Tuesday, May 7, 2013
WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION
* Tony Nitti, one of the stable of FORBES.COM bloggers, has been running a series of posts on the new 3.8% investment income tax. In “Overview of the New 3.8% Investment Income Tax, Part 3: Gains from the Sale Of Property” he addresses the spam email nonsense that has been floating around the internet for a couple of years now -
“. . . if a taxpayers sells a principal residence and the gain is properly excludable under Section 121 because the taxpayer owned and used the home as their primary residence for two of the previous five years, then no gain from the sale of the home is included in ‘three little i’ income.”
What does he mean by the “three little i” income? Check out the post to find out.
* Sandra Block from KIPLINGER.COM explains “Why You Don't Need a Living Trust”.
I have always been wary of such creatures, and have warned clients against them. To say the least, as the subtitle of the item suggests, “They are costly and often overhyped”.
As one of the article’s headings points out - “Probate doesn't have to be a nightmare”.
* In her OUR TAXING TIMES post “RAL Fees in Court” Trish McIntire reports –
“The California State Supreme Court denied an appeal made by Liberty Tax Service on a 2009 ruling. Actually, they refused to hear the case after the state appeals court upheld the original ruling.”
A victory! I have always said Refund Anticipation Loans (RALs) are bad, and tax preparers should not be offering them. Unscrupulous fast food tax preparation chains like Henry and Richard and Liberty made a fortune on these usurious loans in the past, and have been taken to task often by state court.
* Joe Kristan gives us the word that the “IRS Publishes 2014 Health Savings Account (HSA) Limits” at the ROTH AND COMPANY TAX UPDATE BLOG -
“The IRS has issued the 2014 contribution limits for health savings accounts: $3,300 for single plans and $6,550 for family plans. The 2013 limits are $3,250 for single plans and $6,450 for family plans.”
* There is hope, based on recent quotes from House Republicans -
‘‘We’re not going to take the current code and see what comes out. We’re going to take a blank piece of paper and see what goes back in.’’ House Ways and Means Committee chairman Dave Camp.
‘‘The conference will unite around tax reform.’’ House Majority Whip Kevin McCarthy.
“There will be a premium here on simplicity. If we can craft a code that’s simpler and the rates are lower, it’s the kind of thing that can carry us a long way.” House Deputy Whip.
However, knowing that, after all, the members of Congress are self-absorbed idiots, my optimism is cautious.
* Wise words from Professor Jim Maule of MAULED AGAIN in a letter to the editor to TAX NOTES TODAY titled “IRS-Prepared Tax Returns: A Theory That Doesn't Work in Practice” -
“The idea of the IRS preparing individuals’ returns is a classic example of a theory that cannot survive in a practical world. Like most theories, it deserved an experiment. It had that chance, in California, and it failed, with only a tiny portion of the eligible population deciding to participate.
Making taxpayers’ lives easier is a matter of simplifying the tax law, not enabling the complexities by turning tax preparation over to the IRS.”
* Kay Bell brings us “Tax Carnival #116: May Tax Flowers 2013” at DON’T MESS WITH TAXES.
The first item in the Carnival is a post from Emily of EVOLVING PERSONAL FINANCE titled “Our Experiences Using Tax Software”. Kay tell us that Emily "likes to use tax software to check our returns, but we don't fully trust it. We also do our returns manually so we can understand them."
In the actual post Emily explains -
“I do think it’s important to understand your taxes on a theoretical level, even if you farm out the actual work to a CPA or tax software. There’s no excuse for not understanding how marginal tax brackets work or deductions vs. credits! I think you should have a general idea of what deductions and credits you are taking and why you can take them.”
Emily is certainly right not to fully trust tax preparation software, and is certainly correct that taxpayers should understand their taxes, regardless of who, or what, prepares the return.
BTW – I am represented in the Carnival with my post on the Home Office “Safe Harbor Deduction”.