166 to comply with modified payroll reporting requirements for two months”, a statement with which Kelly agreed.

+ And Kelly’s fellow FORBES.COM blogger Peter J Reilly gives us his list of “8 Unfair 2011 Tax Decisions”.

+ Prof Jim Maule gets his 2+ cents in on the issue of the 2-month payroll reduction extention in “Punting On Taxes”.

His bottom line correctly observes -

So long as the Congress continues to value electoral politics and re-election as more important concerns than fulfilling its fiduciary duties to the nation, the downward spiral will continue.”

+ Do you want to know the “25 Richest Members of Congress”?

+ Want to know what’s new for NY State personal income tax for 2011?  Click here.


A year-end thanks to all the fellow tax bloggers, commentators, and journalists whose posts, editorials, columns, and articles have appeared in the BUZZ for keeping me, and you, up-to-date on the tax world.

And a personal special thanks to Russ Fox and Bruce McFarland for your help with my Schedule A Guide.

To all my readers – may 2012 be less taxing!

FYI - I am not done with 2011 yet – look for my TAX YEAR IN REVIEW on Friday!


Tuesday, December 27, 2011


It has become a regular habit for the idiots in Congress to wait until literally the very last minute each year, after the IRS has gone to press with forms and instructions, to pass a temporary extension of a temporary tax break or benefit.

When they do this the IRS must incur additional costs to reprint forms, tables, and instructions to reflect the last minute extensions.  And I expect other federal agencies also incur additional expenses.  This adds to the annual, and accumulated, budget deficit.

I propose that the total amount of these additional costs, a direct result of the idiots in Congress not doing their job properly, be added up and subtracted from the compensation paid to these idiots.

Maybe if the fools take a personal hit in the pocketbook they will decide to act more responsibly!       


Since it is a proven fact that most of the idiots in Congress do not read in full the legislation on which they vote, we clearly need an independent taxpayers’ “Auditor” office (different from the IRS “Taxpayer Advocate” office) to review each and every piece of legislation in the same way as Tom Coburn and his staff evaluated "every department and virtually every major government program" in preparing his “Back In Black” budget report.

Each proposed law should be looked at to discover components and provisions that are - 

“• Not Needed — Serves no vital or essential federal role or has outlived its intended purpose.

• Does Not Meet Any Need — Little or no evidence to demonstrate results or effectiveness achieving stated goals.

• Wasteful — Significant amounts of silly or unjustifiable expenditures.

• Duplicative — Duplicates or overlaps existing government agencies or initiatives.

• Not a Priority at this Time — Mission cannot be justified within today’s budgetary constraints.

• Not Cost Efficient — Benefits do not exceed the costs.

• Parochial — Serves a local or special interest with no overriding federal role and exceeds the limited powers granted to Congress enumerated in Article 1, Section 8 of the U.S. Constitution.”

This office should also review each government program annually for the above criteria, plus the following one –

Mismanaged — Significant amounts of erroneous, fraudulent and improper expenditures, excessive overhead and administrative costs, or otherwise poorly administered or implemented.”

The findings, both for individual legislation and year-end program evaluations, should be openly published, as are the audits of TIGTA (Treasury Inspector General for Tax Administration).

The cost of such an office would be more than paid for by the savings it will generate.


Monday, December 26, 2011


I could have titled this post “ON A QUEER DAY” – but that would be too easy.

Early last week I say the new revised production of ON A CLEAR DAY YOU CAN SEE FOREVER with Harry Connick Jr at the St James Theatre in NYC.  As I previously mentioned – the new book turns Daisy Gamble into David Gamble, in a relationship with a less quirky Warren, although Melinda Wells remains a woman (but she is now a 1940’s jazz singer).

As also previously mentioned – OACD was my high school senior play, and I was in the chorus and had three minor roles, including a solo dance number.

Hey, Neil Patrick Harris, I thought you told us “Broadway is not just for gays anymore” at this year’s TONY Awards.

While giving Daisy a penis (which is awkward and totally unnecessary), the new book takes away the character’s ESP.  This does not cause too many gaps, but it does make the doctor calling for Daisy/David to “Come Back to Me” from his office a bit silly.  The opening “Hey Buds Below” number is now set in a florist shop as David “talks” to the flowers he is arranging, instead of as a demonstration of her “power” in the doctor’s office.

As I expected, the two songs from the Victorian England past life are gone – including the very witty “Don’t Tamper With My Sister”, the lyrics of which include the politician’s credo - “A sin is not a sin until a sin is seen” (“so let us misdemean where lights are low”).  While I missed this song, I can live with the change in past life.

