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Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice,

Updated: 2018-01-16T05:42:06.910-05:00




OOPS! They did it again!  The NJ chapter of the National Association of Tax Professionals held another truly “famous” State Tax Seminar.  In the 25+ year history of this annual event I have missed only 2, due to snow.  As I have always said, this seminar is a “must attend” for any tax professional who prepares NJ state individual or corporate income, payroll, inheritance, and/or sales tax returns.I provide a review of this seminar for my fellow tax pros at THE TAX PROFESSIONAL.  For this post I want to review some of the things discussed at the seminar that are of interest to NJ taxpayers.Most of this seminar is devoted to updates and presentations on the various NJ state taxes by “Jake and Company”, aka the NJ Division of Taxation’s “Taxation University”.  The “Jake” is Jake Foy, head of TU, who has been a fixture at this annual seminar for almost 2 decades.Jake started off on the topic of “tax updates” by telling us that, as was the case last year, the refunds requested on 2017 NJ-1040s will NOT begin to be issued until March 1st – regardless of when you actually file your return.  Otherwise, NJ expects to process NJ-1040s and get refunds to NJ taxpayers within 3-4 weeks.If you sent in your return today requesting a refund, either manually or electronically, you would NOT get your check, or a direct deposit of your refund, until March 1st.  Many NJ taxpayers chose to prepay the February and May 2018 property tax payments in December of 2017 to get a 2017 federal tax deduction, in response to the changes for 2018 – 2025 made by the GOP Tax Act.  If you did this it will not affect either your 2017 or 2018 NJ-1040 filing.   For NJ-1040 purposes, the state only cares that what is considered the calendar year’s tax assessment – taxes due on February 1, May 1, August 1, and November 1 - are paid in full.  They do not care in what year these assessments are paid.  You can only deduct up to $10,000 in 2017 property taxes on the 2017 NJ-1040, and you can only deduct tax payments due in 2018, again up to $10,000, on the 2018 NJ-1040, regardless of when you actually made the payment.  So, prepaying 2018 taxes in 2017 does not increase your 2017 NJ-1040 deduction, and it does not reduce your 2018 NJ-1040 deduction.  With regard to the deduction on the NJ-1040 for property taxes, like, coincidentally, the GOP Tax Act limited to $10,000, NJ has different rules for who can claim how much than the federal rules and regulations for the property tax deduction.  This was not discussed in detail at the seminar, but I will share here what I have learned over the years, often from specific situations with my clients.The NJ-1040 deduction is available only to the owner(s) on the title of the property, and in the same proportion as their percentage of ownership.  If there are two unmarried owners each is entitled to deduct 50% of the property’s taxes.  NJ considers a married couple to be ONE person.  So, if the owners of the property listed on the title are the father, mother and son, although there are 3 people who own the property, because husband and wife are 1 person, the mother and father can deduct 50% of the taxes on their joint NJ-1040 and the son can claim 50% - but only if all three people actually live in the home.  If the parents live in the home, using 100% as their personal residence, and the son lives in another home, the parents can deduct 50% of the taxes, up to $10,000, and the son can deduct NONE of the taxes on that property.  If the son owns and lives in another property he can claim the property taxes on that property as a deduction. Unlike the IRS, NJ does not care who actually pays the property taxes.  Even if the parents in the above example pay 100% of the real estate taxes they can still only deduct 50% - though the parents can, and do, claim 100% of the property taxes on their federal Schedule A.  Bottom line – the NJ-1040 deduction for property taxes is not always the [...]



