Friday, May 31, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’


* Fellow tax blogger Russ Fox EA, of TAXABLE TALK, explains “Why I’m an Amicus Curiae”.

Russ joined with Joe Kristan CPA and Jason Dinesen EA and the Tax Foundation to submit an Amicus Curiae brief in support of the court’s decision in the Loving case.  I also offered my help to Dan Alban of the Institute for Justice, but I was too late.  By then Dan was overflowing with tax pro support.

I wholeheartedly support the Loving decision, but not necessarily for all of the same reasons as my colleagues.  The main reason - I agree that the Service does not have the authority to force its RTRP program on all tax preparers.

The recent scandal has proven that the IRS can’t even properly regulate its own employees, let alone try to properly regulate tax preparers!

* Speaking of the Service, “IRS Appoints Executive to Restore Integrity after Controversy”.  So says ACCOUNTING TODAY.

The Internal Revenue Service has appointed David Fisher, chief financial officer of the Government Accountability Office, as a senior executive to help the tax agency recover from the controversy over its scrutiny of small-government groups.”

* The TAX FOUNDATION gives us a map of the “Percentage of Tax Returns Claiming Charitable Gifts Deduction” for tax year 2011.

I was surprised to see that New Jersey was #2 – supposedly the 2nd most charitable state after Maryland.  West Virginia was #50.

Of course this map does not truly indicate the states with the most charitable residents – just the states whose residents claim the most charitable deductions.  It is skewed by the number of residents who itemize instead of claiming the Standard Deduction – which is based on high deductible items like taxes and mortgage interest – and the fact that, as a 40+ year veteran tax preparer, I do believe that the charitable deduction is among the most often overstated on returns.

* At ACCOUNTING WEB Mark Lee tells us “Social Media: Ten Things Accountants Should Never Do”.

I admit that I do use Twitter to promote my blog and products (but not my tax practice – since I do not want nor accept new 1040 clients).  However its use to me is more as a source of tax information than as a promotional tool.  I will never be on Spacebook or My Face.  If I want to publicize my firm online I will do it via a blog or website.  And if I want to share experiences or pictures with friends and family I will send them an email.

My practice, and that of my mentor before me, actually grew successful as a result of what used to be “social media” – word of mouth.  One client telling a friend or co-worker of our good work.  Neither of us ever took out a print, or any other kind, of advertisement anywhere (unless it was an ad journal for a fund-raising event – really a contribution).  We didn’t need to.  We were experienced, competent, and ethical tax preparers, who worked hard for our clients.  And our reputation spread via word of mouth. 

* I have a friend from college who is a stockbroker, but I agree with Roger Wohlner, THE CHICAGO FINANCIAL PLANNER, that “Your Stockbroker is Not Your Friend”.

Let’s face it - your stockbroker is just a salesman.   

I am not saying all stockbrokers are not honest or ethical.  I was lucky to find a stockbroker for first my parents and then myself who did us good, and whom I trusted.  And I have no doubt that my friend who is a stockbroker is honest and ethical. 

I am just saying – whenever you are given advice, financial or otherwise, consider the source and its motivation.

* Jason Dinesen of DINESEN TAX TIMES offers a holiday re-run with “Dinesen Tax Greatest Hits: When a Temporary Absence is Not a Temporary Absence”. 

As Jason explains – “This story is about a Tax Court ruling over dependency exemptions relating to separated couples.”

* Kay Bell reports on another “rogue” IRS employee in “IRS Employee Charged with Going on a Years-Long Buying Spree with Uncle Sam's Credit Card”.

The IRS employee, a secretary, “racked up a total bill of $8,515” in personal expenses over a 46-month period.

Did I already say “the IRS can’t even properly regulate its own employees, let alone try to properly regulate tax preparers”?

* Oops, they did it again!  Phishing Again”, that is, according to Trish McIntire at OUR TAXING TIMES.

I, and my fellow tax bloggers, cannot say this often enough –

The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.”


Tax expenditures are funny. They're not taxes, exactly, because they save us money. They're not spending, exactly, because the dollars are never actually spent. They're somewhere in between. So think of it as tax spending.”

