Saturday, October 20, 2012


Lots to talk about today!

* The IRS has issued “Return Preparer Office Federal Tax Return Preparer Statistics” with up-to-date data current as of 10/01/2012.

It appears that there are still 325,203 “preparers with provisional PTINs who have not yet passed the RTRP test”.  I am not alone.

* Jason Dinesen concludes his series on the plight of the Enrolled Agent with “Would a Name Change Help Enrolled Agents? Part 3” at DINESEN TAX TIMES.

While I do believe that the title of “Enrolled Agent” should be changed to perhaps “Enrolled Tax Return Preparer” (ETRP) to tie in to and complement the new RTRP designation, Jason does make a good point (highlight is his) -  

But the name isn’t the problem. The problem is that no one has heard of us! Like I wrote in Part 2, 87% of the population has never heard of an enrolled agent.”

I do agree that the general taxpayer public is not aware of the special nature of the Enrolled Agent, and those that have heard the name are confused.  I have tried to “spread the word” on the EA designation here at TWTP. 

I have toyed with the idea of creating a RTRP organization, not to provide CPE as those that have already sprung up are concentrated on, but solely to promote the designation via public education.  Perhaps such an organization can be expanded to include EAs and RTRPs. 

It is important that the public be made aware that, while a specific CPA may be proficient in 1040 preparation, only those individuals with the initials RTRP and EA have proven competency by taking a test in tax preparation and are required to remain current in federal tax issues by maintaining annual continuing professional education. 

That is a fact.  I am not being “crabby”, Joe.

* TAXPRO TODAY gives us some “Tax Stats” -

In fiscal year 2001, the IRS closed about 538,000 mail audits of individual tax returns, and assessed about $1.4 billion in additional taxes. Ten years later, the IRS more than doubled the number of mail audits, with about 1.2 million correspondence examinations, and $8.7 billion in additional assessed taxes for fiscal year 2011. That represents a more-than-sixfold increase from 2001. With such a high return on investment, the IRS will likely continue to use mail audits to close the tax gap.”

They are talking about CP 2000 notices.  Unfortunately I think much of the monies collected from these notices are the result of taxpayers being intimidated by receiving correspondence from “Sam” and paying what they are asked for without questioning whether the notice is correct.

In my 40+ years in “the business” I have found that IRS notices are more often than not incorrect (and state notices even more so). 

Whenever you receive a notice from the IRS or a state tax authority check it out carefully.  If you paid a tax professional to prepare the return in question, send the notice to the tax pro ASAP.  If you self-prepared the return and you do not understand what is being questioned, contact a tax pro immediately.

Do not ever just automatically pay a balance due tax notice, and do not ever ignore a balance due tax notice!

* Kay Bell does a good job of covering the tax points discussed in the 2nd Presidential debate in depth in “Taxes Discussed, Sort of, in the Second Presidential Debate” at DON’T MESS WITH TAXES.

Kay tell us that, as expected (I did not watch the debate – I watched two movies about blind detectives on TCM), tax-wise “we didn't get much more at the Hofstra University town hall session than what's already been offered”.

I do want to comment on something BO said –

"But what I've also said is if we're serious about reducing the deficit, if this is genuinely a moral obligation to the next generation, then in addition to some tough spending cuts, we've also got to make sure that the wealthy do a little bit more.”

Why do we need "to make sure that the wealthy do a little bit more"?  If the top 5 percent of taxpayers pays 60 percent of the income tax the nation collects, as suggested in the debate, why should they pay more?  Is it fair to charge someone a fee for no other reason than the fact that they can afford to pay it?

Let me rephrase an example I have often used.  A person making over $250,000 per year and a person making much less both walk into a liquor store.  They each want to buy a can of Budweiser.  If it fair for the store to charge the richer of the two $3.50 for the can and the other person only $2.00 for the same can?  If the richer person wants a bottle of high-end champagne he would obviously pay more than $2.00 or $3.50.  But why should he pay $3.50 for a $2.00 can or beer?

And the richer person may voluntarily choose to pay for the can of beer for the “less-fortunate” person.  But it is not the role of government to force the richer person to buy the can of beer for the poorer one.

* And Kay provides us with another reminder about employer-sponsored Flexible Spending Accounts in “It's Workplace Benefits -- Including Spending Accounts -- Enrollment Time”.

* ACCOUNTING TODAY asks “Is This the Death of the Circ 230 Disclaimer?”.

The item begins by explaining that –

Clients have been confused by e-mails from their accountants to set a lunch meeting that include a warning, often highlighted in bold font and upper case letters, that the invitation could not and should not be considered tax advice and could not be relied upon to avoid penalties.”

So a client meets with his accountant to receive tax advice, which is not to be considered tax advice?  WTF?

Disclaimers like this are completely ridiculous.  Of course the accountant, or other tax professional, is providing tax advice.  That is what the client is paying for.  Saying that it is not tax advice is basically a lie and a waste of words.  Thankfully this nonsense will now end, or at least there will be less nonsense.

Many of the relatively new regulations regarding client “privacy” are similarly ridiculous.  I will elaborate if asked.

* Robert W Woods of FORBES.COM thinks “No Matter Who Wins the Election, Higher Taxes are Certain”.

He explains why -

For those who want to sell investment property at 15%, now might be a good time. There may never be another chance.”

I also think it might be a good thing to sell investment property in 2012 to lock in the 15% (or 0%) tax rate.  As I have explained in previous TWTP and TheStreet posts, you can sell an investment at a gain and buy it back the next day, so that it will remain in your portfolio.  There is no “wash sale” adjustment if you sell at a profit – only if you sell at a loss.

* Tax pros should real my THE TAX PROFESSIONAL post “A Milestone”.

* Russ Fox explains what could indeed be a real problem with the 2013 tax filing season in “Why the 2013 Tax Season May Give Me Lots More Gray Hair” at TAXABLE TALK.

The IRS won’t be able to update their computer systems until after the legislation passes in late January. A few years ago, there was a tax season where we couldn’t file most returns until mid-February because Congress waited until mid-December to pass extender legislation. Yes, it could be mid-March before we’re able to file many tax returns. Imagining a compressed one-month “normal” tax filing season is not pleasant for a tax professional.”

I have been gray for years.


A seasonal funny, again from the local OUR TOWN adzine –

Jean Claude Van Damme, Steven Seagal, and Arnold Schwarzenegger decide to go out trick-or-treating together for Halloween as historic musical composers.  They go to a costume store.

Jean Claude sees a costume he likes.  “I think I’ll go as Beethoven”, he announces.

Steven sees one that grabs his attention.  “I’ll be Mozart.”

Arnold was having a tough time finding a costume, but finally he discovered one that appealed to him, and says, “I’ll be Bach!”

Did you see it coming?


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