* No surprise here. Howard Gleckman of TAX VOX reveals that “The IRS Private Debt Collection Program Once Again Looks Like A Failure”.“What’s the old line about ‘fool me once?’ When it comes to privatizing debt collections for the IRS, Congress has now tried to fool American taxpayers for the third time. According to a new report by the agency’s Taxpayer Advocate Service, the outcome is roughly the same as the last two episodes—the agency is spending far more on the program than the firms are collecting and remitting to the Treasury.Just as troubling, the reports finds the debt collectors were mostly targeting lower-income taxpayers, some of whom are receiving Social Security Disability Insurance (SSDI)--a group that was supposed to be excluded from the program. Of the 4,100 taxpayers who made payments after their debts were assigned to private collectors, 1,100, or 28 percent, had incomes below $20,000. About 5 percent were receiving SSDI or Social Security retirement benefits. They had a median income of $14,365.”Howard’s obvious bottom line (highlight is mine) – “so far, the evidence suggests it’s a much better deal for the debt collectors than for the rest of us”.* The IRS has provided “Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding”.The IRS Notice says -“Employers should implement the 2018 withholding tables as soon as possible, but not later than February 15, 2018.”So employees will begin to see the effect of the slightly lower tax rates beginning with February paychecks.* Last week-end a client told me about California’s attempted scam to change income tax payments into fully deductible charitable contributions.  I told him it wouldn’t work – and that it was a scam.  It appears Russ Fox of TAXABLE TALK agrees with me – as he explains in “Why California’s Attempt to Make State Taxes a Charitable Deduction is Doomed”.Other states are trying to think “outside the box” to find ways to make the state tax payments deductible.  None of them will work, for similar reasons.* An interesting “Ask The Taxgirl” question for Kelly Phiilips Erb at FORBES.COM – “Charitable Deductions For Giving Away Free Stuff “.As usual, KPE provides the correct answer -“Sorry, only donations to qualified charitable organizations are tax deductible.”And -“Donations to individuals will not qualify for a tax deduction. You cannot deduct contributions to individuals no matter how deserving.”* Jennifer Dunn tells us “When are the Sales Tax Holidays in 2018?” at TAX JAR, providing a state-by-state listing and description of the various scheduled sales tax holidays.* At THE TAX PROFESSIONAL I provide my “review” of the annual NJ-NATP "Famous State Tax Seminar", which is truly famous.* Jason Dinesen continues with his “Glossary” posts at DINESEN TAX TIMES by explaining the term “Independent Contractor”.  * Michael Cohn reports "Taxpayer Advocate Worried About How IRS Will Handle New Tax Law" at ACCOUNTING TODAY.* Speaking of Nina Olsen, from the IRS – “National Taxpayer Advocate Delivers Annual Report To Congress; Discusses Tax Reform Implementation,Unveils 'Purple Book'”.* The TAX FOUNDATION explains “State Tax Changes That Took Effect on January 1, 2018”.* Wow, NJ is only #10 on KIPLINGER’S list of “The Least Tax-Friendly States in the U.S."!  I guess the reduction and eventual elimination of the estate tax helped it to move downward on the list.Still a fact – “New Jersey’s property taxes are the highest in the U.S.”.FYI, Maryland is #1 – the least tax-friendly state.THE FINAL WORDSIt is an error to assume that opponents of shithole President Donald T Rump are limited to Democrats and “the left”.  Every patriotic American, whether Republican or Democrat, conservative or liberal, MUST oppose and denounce Trump the MAN and not merely Trump a Republican President.  And many Americans of all political “persuasions” do.The issue is with T[...]



For the future safety and security of America and the world Trump Must Go!To save the Republican Party Trump Must Go!Because of his history of sexual assault and misconduct, which he bragged about, Trump Must Go!Because he is an outspoken bigot Trump Must Go!Because as a businessman be consistently and unapologetically screwed his shareholders, investors, contractors, vendors, employees, and customers while lining his pockets Trump Must Go!Because he fleeced vulnerable Americans with his Trump University scam Trump Must Go!Because he refuses to divest himself of his holdings, using the Presidency to line his pockets at the expense of the American people Trump Must Go!Because he spends just about every week-end playing golf at one of his resorts on the country’s dime, lining his pockets at the expense of the American people Trump Must Go!Because he is a mentally unstable malignant narcissist Trump Must Go!Because he is ignorant and incompetent Trump Must Go!Because he is a serial liar who constantly lies to everyone about everything all the time Trump Must Go!Because his one true agenda is and has always been (1) feed ego and (2) line pockets Trump Must Go!Because is more interested in the perception of the size of his abilities, accomplishments, crowds, reception, wealth, and body parts than in the principals of American democracy or the American people Trump Must Go!Because he is more concerned with the “reviews” of his “performance” than in actually accomplishing anything positive Trump Must Go!Because his only priority will always be himself and never America or the American people Trump Must Go!Because he cannot speak about anything to anyone anywhere without prefacing any statement or remarks by basically saying, “look how great I am”, spouting easily identifiable delusional lies as proof Trump Must Go!Because he is incapable of dealing with challenges and criticism like a mature adult Trump Must Go!Because he is ALL ego and NO character Trump Must Go! Because he has seriously damaged the credibility and stature of America in the eyes of the world Trump Must Go!Because he is being played like a fiddle by Putin, and can be easily played by other enemies Trump Must Go!Because he is unqualified, unprepared and unfit Trump Must Go!Because he has no conscience, no shame, no humility, no empathy, and, saddest of all, no humanity Trump Must Go!Because, to use his own language, he is a totally worthless piece of shit Trump Must Go!In order to Make America Great Again Trump Must Go!Do you need any more reasons?TTFN[...]