The problem is they are not spending, but they are spending.  Having these social welfare programs washed through the Tax Code takes away the accountability and skews the budget by not properly reporting the true cost of welfare, education benefits, etc.

* The ACCOUNTANTS WORLD daily headline service provided the following information, taken from a June 2013 JOURNAL OF ACCOUNTANCY article -

IRS Extends Suspension of Examinations of “Repair Reg.” Issues
(JofA) - For examinations of tax years beginning before Jan. 1, 2012, examiners are instructed to discontinue current exam activity and not begin any new activity with regard to: Whether costs incurred to maintain, replace, or improve tangible property must be capitalized under Sec. 263(a).”

THE FINAL WORD –

The hosts of TODAY went through an “Extreme Mudder” obstacle course on the show yesterday morning.  The concept emphasizes teamwork over individual achievement, which is good. 

But, of course, considering the “reality tv” over-the-top mentality of today’s unimaginative idiots, the obstacle course was not just difficult and challenging, like the ones used by the various Armed Forces.  It was excessively dangerous on purpose – with participants plunging into below freezing water (not just cold) and crawling on hands and knees through the mud under electrified barbed wire (after plunging into the water).

These “reality tv” trappings are certainly unnecessary and potentially very life threatening to participants.  They certainly make a joke out of what may actually have started as a legitimate concept.

TTFN

Thursday, May 30, 2013

DON'T BLAME APPLE!


I will admit that I have not been following the APPLE tax story – because I have no interest in corporate taxes.    

If APPLE did indeed avoid taxes on billions of dollars using totally legal strategies, techniques, deductions, or credits, written into the Tax Code by the idiots, past and present, in Congress, then they did nothing wrong and have nothing to answer for.

There is no legal, ethical, or even moral obligation to pay one penny more in taxes than is allowed under the Tax Code.  And it is not legally, ethically, or even morally wrong to use whatever legal means available to reduce one’s tax bill, even to 0.

Taxes are a cost of doing business.  Directors, officers, and executives of publicly-held corporations have a fiduciary responsibility to their shareholders to reduce costs, and increase profits, by any legal and ethical means available (within the context of long-term considerations).

And just a reminder - if by not paying federal income taxes APPLE, a publicly traded company, was able to increase the dividends paid to its shareholders, these dividends were taxed on the individual tax returns of the shareholders (unless they were in the 15% or 10% bracket).  So the income did not totally escape taxes.  Remember the double-taxation of corporate income.

There are countless court decisions upholding the correctness of business entities as well as individual taxpayers taking advantage of legal so-called “loopholes” to avoid taxes. 

Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.”  Judge Learned Hand in Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).

And (highlight is mine) -

Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”  The learned Learned Hand again in Commissioner v. Newman, 159 F2d 848 (1947).

It is fair that APPLE did not pay taxes on its income.  No.  But the Tax Code is certainly not fair.  Is it fair that almost half of Americans either pay absolutely no federal income tax or actually make a profit by filing a tax return?  Of course not.  Should the Tax Code be fair?  I would say yes.

The fault lies not with APPLE or the members of the 47% or the “wealthy”.  The fault lies with the idiots in Congress who write the tax law. 

Are the various so-called “loopholes” used by APPLE, other corporations, and both the 47% and the “wealthy” to reduce or totally avoid taxes “fair”, “correct” or “appropriate”?  In most cases a definite no.  And in most of the cases where the “ends” may be considered correct and appropriate, the “means” – a tax deduction or credit – is not.

Loopholes, including probably some used by APPLE, are, more often than not, written into the Tax Code by the idiots in Congress as “payment” to special interest lobbyists who have filled either the pockets or re-election campaign coffers of Congresspersons.

So APPLE, the 47%, and the “wealthy” are doing nothing wrong.  They are acting correctly and properly.  Our ire should be directed at the idiots in Congress, who we (well not me) continue to re-elect year after year.