New songs, from Lerner and Lane’s movie ROYAL WEDDING and the Barbra Streisand movie adaptation of the musical, are added.  Those added to facilitate the new past life fit in appropriately, as does a duet by David and his female roommate.  But the “songlets” from the movie that are sung by Harry Connick Jr, like the sex change of the Daisy character, seem awkward and unnecessary.

The book is not updated to present day, but an extra decade is added on to accommodate the past life timeline.

While I will agree that there was a problem with the ending – in the original book Daisy leaves her fiancé Warren and she and the doctor “unite to explore their extraordinary future” – I do not recall there being much else wrong with the story or its development.  The new book does good by making the doctor a widow who has not gotten over the untimely death of his wife, and fixes the ending (although it still needs a bit more tweak).  And, as I said above, I can accept the change in past life, with the doctor interacting more with the “previous” Daisy/David.   

The gratuitous gaiety, while totally unnecessary, is not, thankfully, offensive.  The gay couple plays it, pardon the pun, straight.  Neither one is overly “flamboyant”.  And the Warren character works better as a “normal” beau, especially for the ending.  The sex change does add a strange and comic undertone to the song “What Did I Have I Don’t Have Now”, although it is still powerful. 

I do not like the removal of the sub-plot about a Greek shipping magnate funding the doctor’s research so he can find out who his next life will be and leave his fortune to him, singing “When I’m Being Born Again”.  The song remains, but now is song by the doctor’s students. 

So take away the penis, the plot device of using the story as a case study presentation at a psychiatry conference, the awkward songlets from the movie, return the ESP and the Greek, and keep the change in past life, the revised Warren, the new female colleague pining for the doctor, and the rewritten ending and you will have a great production.   

The bottom line – I liked the current revival better than I thought I would.  It certainly was not as bad as the reviews I read before seeing the show would lead you to believe.  The actors are good and, of course, the score is great (which I already knew).  HCJ was better in THE PAJAMA GAME, but is ok here.   

Let us hope changing the sex of musical comedy characters does not become a trend.  The last thing I would want to see is Miss Adelaide become Mr. Adelaide, and the Hot Box Dancers become an All Male Revue!


The IRS has pointed out a special new tax of the recently-passed Act that temporarily extended the payroll tax reduction.

Under the terms negotiated by Congress, the law also includes a new ‘recapture’ provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).   

This additional recapture tax is an add-on to income tax liability that the employee would otherwise pay for 2012 and is not subject to reduction by credits or deductions. The recapture tax would be payable in 2013 when the employee files his or her income tax return for the 2012 tax year.”  

Of course if the idiots in Congress decide next February to extend the payroll tax reduction through the end of 2012 this “recapture tax” will disappear.


The TAX FOUNDATION recently issued a “Presidential Candidate Tax Plan Report Card” which rated the tax reform proposals of the various Republican candidates.  Jon Huntsman came out on top with a B+.

Here, from his official website, is Huntsman’s plan for reforming the 1040 - 

Simplify the Personal Income Tax Code and Lower Rates

Gov. Huntsman supports a version of the plan crafted by the Fiscal Commission, headed by Erskine Bowles and Alan Simpson, commonly known as the ‘zero plan’. Rather than nibble around the edges of the existing tax code, he will introduce a revenue-neutral plan that eliminates all deductions and credits in favor of three drastically lower rates of 8%, 14% and 23%. Eliminating deductions and credits in favor of lower marginal rates will yield a simpler and more efficient tax code, decreasing the burden on taxpayers.

Eliminate the Alternative Minimum Tax

Under the new simplified plan, Governor Huntsman will eliminate the Alternative Minimum Tax, which is not indexed for inflation and is penalizing an increasing number of families and small businesses. This tax is especially burdensome on the majority of small business owners who file as individuals.

Eliminate the Taxes on Capital Gains and Dividends In Order to Eliminate the Double Taxation on Investment

Eliminating taxes on capital gains and dividends would lower the cost of capital and encourage investment in the American economy to create jobs. Additionally, these taxes amount to a double-taxation on most individuals who choose to invest since they first had to earn that money and pay income tax on it. Taxing these same dollars again when capital gains are realized serves to deter productive and much-needed investment in our economy.”

Huntsman wants not so much a “flat tax” as “flat income”.  There would be no “tax expenditures” other than, I expect, some kind of Standard Deduction, but mutiple rates (I prefer one).  And, to his credit, part of this includes the death of the dreaded Alternative Minimum Tax.  He wants to eliminate the double taxation of corporate dividends by eliminating the individual tax on dividends.