There has been much talk about the effects of the limited $10,000 - $5,000 if Married Filing Separately -  itemized deduction for property taxes and state and local income or sales taxes combined in the GOP Tax Act.  However, something that has not been mentioned, at least in what I have read, is the fact that this limitation substantially increases the Marriage Tax Penalty.Two working single individuals, either living together or separately, who itemize can each claim a deduction of up to $10,000 in combined property taxes and state and local income or sales taxes.  That is a total of $20,000 in itemized deductions on the 2 returns.  For residents of New Jersey, where my clients are from, it is not hard for each individual to reach the $10,000 maximum, or come close to it, even if they both own and live in one home.If these two individuals, who both work and have their own separate income, were married the itemized deduction would still be limited to $10,000.  Filing separately would not make any difference, as everything I have read specifically identifies the limitation as $5,000 for married taxpayers filing separate returns.  So, by having joined together in holy wedlock this dual-income couple will probably be paying tax on $10,000 more in net taxable income, which would, again in New Jersey, result in over $2,000 in additional federal income tax.  This tax penalty could be increased if the state tax return follows the federal return.   I wonder if this is what the idiots in Congress intended.  Of it they actually gave the matter any thought.Just saying.TTFN[...]



If you are able to make contributions to a ROTH IRA you should use a ROTH IRA account as your current savings account.Contributions to a ROTH IRA are never deductible on your federal or state income tax returns.  But earnings on money held in a ROTH IRA account can eventually be totally tax free to both you and your beneficiaries.Here is what you need to know about a ROTH IRA -* The maximum amount you can contribute to a ROTH IRA, a traditional IRA or a combination of ROTH and IRA accounts for 2018 is $5,500.   If you are age 50 or older you can contribute an additional $1,000.* You can contribute to a Roth IRA at any ageas long as you have earned incomefrom a job or from self-employment.   You do not have to stop making contributions at age 70½ if you still have earned income. * The amount of your allowable contribution to a ROTH IRA is phased out and eventually eliminated based on your Adjusted Gross Income (AGI).  The AGI phase-out range for taxpayers making contributions to a ROTH IRA for 2018 is -$120,000 - $135,000 = Single and Head of Household$189,000 - $199,000 = Married Filing Joint and Qualifying Widow(er) $0 - $10,000 = Married Filing Separate* You can withdraw your contributions at any time without taxes or penalty.  All withdrawals are considered to come from contributions first.  * You must hold the Roth account for at least five years and be at least 59½ before you can withdraw earnings tax-free and penalty-free.  The 5-year period begins on the first day you make your first ROTH contribution.* You never have to take any withdrawals from a ROTH IRA in your lifetime.  There are no annual required minimum distributions beginning at age 70½.As long as you never touch the accumulated earnings on your ROTH IRA investment, and withdraw only your contributions, you can take money from this account at any time over the years without any tax cost.  And your accumulated earnings will grow to a nice retirement nest egg, or legacy for your beneficiaries, if invested wisely.You have contributed $10,000 to a ROTH IRA over the past couple of years, which has accumulated earnings of $2,000.  You need $5,000, or as much as $10,000, to pay for an extraordinary medical bill, or for needed home repairs, or to pay for your child’s college education.  You can take the $5,000 - $10,000 from your ROTH IRA account without any tax consequences.Here is another good idea – If your son or daughter has a summer job you should consider opening up a Roth IRA account for him or her.To qualify for an IRA your child must have earned income — wages or net earnings from self-employment.  Money you give your child for doing chores around the house doesn’t count, but earnings from babysitting or mowing lawns mayqualify.You can contribute 100% of your child’s earnings to the account, up to the $5,500 maximum. If your son earns $2,400 for the summer you can contribute $2,400 to a Roth IRA for him. If he earns $6,500 you can contribute $5,500.There is nothing in the tax code that says that the money deposited in an IRA for your son or daughter has to come from the child’s funds.  You can use your own money to fund the IRA contribution and let your child keep his earnings.You can use a Roth IRA to encourage your children to work or to save. If your son earns $5,000 in a part-time job, open a Roth IRA for him.  Or, if your daughter agrees to put $2,500 of her salary from a summer job in a Roth, match it and put in another $2,500.If you put the maximum into a Roth each year for your 16-year-old from 2018 through 2023, when he/she will turn 21, and no other contributions are ever made, the account could grow to a truly tidy sum (in 6 figures) by the time the child turns 65.One caveat - there exists a potential problem with opening a Roth account for a child. Once the child reaches the “age of majority,” usually 18, he/she will have full access t[...]