TTFN

Wednesday, May 29, 2013

THE IMPOSSIBLE DREAM


I have no reason to believe that Max and Dave (Baucus and Camp of www.taxreform.gov) are not truly sincere in their attempt to bring about real tax reform.  But, while I applaud and wholeheartedly support their efforts, I, unfortunately, do not believe that we will get anything near the true tax reform that is needed anytime soon.

Why?

(1)  The Tax Reform Act of 1986 was championed by then President Ronald Reagan.  President Obama clearly does not want serious, substantive tax reform.  The tax proposals put forward during his tenure have been basically to increase the tax rate on the “wealthy”, either through the front door or the back door (i.e. limiting the tax benefit of itemized deductions to 28%), including such truly idiotic ideas like limiting the amount a person could save for retirement, and complicating the Tax Code even more by continuing to distribute social welfare program benefits through the Form 1040.

(2)  Passing such an overhaul of the Tax Code would require cooperation by both Parties.  Perhaps more than ever in our history the members of Congress are self-absorbed idiots who cannot think independently and are only capable of quoting their party’s script.  It is impossible to get anything done in Washington today because of the contentiousness of our elected officials.  If a Democrat proposed legislation that would truly end poverty the Republicans would denounce it, and vote against it, solely because it was not proposed by a Republican.  And Democrats would, for the same reason, oppose a Republican-sponsored bill that would truly bring world peace. 

(3)  Everyone in Congress says they want to do away with “tax loopholes” – except for the ones that they have personally sponsored or that provide a benefit to the particular lobbies that have filled their pockets (or the coffers of their re-election campaigns).

So while I can dream of a truly fair and simple Tax Code, and will continue to actively campaign for one, I do not expect to see my dream become a reality perhaps in my lifetime, or at least while I am still in business.

Am I wrong?

TTFN

Tuesday, May 28, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION


I trust you had a “successful” Memorial Day Week-End.  While I did work on a GD extension in the morning on Monday (which ended up a "red file"), I took some time off in the afternoon for a leisurely lunch with friends from NJ in Milford. 
  
* A “blast from the past” from MAINSTREET.COM that is still applicable – “How to Take a Tax-Deductible Vacation”.  I think you will recognize the author.

* Trish McIntire writes on “Planning for Your Taxes” in her capacity as resident tax expert at ANSWERS.COM.

* EA Jamaal Solomon has begun a weekly series titled “Diary of a Young Tax Accountant: My Long Journey to Become a Successful Entrepreneur” at TAX FACTOR.

Jamaal and I will be working together this summer on a discussion of top issues facing young and seasoned tax professionals and are considering discussions of specific tax issues from a young and seasoned point of view.

* Better late than never.  USA TODAY reports that 7 months later “Tax Relief Proposed for Victims of Hurricane Sandy”,

The article tells us “possible congressional action to help Oklahoma tornado victims could provide the lawmakers with a legislative vehicle”.

* A reminder from Jean Murray that in many cases “Farmer's Market, Flea Market Booths Must Pay Taxes” at ABOUT.COM.

* For those of you who are interested – click here to download the Amicus brief supporting Loving v. IRS plaintiffs filed by fellow tax bloggers including Joe Kristan, Russ Fox, and Jason Dinesen.

* Ron of THE WISDOM JOURNAL lists “25 Shocking Statistics About Personal Finance in the US”.  

* Professor Annette Nellen suggests a unique plan for “Modernizing Retirement Plans and Savings” at 21st CENTURY TAXATION.

Her plan could be used to provide the benefit of the “Saver’s Credit” currently distributed through the Tax Code (instead of, as she suggests, having low income individuals’ retirement contributions be paid via the Earned Income Credit). 

What do you think of her idea?   

The Final Word-

The TODAY SHOW hosted a tribute show to the Jersey shore – celebrating the beginning of summer at the shore – on Friday.  The show highlighted the recovery of the shore from the devastation of SANDY.