How do I evaluate the various reform plans of the Republicans?

First of all – Cain’s 9-9-9 Plan is out of the picture.  Cain has left the race, and no other candidate has supported his plan – so it is basically history at this point.

Several of the candidates call for the permanent extension of the “Bush” tax cuts.  This is not tax reform – it is simply a continuation of the status quo.  Not acceptible.

A couple candidates call for a “choice” between the current mucking fess and a simple flat tax system.  This is ridiculous.  While their simpler flat systems (not much difference between the two) are good ideas, the concept of choosing makes absolutely no sense, and just creates more work for tax preparers and higher costs for taxpayers.  I call for a simpler flat tax system with minimal “tax expenditures”, no tax credits, and one tax rate for all.

Many want to eliminate the dreaded AMT, the so-called “death tax”, and the tax on capital gains and dividends.  There is no doubt that the dreaded AMT must be destroyed.  And doing away with the federal estate tax is not a bad idea, as long as the step-up in basis for inherited property is maintained.  But doing away altogether with federal income tax on capital gains and dividends would certainly give the foolish Occupy Wall Street-ers something legitimate to protest.  Warren Buffett would truly pay more tax than his secretary – he would pay no tax!

I wholeheartedly support doing away with the double-taxation of dividends – but at the corporate level and not the individual level.  Corporations should be allowed to claim a “dividends paid” deduction.  This would also, in effect, reduce the corporate tax, which most candidates support.

I do believe that the place to start is with the Bowles-Simpson “zero plan”, I do support keeping some basic tax expenditures – such as for charitable contributions, mortgage interest and real estate taxes (on the primary principle residence only), and state and local income taxes.  As I have explained before, allowing a deduction for basic mortgage interest and real estate and state income taxes helps to “geographically equalize” the tax system (click here). 

I have not discussed the candidates’ plans for corporate tax reform.  I do support a lower corporate tax rate – but also call for doing away with all tax preferences and loopholes for corporations (as well as doing away with depreciation on real property for all taxpayers – corporate and individual).  And I do agree with the Tax Foundation that the top rate for corporations should not be more than that of individuals so as not to erode the corporate tax base and distort business decision making.

So no candidate gets a perfect score from me.  No candidate’s tax reform proposal is acceptable in full as offered.  But it looks like Huntsman gets the highest grade (although perhaps not as high) from me as well.


Saturday, December 24, 2011





+ If you have not already done so - check out the December issue of LOIS.

+ Peter J Reilly starts off the year-in-review posts with “Of Thongs and Sheet Music - The Lamest Taxpayer Arguments of 2011”.

I will publish mine tax year in review piece in early January.

+ Trish McIntire talks about “the expectations we bring to choosing a tax pro” in “Expectations” over at OUR TAXING TIMES.

+ Richard Rubin and Steven Sloan remind us that a “Payroll Tax Tiff Times 25 Awaits Congress in ‘Utter Dysfunction’” at BLOOMBERG.COM.

Unless Congress acts by the end of 2012, income tax cuts will expire, automatic reductions in defense and domestic spending will start and the alternative minimum tax will ensnare millions more taxpayers. The same Congress that can’t find a way to extend the widely supported payroll tax cut beyond Dec. 31 will be seeking to bridge long-held ideological differences.”

Nothing will be done in 2012.  I expect that next December the idiots in Congress will extend the “Bush” tax cuts and the extenders for another two years.

The article quotes Leonard Burman, a former Treasury Department official who teaches public affairs at Syracuse University in New York, who agrees with most of us who follow the idiots –

I’ve never seen such a high level of dysfunction in the 25 years or so that I’ve been paying attention to government.”

+ ABC NEWS tells us that “Americans Frustrated by Congressional Stalemates”.

Around the country, people of different backgrounds, incomes and political leanings say they're angry and downright disgusted by the posturing in Washington after the House rejected a two-month extension of the payroll tax cut passed by the Senate, then both chambers adjourned for the holidays.”

The item quotes Greg Kirksey, a pastor in Little Rock, Arkansas –

But I'm afraid because it's a political year ... I'm not thinking anybody's really got the guts to make the hard decisions. They just keep putting a Band-Aid on, putting a Band-Aid on, kicking the can down the road a little farther."

+ Joe Kristan provides a “Year-End Tax Tip for Iowans: Fund Your College Savings Iowa Plan” at the ROTH AND COMPANY TAX UPDATE BLOG.