Do you need to find a qualified and competent tax professional to prepare your 2017 income tax returns?  Here is some advice from my website FIND A TAX PROFESSIONAL (click in the title highlighted in blue) –CHOOSING A TAX PROFESSIONALDON’T ASSUME (my annual, perhaps controversial, very important warning)ALPHABET SOUP (explaining what all the “initials” have to do with preparing a Form 1040)WHAT TO ASK A POTENTIAL TAX PREPARERWHAT TO GIVE YOUR TAX PREPARERYOU ARE RESPONSIBLEThe last item – YOU ARE RESPONSIBLE – is very important.  Regardless of who prepares your return you are ultimately responsible for all the information reported on your return!And while we are talking about preparing your 2017 returns - here is more very important advice – don’t rely on a “box” to prepare a correct tax return!Have you seen the tv ads for Turbo Tax?  They are the most stupid things I have ever seen.  Please remember - No software package, or online filing service, is a substitute for knowledge of the Tax Code.  And no tax software package, or online filing service, is a substitute for a competent, experienced tax professional.As with any software program the rule is "garbage in - garbage out". If you don't know how to enter the information, or what information to enter, you will not get the best, or even a correct, answer.IRS statistics indicate that taxpayers using do-it-yourself tax software spend an average of between 6 and 10+ hours longer preparing their tax returns (depending on the number of worksheets and schedules) than taxpayers who do manual calculations. Further, the IRS estimates that do-it-yourself software users spend an average of 10 to over 20 hours longer on the return than if they used a paid tax preparer, again depending on the returns’ complexity.When the IRS comes after you for errors on your tax return you can’t blame it on the software. The US Tax Court has on several occasions rejected the "Turbo-Tax Defense" when a taxpayer attempted to blame tax preparation software for a negligent tax return.You don’t save any time or get any added guarantees of accuracy.  Paying a competent tax professional to do your return is ultimately much cheaper than taking a chance with a tax software package or an online service!TTFN[...]