For the most part it was a good show.  However the TODAY SHOW insulted the State of New Jersey by including cast members of MTV’s steaming pile of excrement known as THE JERSEY SHORE on the tribute show and providing acknowledgment and credibility to this worthless piece of garbage.  These brain dead self-absorbed sluts and skanks did not belong on a show highlighting the best of the Jersey shore. 

THE TODAY SHOW owes an apology to the residents of the State of New Jersey for this inexcusable action!

TTFN

Friday, May 24, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’


* Bill Perez reminds us that IRS offices are closed today (Friday, May 24) in “IRS Offices to be Closed on May 24” at ABOUT.COM.

* Did you see my piece “Tax Tip: Summer Employment for Your Dependent Child” at MAINSTREET.COM?

* The IRS tells us “More Taxpayers e-file from Home in 2013” -

So far in 2013, more than 43 million people have self-prepared and e-filed their tax returns from home, an increase of more than 4 percent compared to the prior year.”

In most cases in order to e-file from home these taxpayers needed to use a “box” – tax preparation software – to prepare their return.  That means there is the potential for 43 million incorrect tax returns.

If you don’t know anything about the Tax Code do not rely on a “box” to correctly prepare your tax return.  A “box” is not a substitute for tax knowledge, or for a qualified, competent tax professional.

* Trish McIntire does a good job of explaining the Section 501(c)(4) organization, the tax-exempt entity involved in the current IRS scandal, in “Another Tax Exempt Twist” at OUR TAXING TIMES.

* And Trish also explains “Oklahoma Disaster- Tax Relief” –

Taxpayers in Cleveland, Lincoln, McClain, Oklahoma and Pottawatomie counties (possibly more to be added later) will be able to postpone tax and payment filings until September 30th.The IRS will abate failure to file and failure to pay penalties for taxpayers who have to delay their tax filings.

The tax and payment filings include any due from May 18th. This will include 2nd and 3rd quarter estimates for individuals and a wide variety of business taxes. The IRS will also work with taxpayers whose books and records are in the disaster area and workers with recognized relief organizations but live outside the disaster area.”

* JK LASSER instructs us on “Hurricane Season and Tax Rules to Know About”.

* Bruce McFarland, the MISSOURI TAXGUY, walks us through “Form W-2”.

* Jeff Rose gives us a good detailed listing of “Home Sweet Home: What is the True Cost of Having Your Own Home?” at GOOD FINANCIAL SENSE.

* Employers – be aware that “I-9 Form Updated – Make Sure You’re Prepared”.  So says Nancy Smyth at the Sunburst Software Solutions, Inc. QUICKBOOKS FOR CONTRACTORS BLOG.  

The Final Word-

After several strong drinks a woman turns to an attractive man, a stranger, sitting next to her at a Washington DC bar.

“Listen here, good looking.  I screw anybody, anytime, anywhere.  Your place, my place, in the car, front door, back door, on the ground, standing up, sitting down, with or without clothes on.  It doesn’t matter to me.”

Eyes wide open with interest the man responds, “No kidding.  I’m in Congress, too.  What state are you from?”

TTFN

Thursday, May 23, 2013

A KIND OF CATCH-22


The IRS-required excessive “due diligence” forced upon tax return professionals who prepare returns with Earned Income Credit (EIC) claims, and the potential for increased preparer penalties related to the EIC, cause tax pros who actually do prepare returns with these claims (I expect that there are tax pros who, because of this, will no longer accept new clients that qualify for the EIC) to charge an increased fee for tax return preparation. 

This is appropriate and proper.  Filing an EIC claim takes much more time than claiming other tax benefits.  The fee for tax preparation is based on the time involved to prepare a return.  Even when a tax pro charges by the form, the cost for preparing the EIC forms is based on the increased time involved.

The Earned Income Credit is a welfare benefit for the working poor that is distributed via the tax return.  Taxpayers who legitimately qualify for the EIC are low-income individuals who, in many cases, cannot afford to spend extra money on tax preparation.