Iowa's state-sponsored Section 529 plan, College Savings Iowa, adds another benefit for Iowa taxpayers: a deduction on your state tax return. Iowans can deduct up to $2,865 per donor, per donee for 2011 contributions to CSI. For a couple with two children, that adds up to a maximum deduction of $11,460 for 2011.”

NJ does not offer a similar state tax deduction, but several states do.

So you can get in trouble for both under-reporting and over-reporting income!

+ MISSOURI TAX GUY Bruce McFarland explains “What Should Non-Filing Taxpayers Do?


I wish you all a “successful” Christmas.

Except for the idiots in Congress – they all deserve a large lump of coal in their stockings!


Friday, December 23, 2011


The idiots in Congress have finally acted on extending the payroll tax reduction so they would not have to sacrifice any of their (certainly undeserved) holiday leave.  There were back-to-back voice vote approvals of the measure by the Senate and House this morning.  President Barack Obama is expected to sign the new bill today before he heads to Hawaii to join his family for what's left of the holidays.

I can’t describe this action any better than my fellow tax blogger TAX GIRL Kelly Phillips Erb - “When Dumb Meets Stupid: Payroll Tax Cut ‘Compromise’”.

So months and months of debate on the payroll tax cut has resulted in this: a two month extension.”

“But it’s paid for!” is the excuse of the idiots in Congress.  Kelly correctly points out –

You know what’s not paid for? The agita that employers, tax pros and the IRS will face trying to sort out a bifurcated tax year.”

While I selfishly liked having to pay less Social Security tax on my wages, I tend to agree with Kelly when she described the measure –

It was clearly a vote-getting scheme to replace the confusing Making Work Pay Credit.”

And I agree with Kelly’s when she suggests that preparing the 1st Quarter 2012 Form 941 will result in unnecessary agita for both accountants and the IRS –

Those forms 941 will be a joy, huh?

It is relatively easy for employers to extend the payroll tax reduction for a 2 month period.  They can identify what wages were paid during the first 2 months of the year.  But what of the self-employed taxpayer filing a Schedule C?  Does he now have to prepare 2 Schedule Cs – one for January and February and one for the rest of the year?  Of will the reduction just be pro-rated on 1/6th of net earnings from self-employment?

I suppose that Congress will vote during the last week of February 2012 to extend the cut for another 2 months.

This action proves once again that the idiots in Congress cannot accomplish anything – even if both parties support an item (such as the extension of the payroll tax reduction in this case).  It also shows the idiocy of “temporary” tax cuts.

What fools these Congresspersons be!


The 2011 New Jersey state income tax returns are now available to download at the NJ Division of Taxation website.  Click here.

There appears that there are no changes to the Form NJ-1040 for 2011 – nor to the Homestead Benefit and Payroll Tax Reimbursement programs.

The filing deadline for 2011 state returns is April 17, 2012, set to coincide with the federal deadline.

To determine the correct amount of property taxes paid on their New Jersey principal residence homeowners must know whether they received a homestead benefit during 2011, the amount of the benefit, and whether the benefit was paid as a credit on their 2011 property tax bill or in the form of a check.

• If you did not receive a homestead benefit during 2011, use the amount of property taxes paid to your municipality on your principal residence for 2011.

• If you received a homestead benefit as a credit on your property tax bill during 2011, use the amount of property taxes paid to your municipality on your principal residence for 2011 plus the amount of the adjustment youreceived on your property tax bill for May 2011 for the homestead benefit.

• If you received a homestead benefit in the form of a check during 2011, use the amount of property taxes paid to your municipality on your principal residence for 2011.

• If you do not know whether you received a homestead benefit during 2011, the amount of the benefit, or whether the benefit was paid as a credit or in the form of a check, you can “Check the Status (Amount) of Your Homestead Benefit” at the Division’s website.

Taxpayers who converted an existing IRA to a rollover Roth IRA during tax year 2010 and made a Federal election to report the income in equal installments in 2011 and 2012, must report one-half of the amount that is taxable for New Jersey purposes on their income tax return for 2011.


This post seems to be a bit “déjà vu all over again”.

Here, taken from his, “21st Century Contract with America”, are Newt Gingrich’a tax proposals (all highlights are mine), which seem to be, for the most part, a “tweaking” of the proposals of a fellow Republican candidate (click here) -  

My Jobs and Prosperity plan will then make four major tax cuts:

Reduce the Corporate Tax to 12.5%.  Reducing the corporate income tax, currently the second highest in the developed world, will make America the number one destination in the world for foreign investment and the millions of jobs that will accompany this designation. Additionally, we must end the practice of double-taxation for American firms that make profits overseas. Under a new territorial tax system, American businesses will only pay income taxes on profits earned within the United States, and American firms will be able to repatriate over $1 trillion in profits currently trapped overseas. 