The tv ads from Henry and Richard have started.  Of course, it had nothing to do with H&R’s ability to competently and accurately prepare tax returns – just “come in and get a check”.  Thankfully it did not feature the idiot in the bowtie.  It appears that Block is also offering some free online tax preparation – MORE ZERO – so they can sell your information to 3rd party advertisers.And the Turbo Tax tv ad with the knitted teddy bear is perhaps the stupidest thing I have ever seen – dumber than Henry and Richard ads.  Other TT ads I have seen are no less ridiculous.* A reminder to journalists and bloggers of my annual Very Important Message.* My fellow bloggers have joined me in posting about the year in taxes 2017 -Kay Bell shared her list of the “Top 10 tax issues of 2017” at DON’T MESS WITH TAXES. Professor Paul Caron, aka the TAX PROF, listed "The Top 10 Tax Posts of 2017" from his blog.* Tony Nitti’s first “Tax Geek Tuesday” post of 2017 dealt with “Changes To Depreciation In The New Tax Law”. * This week’s post at THE TAX PROFESSIONAL – "A Little This-A, A Little That-A". * JD SUPRA reports “Treasury Inspector General Warns Taxpayers Of IRS Impersonators As Tax Filing Season Approaches”.“The IRS generally first contacts people by mail – not by phone – about unpaid taxes, and the IRS will not ask for payment using a prepaid debit card, a money order, or wire transfer.  The IRS also will not ask for a credit card number over the phone. If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:If you owe federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040.  IRS workers can help you with your payment questions;If you do not owe taxes, fill out the “IRS Impersonation scam” form on TIGTA’s website,, or call TIGTA at 800-366-4484;You can also file a complaint with the Federal Trade Commission at  Add “IRS Telephone Scam” to the comments in your complaint.”* I have said often that the new GOP Tax Act will cause states to revise their individual tax systems.  The NY POST tells us “New York Could Restructure Tax Code to Dodge Effects of New Tax Law”.    The article quotes Governor Andy Cuomo –“We are developing a plan to restructure our tax code to reduce reliance on our current income tax system and adopt a statewide payroll system.”  * FYI – I have publicly posted my details of what true tax reform legislation should have looked like here. THE FINAL WORDSYou don't need a book to tell you Donald T Rump is an ignorant, incompetent and mentally unstable buffoon. You just need to read his tweets and listen to him speak. TTFN[...]



Do you have to file a 2017 tax return?  Let’s review.Generally, you do not have to file a federal 2017 Form 1040, or 1040A, unless your “gross income” is at least -Single = 10,400Single, Age 65 or Older = 11,950 Head of Household (with one dependent) = 17,450Married Couple = 20,800Family of 4 = 28,900Married Couple, One Spouse 65 or Older = 22,050Married Couple, Both 65 or Older = 23,300“Gross income” means –“All income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2014 or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly).” Gross income includes gains, but not losses, reported on Form 8949 or Schedule D.  If you are a sole proprietor filing a Schedule C, gross income is the amount reported on Line 7 of Part 1 – gross receipts less returns and allowances and cost of goods sold plus “other income”.  And if you are a landlord gross income includes the gross rents reported on Schedule E.So, you see that the filing requirements are not based on actual "net" taxable income.  For any type of business income or capital gains the income before deducting any expenses or deducting the cost basis of investments sold is counted.  You must file a return to identify the expenses and cost basis.You must file a tax return for a dependent if any of the following applies –*  unearned income is more than $1,050* earned income is more than $6,350, or* gross income is more than the greater of $1,050 or the sum of $350 and the individual's earned income (total not more than $6,350).Regardless of your gross income, you generally must file an income tax return if -* you had net self-employment income of $400 or more,* you owe household employment taxes,* you owe additional taxes on premature retirement plan distributions* you failed to take a required minimum distribution from a retirement plan,* you must repay the 2008 Homebuyer Credit,* you owe Social Security and Medicare taxes on unreported tip income, or* you received an advance payment on the Premium Tax Credit.And, whether or not you are required to do so, you should file a tax return to get a refund of tax withheld or to take advantage of a refundable tax credit like the Earned Income Credit or the Additional Child Tax Credit.Another reason to file a tax return, even if you are not legally required to do so, is to start the clock running on the normally 3-year statute of limitations for IRS audit or review of a return. The numbers for individual state income tax returns differ.  You may not have to file a federal return, but you must, or should, file a state return.  For example, the State of Pennsylvania is a gross income tax with no personal exemptions or standard, or itemized, deductions.  You must file a PA-40 and pay the 3.07% flat state income tax if “you received total PA gross taxable income in excess of $33”. Any questions?  Ask your, or a, tax professional.  To find a qualified tax professional in your area go to FIND A TAX PROFESSIONAL.  Whatever you do, do not email me.  I am no longer accepting any new clients.  Want to know “What’s New In Taxes for 2017”?  Click here.  TTFN[...]