The Earned Income Credit is the only federal welfare program that I know of where the beneficiary must directly pay for the administrative costs of delivering the benefit.  It is as if the beneficiary must pay a “processing fee” for receiving his/her Aid to Families with Dependent Children welfare check.  Or individuals who qualify for the food stamp program must pay the supermarket an additional “processing fee” when purchasing food (“OK, that is $2.50 for the cereal plus a 5% welfare surtax for using your Families First card.”).

And this administrative cost is not deducted from the benefit payment.  It must be paid up-front – weeks before receiving the actual benefit payment.

This really makes sense!

TTFN   

Wednesday, May 22, 2013

TRUE TAX TIME TALES - IRA WITHDRAWALS


Here are two instances from the recent tax-filing season that concern excess withdrawals from an IRA and the tax consequences, federal and state (NJ), thereof.

Both taxpayers are retired and over age 70½, so they are receiving annual RMDs (Required Minimum Distribution) from their traditional IRA investments.

Client A is a widow with income from Social Security, her IRA, a state pension, and interest, dividends and capital gains.

Client B, who is married, has income from Social Security, his IRA, a small corporate pension, taxable interest, dividends and capital gains, and a large investment in tax-exempt municipal bonds that generate substantial supposedly tax-free income.

Normally Client A would take the RMDs from her various IRA accounts, and Client B would take a distribution of the earnings from his IRA investments, which was slightly more than his RMD.

In 2013 both had investments in their traditional IRA come due - a CD for Client A and a corporate bond for Client B - resulting in excessive cash in the IRA.  Both took significant cash withdrawals from their traditional IRAs that were in excess of their RMDs for specific reasons.  For Client A the excess amount was $43,000+ and for Client B the excess amount was $35,900.

Here is what I explained to Client A –

Oi vey!

The $43,413.00 extra IRA withdrawal increased your AGI, so it decreased the amount of your medical and miscellaneous expense deductions. The $43,413.00 added $47,547.00 to your net taxable income.

Plus it pushed you well into the 25% tax bracket, and caused your long-term capital gains and qualified dividends to be taxed at 15%. Without this additional income they would have been taxed at 0%.

It cost $12,164.00 in additional federal taxes, but only $4,341.00 (10%) was withheld - leaving a shortage of $7,823.00.

It also reduced the amount of medical expenses I could deduct on the NJ return - the $43,413.00 added $44,281.00 to your net NJ taxable income. It cost $1,121.00 in NJ state income taxes, and nothing was withheld for NJ.

So the total tax cost of this withdrawal was $13,285.00 - or about 31%.”

But there was more –

“Plus it kicked your actual gross income to over $100,000 – much more than the $80,000 income threshold to qualify for the Property Tax Reimbursement (PTR) {A special NJ state program that reimburses seniors and the disabled each year for the increase in property taxes – rdf} for 2012 AND 2013 (you need two consecutive years of under $80,000 to qualify). You will not get a PTR check for 2012 or 2013.”

So the actual cost of the excess IRA withdrawal was increased by over $1,000.

Client B’s additional IRA withdrawal also reduced his deductible medical expenses – so the additional taxable income went from $35,900 to approximately $38,600.  In the past he did not have to worry about the dreaded Alternative Minimum Tax, so his portfolio included a substantial amount of interest from “private activity bonds”.  As a result, the increased IRA withdrawal caused B to become a victim of AMT.  The bottom line was about $6,300 more in federal income tax. 

Luckily Client B lives in a state that does not have an income tax.

Because neither client had a “tax basis” in their IRA investments the amount of the IRA withdrawals were fully taxable as ordinary income.

Neither A nor B had to take the money from their traditional IRA accounts.  Both could have come up with the same amount of cash by selling available current investments – mutual fund shares for Client A and tax-exempt bonds for Client B.  At most there could have been a capital gain on the sale – which would have been taxed at the 0% rate on the federal level.

Both taxpayers were already being taxed on the full 85% of their Social Security benefits.  But for those who are not - for each additional unnecessary $1,000 IRA withdrawal they could be taxed on $1,850, making an unnecessary IRA withdrawal even more costly.

Obviously neither A nor B consulted me before taking the additional IRA withdrawals.

What can we learn from the experience of these two clients? 