Abolish the Capital Gains Tax.  Lowering the cost of investment means hundreds of thousands of more jobs will be created. It happens every time we lower the capital gains tax. At a zero percent rate, hundreds of billions of dollars in new investments will pour into the United States to create new firms and build new factories.

Abolish the Death Tax.  This law is economically misguided and morally indefensible, and it is time for the government to stop destroying family wealth. Abolishing the death tax ensures family-owned businesses can focus on creating jobs and growing rather than on dealing with tax law.

100% Expensing. We want American workers to have the most modern and most productive equipment in the world, and we can encourage this development by allowing companies to write off all their new equipment in one year.

My legislation will also include an optional flat tax of 15% or less.  All tax filers would be given the option to pay their income taxes subject to current income tax provisions or to pay under a lower single rate of taxation with limited deductions.  A revenue neutral flat tax reform would save hundreds of billions of dollars in compliance costs each year and would eliminate the need for taxes on savings, dividends, and capital gains.

This optional flat tax system will create a new personal deduction of $12,000 for every American. This deduction is well above the current poverty level, ensuring that this new system does not unfairly target the poor. The current $1,000 tax credit for each child aged sixteen or younger would also apply, as would the current earned income tax credit (EITC).

An optional flat tax reform will be simple: tax returns can be done on one sheet of paper. Subtract from income a standard deduction and deductions for charity and home ownership, multiply the result by the fixed single rate of taxation of at most 15%, and the process is over. 

Gone will be the stressful hours spent figuring out whether your military service or marital status will adversely affect your return. No more headaches trying to determine where estimated tax payments go. Tax preparation fees could be money spent on something more rewarding.

Such an optional flat tax system would create a new standard deduction, which would be above the established poverty level, meaning an optional flat tax would not unfairly target the poor.

An optional flat tax would eliminate the Alternative Minimum Tax. And if a person had twice as much income as another, he or she would be taxed twice as much. Furthermore, a single rate tax structure would eliminate taxes on savings, capital gains, and dividends. Saving would increase and businesses would expand to create new jobs.

This concept of an optional flat tax would give American taxpayers an opportunity to choose simplicity versus complexity and a single rate over a lot of deductions.

Because the flat tax is optional, it does not raise taxes on a single person or unfairly impact seniors, lower income workers, or the poor.”

Again with the “optional” flat tax!  What is the purpose of keeping the current mucking fess as an option?  All this does is create more work for tax pros and higher fees for our clients – as we will have to prepare two separate tax returns for each and every client (three returns for some) to see which is better.  Just replace the current system with the flat tax option!

I am certainly all for eliminating the dreaded AMT, but I do not support eliminating taxes on savings, capital gains and dividends.  If we do this Warren Buffett’s secretary would definitely pay more tax – as Warren would pay nothing!  Investors must not escape taxation altogether.  I do, however, support a lower tax rate for long-term capital gains, or rather a 50% capital gain deduction, and eliminating double taxation of dividends by providing corporations with a “dividends paid deduction”.

I am also not opposed to eliminating the “death tax”, as long as we maintain the stepped-up basis of inherited property.

But I do not support a permanent 100% “Section 179” expensing for all business equipment.

Does Newt want a $12,000 personal exemption AND a standard deduction?  Is he proposing a $12,000 per taxpayer and dependent personal exemption – or $12,000 each for a taxpayer and a spouse only (and not for dependents)?  The $12,000 personal exemption (if per taxpayer and dependent) would be enough.  And if there were a $12,000 personal exemption why the need to also have Child Tax and Earned Income credits?  No credits (except possibly the Foreign Tax Credit) – especially refundable ones – is better.  Or do the credits replace the per dependent exemption?

I do strongly support the concept of doing away with the different filing statuses, as Newt’s plan seems to suggest - i.e. no more Head of Household, Married Filing Joint or Separate, or Qualified Widow(er).  There should be neither a marriage penalty nor a marriage benefit in the Tax Code.  And the $12,000 per dependent exemption, if that is what he proposes, eliminates the need for a Head of Household status.  

And I do support limiting “tax expenditures” to “deductions for charity and home ownership” (here I assume “home ownership” includes both real estate taxes and mortgage interest).

While I certainly do not want Newt Gingrich, or Governor Perry, in the White House – I do think some of their tax proposals deserve serious consideration.