While the GOP Tax Act adds much unnecessary complexity to the Tax Code, it does make some things simpler.By eliminating the miscellaneous deductions subject to the 2% of AGI limitation, taxpayer recordkeeping is simplified.  Employees who are not reimbursed for their job-related expenses under an accountable plan will no longer need to keep track of business mileage, business meals and entertaining, and other employee business expenses.  And there is no longer the need to keep track of job-seeking expenses, including travel to interviews, or educational expenses to maintain or improve skills required in your current trade or business.  Investment and tax preparation costs are no longer deductible, so no longer a need to keep track of these expenses.  Of course, this simplification comes at a cost – the loss of a potentially large tax deduction. The Act changes tax planning considerations, and makes year-end planning simpler.To begin, with the increased Standard Deduction, unfortunately made much less attractive for taxpayers without dependents due to the loss of the personal exemption deduction, there will be less taxpayers who will benefit from itemizing.For those who could be able to benefit from itemizing – * It will still be possible to “bunch” medical expenses and charitable contributions – that is claim additional deductions in a year when you may be able to itemize, so that you itemize every other year.  The use of a charitable donor-advised fund account and contributions of appreciated stock at year-end will still apply.  And during the year, the Qualified Charitable Distribution (click here) is an even more attractive strategy for those age 70½ and over. * With the limitation of the itemized deduction for combined property and state and local income or sales taxes to $10,000, there is little that can be done here, other than to attempt to maximize the deduction.  If the $10,000 maximum will not be already met, it is still a good idea to make any 4th quarter state estimated tax payment in December instead of January of the next year.  And pre-payment, if possible, of property taxes can be used to bunch deductions.  * One can still make a 13th mortgage payment to bunch the interest deduction.* The total elimination of job related, investment, and tax preparation expenses, and other miscellaneous deductions subject to the 2% of AGI exclusion, makes these deductions no longer an issue, so there is nothing more than can be done. * And the changes to the dreaded Alternative Minimum Tax (AMT) will create less victims, so AMT considerations will no longer apply for most.While the new limitations on the mortgage interest deduction simplifies the Tax Code, it greatly complicates recordkeeping for taxpayers and potentially for tax professionals.  Under the GOP Tax Act interest on home equity debt, regardless of the amount of the debt principal, is no longer deductible.  Period.  There is grandfathering of existing acquisition debt interest rules – but there is NO grandfathering of existing home equity debt.  Taxpayers will need to separately track acquisition and home equity debt going forward, and going back to day one on all current mortgage debt!  I do believe in the original House version of the bill all existing mortgage debt was “grandfathered” – including home equity debt.  While I can understand, and agree with, the philosophy of limiting deductible mortgage interest to acquisition debt, for practicality sake I wish that existing home equity debt had been included in the grandfathering.Taxpayers have always been required to keep separate track of acquisition and home equity debt, but few actually did due to the allowance of a deduction for interest on up to $100,000 of home equity debt.  This is now som[...]



This post, which I issue every year at this time, is for all of the journalists and bloggers out there.When writing about taxes this filing season DO NOT advise your clients to ask, consult, contact, or talk to your CPA or a CPA!The correct advice is – ask, consult, contact, or talk to your or a tax professional.The mere existence of the initials “CPA” after a person’s name does not in any way, shape, or form indicate that he or she knows his or her arse from a hole in the ground when it comes to preparing 1040s.A particular CPA may indeed be competent and experienced in preparing 1040s, and many are, but it is only because of the education, training, experience, and other factors that are unique to that specific individual, and has nothing whatsoever to do with the initials “CPA”. And that specific individual is just one of your many choices among tax professionals.Got it?TTFN[...]