For one, do not take money in excess of your RMD out of an IRA when you have an alternate source in “current” investments.

And, of course, do not take a substantial excess withdrawal from your IRA without first talking to your tax professional.  If A or B had called me before withdrawing the money I could have worked up a projection and showed them just how much the IRA withdrawal would cost.

TTFN

Tuesday, May 21, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION


* Do as I say, not as I do.!

Jordan Fabian of ABC NEWS quotes tax cheat “Charles Rangel at IRS Hearing: ‘Wrong to Abuse the Tax System’”.

As Jordan says – “Only in Washington, you guys.”

* Here is the word on refunds for those tax professionals who scheduled and paid for the RTRP test -

Fee amounts collected for scheduled registered tax return preparer test appointments canceled due to the court ordered injunction are being refunded. Additionally, fees collected from return preparers who tested on or after January 18, 2013, the date the test was enjoined, are also being refunded. No additional refund or reimbursement requests related to registered tax return preparer regulation are being provided or considered at this time. E-mail notifications will be provided to those receiving refunds to explain the process. No action is necessary to receive the refund. A credit for the test fee will automatically be made to the account used to pay the fee. It is anticipated that all refunds will be processed by July 19, 2013.”

* The current IRS “Tea Party” scandal is nothing new.  Liberals and conservatives alike have used the IRS to target the opposition for decades.  Dena Aubin of Reuters takes us on a walk down memory lane in “Factbox: IRS's Rich History of Scandals, Political Abuse” at YAHOO!NEWS.

* My former home state of New Jersey is on every list of the most taxed states, with the exception of the gasoline tax.  So it is no surprise that it is included at #6 in MOTLEY FOOL’s “These 6 States Tax Inheritances the Hardest”. 

I was surprised, however, to find that my current home state of Pennsylvania is #1.  PA won’t tax your pension, but apparently it gets you after you have gone to your final audit.

* FYI, the IRS will be closed this Friday, May 24th, as part of its sequestration furlough.  No IRS offices will be operating, IRS employees will be off without pay, no tax returns will be processed, and no compliance-related activities will take place.    

The Final Word-

Are dolphins more intelligent than humans?

I usually only buy birthday cards with real cats in various poses, costumes, and situations.  And the occasional dog.  But I found a great card with dolphins that answers the above question.

On the front of the card one dolphin swimming in the ocean says to another, “Of course we’re more intelligent than humans . . . you don’t see us caring about any Kardashians!

TTFN

Monday, May 20, 2013

GETTING READY FOR SUMMER - PUTTING YOUR KIDS ON THE PAYROLL


Are you self-employed?  Do you plan to hire your dependent child(ren) to work in your business this summer?

Hiring your kid(s) is a great deduction for parents of minor children who have a net income-generating Schedule C business.

(1)  For 2013 a dependent can earn up to $6,100 in wages (or a combination of wages and up to $350 in “unearned income” – i.e. interest, dividends, capital gains) and pay no federal, and probably no state, income taxes.

(2)  Contributions to a traditional IRA can add another $5,500.00 to that figure (however, in the long run, it is probably better to contribute to a ROTH IRA in such a situation).

(3)  If the child is under age 18 you don’t have to withhold or pay FICA (Social Security and Medicare) taxes, and probably state unemployment and disability contributions, on the payments. Wages paid by a parent’s unincorporated business to a dependent child under 21 are also exempt from FUTA (federal unemployment) tax.

(4)  Wages paid to your child is “earned income” and is not subject to the “kiddie tax” rules.

If you do hire your child(REN) it is important that you

  Create a written job description for each “position” outlining the duties and responsibilities involved.

  Pay the kids on an hourly basis.

  Use a time card or sheet to document hours worked and work performed (a sample time card is included in my Schedule C Forms, Schedules and Worksheets compilation).

  Write a company check as payment each week or every-other week.

  Even though the wages are not subject to FICA and FUTA tax and probably also state unemployment and disability contributions, file all appropriate quarterly payroll tax returns, such as the federal Form 941 (you can indicate that the wages are exempt from FICA on the form), submit an annual federal Form 940 indicating the amounts paid as “exempt”, and issue a W-2 in January to report the wages paid.

