Tuesday, May 20, 2014


* It seems that the “AICPA Opposes IRS Voluntary Tax Preparer Certification”.  So says ACCOUNTING TODAY.

I do believe the AICPA was in favor of mandatory licensing/regulation of tax preparers (which exempt CPAs), as per their own article “AICPA Supports IRS Tax Return Preparer Program at Congressional Hearing” from September of 2011 -

The American Institute of Certified Public Accountants supports the Internal Revenue Service’s program, as it is currently structured, to regulate tax return preparers, Patricia Thompson, chair of the AICPA Tax Executive Committee, told members of the House Ways and Means Oversight Subcommittee at a hearing on July 28.”

If a mandatory program with testing and required CPE in taxation is a good idea because it would identify competent tax preparers, why would the same program with the same requirements for certification offered on a voluntary basis not also be a good idea, since it would still identify competent tax preparers?

Clearly the AICPA is afraid, and rightfully so, that a voluntary RTRP certification would take 1040 business away from its members – because the designation would identify individuals who have proven competence specifically in 1040 preparation.  Currently the taxpayer public erroneously thinks that the initials CPA are an indication of a person’s competence in 1040 preparation, which is simply not true. 

I believe that the voluntary RTRP program should be open to CPAs who prepare 1040s, as a way to identify CPAs who are competent and current in 1040 preparation. 

* Peter J Reilly of FORBES.COM wonders “How Much Of Alimony Tax Gap Is From Gaming The System?”.

He is concerned, and rightfully so, about the findings of a recent TIGTA report –

According to the TIGTA report there were 567,887 Forms 1040 for 2010 that had alimony deductions.  The total claimed was $10 Billion.  When they compared the corresponding returns that should have recorded the income, there were discrepancies on 266,190 returns including 122,870 returns that had no alimony income at all reported.  There were nearly 25,000 returns where the income recognized was greater than the deduction claimed which produced a bit of an offset ($75 million).  On net, deductions exceeded income by $2.3 billion.”

Peter rightfully ponders –

If you don’t report interest income that you get a 1099 for, there is a pretty good chance you will get a notice from the IRS, so why doesn’t the same thing happen with alimony?

I am surprised to learn of this problem.  Several years ago I had a client who correctly deducted alimony paid, which was not reported as income on the recipient’s return.  The discrepancy occurred because of poor wording in the divorce agreement.  The IRS identified the discrepancy in its matching program, added-back the alimony deduction, and billed my client for additional tax, penalty, and interest.  It took a long time, and the eventual involvement of the Taxpayer Advocate Service, to get the issue resolved and the alimony deduction upheld.

There are reasons why alimony deducted on one return may not be reported on the recipient’s return.  While called alimony in the divorce agreement payments may really be disguised child support (payment ends not on the remarriage or death of the ex-spouse, but when a child turns age 18, or graduates from college).

There is obviously a problem that the IRS should address as a priority.

* FORBES/COM’s TaxGirl Kelly Phillips Erb brings us an update on the status of the “extenders” in “Tax Extenders Bill Stalled In Senate”.

It appears nothing has changed – the idiots in Congress remain unable to compromise, and therefore unable to do anything.

Kelly reports “chatter suggests that we won’t hear about it again until after the elections”.  So once again we will have to wait until the end of the year to find out if these tax breaks have been extended.  What idiots! 

* Apparently “Deadlines for Us, But Not for Them (Part 2)”, the “them” being the IRS, according to Russ Fox at TAXABLE TALK.

Russ speaks of a specific situation where an initial IRS notice was incorrect, more often than not the case, and Russ, as the return’s preparer, wrote to the Service to explain their error.  It is taking forever for the IRS to actually read the letter and deal with the issue.

Luckily I have not had a similar situation in my IRS dealings.  This has been my experience –

The first response to literally every letter I send to the IRS on behalf of a client is a form letter sent to the client, about a month or two after I mailed out my correspondence, stating “we need 45 more days to review the issue”.  45 or so days later a second letter is sent to the client saying, “we need another 45 days to review the issue”.  45 or so days later a third letter is received that usually tells the client that the issue has been resolved and no additional tax is due. 

So it takes about 5 months for the IRS to read, review, and act on a letter.  But during this 5 months, at least in my experience, there is no further collection activity.

I do sympathize with Russ’s frustration.  The IRS expects taxpayers to respond to IRS notices promptly, but they take forever to properly respond to taxpayer correspondence.

* The TAX POLICY CENTER proposes for discussion 4 “Updated Options to Reform the Deduction for Home Mortgage Interest” and the deduction for real estate taxes.

I do not support any of the 4 options.  I would keep the current deductions for mortgage interest on acquisition debt on your primary principal residence only (no itemized deduction for second or vacation properties or home equity debt on borrowings not used to buy, build, or substantially improve) and real estate taxes on your primary principal residence only.

What do you think? 

* ACCOUNTING TODAY announces “Tax Relief Available for Storm Victims in Florida”.

The IRS is offering tax relief to victims of severe storm, winds and flooding that affected parts of Florida in late April.

Following official disaster declarations by FEMA, the IRS announced that tax relief would be available to affected taxpayers in Escambia and Santa Rosa Counties, and later added Okaloosa and Walton Counties.

The IRS has postponed many deadlines that would normally fall between April 28 and October 15 to October 15, including the June 16 and September 15 deadlines for making quarterly estimated tax payments, as well as a variety of business tax deadlines.

* An extended “tweet” from @URTaxlady, aka Kathy Bylkas ‏with the word on 2014 depreciation limits for “luxury” autos -

The IRS has published depreciation limits for business vehicles first placed in service this year.

50% bonus depreciation is no longer allowed for business equipment purchases, including vehicles. Here's a quick review of the adjustments for 2014.

For business cars first placed in service this year, the first-year depreciation limit is $3,160. After year one, the limits are $5,100 in year two, $3,050 in year three, and $1,875 in all following years.

The 2014 first-year depreciation limit for light trucks and vans is $3,460. Limits for year two are $5,500, in year three $3,350, and in each succeeding year $1,975.”

* Nothing really to do with taxes – more of an FYI.  NJ.COM tells us “N.J. Community Earns Top Honors on 'Richest in America' List”.

New Jersey is home to the wealthiest zip code in the United States, according to a report on Time.com.

The report, citing data from the U.S. Census Bureau and presented by FindTheBest, found that Short Hills is the richest community in America.

Just over 69 percent of households in the Essex County zip code, which has a population of approximately 13,000, make more than $150,000 annually, the report found.”

I am very familiar with Short Hills, having worked for decades in neighbor Summit NJ.  I currently have one client in this zip code, unfortunately not among the 69%.


1 comment:

Peter Reilly said...

I think the real problem with the alimony thing is that the IRS does not have the resources to address the problem. They should not just send out arbitrary notices, since you can't tell who is right, the person who deducted or the one who did not pick up the income. You have to verify the payments were made and then analyze the agreement.

That means you need a revenue agent to look at it. In 2010 there were over 250,000 of these cases and only 20,000 agents.