  If you have other employees make sure the kids’ wages are included on the quarterly and annual payroll tax returns.

This topic is covered in more detail in my report THE SCHEDULE C NOTEBOOK, which has been updated for tax year 2013.

As a special offer – if your order for THE SCHEDULE C NOTEBOOK is postmarked by May 31, 2013, I will also include SCHEDULES, FORMS AND WORKSHEETS FOR SELF-EMPLOYED TAXPAYERS, a $3.00 value, free of charge!

Send your order (with check or money order for $6.95 payable to Taxes and Accounting, Inc) to –

WANDERING TAX PRO SCHEDULE C OFFER
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428

TTFN

Friday, May 17, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’


I’m back!  Refreshed and, ready to reluctantly get back to the GD extensions.  About 10 more that I can do before I stop for the summer.

* It seems the internet's main topic of discussion tax-wise while I was away was the IRS targeting of Tea Party and conservative organizations seeking tax-exempt status for extra scrutiny.


The new Acting Commissioner is Daniel Werfel, controller of the White House budget office.

TAX PROF Paul Caron provides a humungous listing of the media coverage of the IRS scandal in “The IRS Scandal, Day 7” and “The IRS Scandal, Day 8”.  And Joe Kristan lets us know what the tax blogosphere has had to say on the subject in his May 16thTax Round-up” at the ROTH AND COMPANY TAX UPDATE BLOG.

* There were other topics discussed in the tax blogosphere.  For example, Jason Dinesen brought us “Same-Sex Marriage, Community Property, And Multi-State Income — Part 2” and “Part 3” at DINESEN TAX TIMES.

* Congratulations to MISSOURI TAX GUY Bruce McFarland, who has announced that he is “An EA in the Making”.

Bruce probably correctly predicts “the (what I call) pending crash of the RTRP”, and feels that, while he does not necessarily want to represent clients before the IRS, acquiring the EA initials is the only remaining way to obtain recognition as a Tax Professional.

With all the problems that the IRS is now facing, I doubt that they will be able to successfully appeal the Loving decision and bring back their mandatory RTRP requirement.  And I do not believe that they will, as the judge have suggested, maintain the designation as a voluntary one, perhaps, as I have suggested, as part of a two-tiered program that would also encompass the EA designation as well.

Maybe there is hope for the industry-sponsored voluntary Certified Tax Return Preparer designation I proposed.

In any case, best of luck to my buddy Bruce in his quest for the EA designation.

TTFN

Tuesday, May 14, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION


Better late than never – no wifi at my LBI motel.

Truly enjoying a totally-1040-free “recovery” at Jersey shore.  While 1040-free, I am not tax-free, and have been wandering the web when wifi is available as usual.

* Peter Reilly of FORBES.COM opens another BUZZ.  He talks about a recent court case in “Book On New Jersey Wines Does Not Support Deducting Trips To France”.

I seem to recall a similar situation where an “author” tried to deduct monies paid to “ladies of the evening” as research for a book on the “oldest profession”.

BTW, I share Peter’s fond memories from the 1970s (also in New Jersey, but one county over) of Boone’s Farm Apple Wine, although not in the same context.  Also vaguely remember a strawberry wine variation.      

* Kay Bell takes a “journey down memory lane” in her response to the announcement that “Tax-Writing Committee Chairmen Launch Tax Reform Website” over at DON’T MESS WITH TAXES.

* And at TAX RESOLUTION UNIVERSITY Michael Rozbruch adds his more than 2 cents to the discussion of “IRS Prepared Tax Returns: Are They a Good Idea?”.

His bottom line on the subject agrees with mine –

Sadly, the American taxpayer will be the ones who suffer and experience the setback of this ‘system’, not the benefit.”
 
* Just a reminder - click here to submit your ideas on tax reform to Max and Dave.  I did.
Tell them not to clutter the Tax Code with social welfare programs like the Earned Income Credit.  And to move the tax benefits for education where they belong - to the federal student financial aid program administered by the Department of Education.    
* While I truly believe that the Tea Party movement is a danger to effective democracy, and is one of the reasons why the Congress is so ineffectual, and that it’s candidates should be opposed on all levels, I also believe that certain IRS employees went too far in targeting Tea Party and other “conservative” (the Tea Party is not true conservatism) organizations for extra scrutiny when evaluating tax-exempt status requests.

Joe Kristan of the ROTH AND COMPANY TAX UPDATE BLOG (here) and Russ Fox of TAXABLE TALK (here and here) discuss the issue.

I seem to recall that the IRS targeted liberal groups under Dubya.  It is not right for either side to use the IRS for political dirty tricks.

TTFN

Friday, May 10, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’


* It appears that I am not the only wandering tax pro.  Peter Reilly tells of a recent wandering in “Searching for a Little Piece Of New Jersey in Virginia” at FORBES.COM.

* Trish McIntire deals with “Taxable Income Myths” at ANSWERS.COM.

Of special note is her answer to “If no W-2, W-2G or 1099 is received, the income doesn't have to be reported right?

* JK LASSER asks “Are You a High-Income Taxpayer?” and tells you what additional taxes you will be faced with in 2013 and beyond if you are.

Unfortunately I am not.
 
* Jason Dinesen continues to keep those of us who are interested up to date on same-sex marriage tax issues with a two-part series on "Same-Sex Marriage, Community Property, and Multi-State Income" at DINESEN TAX TIMES.
 
The community property tax laws are a real PITA – and I am glad that I do not have to deal with them.

* Over at BARGAINEERING Miranda Marquit explains “Proposed Retirement Cap: More People Could Be Affected Down the Road”.

While Miranda ends her guest post with the question “What do you think of the cap? Do you think it’s a good idea? Or a bad idea?”, blog author Jim Wang’s promoting “tweet” asks “Is the government's proposed cap on retirement accts a bad idea... or a BAD idea?

My answer to both Miranda and Jim is – it is a REALLY BAD idea!

* In “Lawmakers Seek Public Support for Tax Overhaul at USA TODAY Susan Davis  reports that “a new website invites the public to offer their ideas for fixing the tax system”.

It seems –“Senate Finance Chairman Max Baucus, a Democrat, and House Ways and Means Chairman Dave Camp, a Republican, are launching a website Thursday -- taxreform.gov -- and a Twitter handle, @simplertaxes, aimed at inviting taxpayers to offer comments and complaints about how to change the tax code.”

I have checked out the new website, and also follow Max and Dave on Twitter.  I have submitted my recommendations for tax reform (in 5000 words or less).  I suggest you do the same.  FYI, I had previously written directly to Max and Dave, separately, as well as BO with my recommendations.  No word back yet – but it is too soon. 

I continue to applaud Max and Dave for their apparent sincere commitment to tax reform, and hope they can accomplish something of consequence.  However the rest of the idiots in Congress have to pass whatever they come up with, and that is where my hope fades.  Already the fools are lining up to protect their special tax breaks (and those of the lobbyists who line their pockets).

* Russ Fox proves once again that great minds think like in his TAXABLE TALK post “How Long Should You Keep Your Tax Returns For?”.  Russ agrees with what I have been saying for years recommending (with an additional comment) -    

I strongly recommend you keep your tax returns–and proof of filing–forever”.

* A truly frequently asked question, asked of me as well of fellow blogger Jean Murray and probably every other tax preparer - “I Didn't Get Paid for My Work - Can I Claim a Bad Debt Deduction?

Jean provides the correct answer at ABOUT.COM –

You can't claim a bad debt deduction if your business uses the cash method of accounting, because in this method, income is only recorded when it is received; that is, when you deposit the check or credit/debit card payment from your customer.”


FYI, I am off to the Jersey shore (again) for a second week of “recovery” (I am getting sick of looking at 1040s).  I may not be posting next week – depending on whether or not I have anything to say and I have access to wifi.

TTFN