The first BUZZ of 2018! * As you begin the year be sure to check out my recent post “Starting the New Year Off Right”.  * On December 31st Russ Fox announced “The 2017 Tax Offender of the Year”.An interesting choice. * No surprise here.  The FINANCIAL TIMES observes “Tax overhaul adds to IRS challenges amid cuts.” -“The agency has been dealing with real-terms funding cuts of 21 per cent since 2010, according to figures from the Centre on Budget and Policy Priorities, and Mr Trump’s March budget proposed an additional reduction of $239m. Staffing is down 21,000 since the start of the decade.” The item quotes fellow tax blogger Daniel Shaviro, a professor of taxation at New York University School of Law -“The workload the IRS faces is going to be huge.  The new pass-through rules will be a gigantic project for starters, and the international rules are also a brand new system . . . What makes it worse is many in Congress are not interested in helping them.”The idiots in Congress continue to give the IRS unnecessary and inappropriate work – administering Obamacare and other social welfare programs like the EITC – while at the same time continuing to reduce the agency’s budget.  Implementing the multiple changes and new complexities of the GOP Tax Act will be a complicated and difficult, and expensive, task for the IRS* I look forward to fellow tax bloggers joining me in looking back at the year in taxes 2017.  Of you haven't seen it yet click herefor my review.* From ACCOUNTING TODAY – “TIGTA warns taxpayers to be on alert for IRS scammers”. * A good and timely warning, considering what Kay Bell, the yellow rose of taxes reports at DON’T MESS WITH TAXES – “IRS impersonators have stolen more than $61 million and the tax scammers are not through”.* Need any more proof that Donald T Rump is a delusional idiot?  Here is some from ACCOUNTING TODAY – “Trump brags he knows taxes ‘better than the greatest CPA’”.* Of course, we know that just because a person has the initial CPA after his or her name does not mean he or she is an expert, or even knowledgeable, in 1040 taxes.  See my article “Don’t Assume” at FIND A TAX PROFESSIONAL.Next week the BUZZ returns to Mondays.TTFN[...]






Let me end the year 2017 by saying what needs to be said loudly every day until the situation is fixed.I am going to say what I believe at least 75% of every journalist, every elected official, and every government employee has said to themselves and in private, and wishes they could say out loud – Donald Trump is an idiot!Trump is clearly a self-absorbed and self-important malignant narcissist.  It is obvious he has no conscience, no shame, no humility, no empathy, and, saddest of all, no humanity.I have never seen any evidence that Donald Trump has ever performed a totally positive and totally unselfish act in his entire life.  I challenge anyone to provide me with evidence to the contrary.Every President – perhaps every national politician - in my lifetime, regardless of whether or not I have agreed with them politically, and regardless of their individual eccentricities and personality faults and their degrees of ethical or moral challenges, has at least at some time in their political life shown evidence of humanity and humility, and has performed totally positive and unselfish acts.  And have actually admitted when they have made an error.   Donald Trump is incapable of admitting he has ever made a mistake.  And Donald Trump cannot speak about anything to anyone anywhere without prefacing any statement or remarks by basically saying, “look how great I am”, spouting easily identifiable delusional lies as proof.It is clear that Trump is more interested in the perception of the size of his abilities, accomplishments, crowds, reception, wealth, and body parts than in the principals of American democracy or the American people.Despite all the talk of his alleged political "agenda", Trump has none.  His only agenda is, and has always been, (1) feed ego and (2) line pockets.Donald Trump is literally the very last person who should ever be occupying the White House.  He is ignorant, he is incompetent, he is unfit, he is unstable, and he is dangerous!TTF2017[...]



And so, another year has come to an end.  An eventful year for taxes.  Or more appropriately – taxes of the future.The big story of 2017 was, of course, the year-end passage of the “Tax Cuts and Jobs Act” (officially, it appears, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”), along strict Party lines.  The Republican Party, despite having control of both houses of Congress, was not able to accomplish anything in terms of legislation during 2017 – thanks for the most part to the fact that arrogant arsehole Donald T Rump was in the White House.  But they did finally manage to pass major tax legislation, and arsehole Trump signed it into law on December 22, 2017. before he left for one of his resorts (so he could unethically pocket even more of the American taxpayer’s money), in time for Christmas.  Whether or not it is a true Christmas present depends on your individual facts and circumstances.  The GOP tax plan began as a couple of basic concepts – nothing more than scribblings on the back of a cocktail napkin.  It was expanded a bit to a written “framework”.  Actual details were eventually revealed just in time for the House vote.Trump, of course, claimed a victory.  However, it was obvious, at least to me, that the fool didn’t give a rodent’s hind quarters what was actually in the bill (as long as it benefited him financially) – he just wanted ANY bill passed before the end of the year so he could say “look what I did for you”.   And, despite what serial liar Trump said about this legislation, it was NOT a massive tax cut for the middle class, and Trump and his family most certainly WILL receive a massive tax cut.  As I have said in previous posts, the Act is not as good as the Republicans claim and not as bad as the Democrats insist.  In my opinion there is good in the legislation and there is bad in the legislation.  What is true about the new Tax Act is that it will affect every single taxpayer.  And it can truly be called the new “Accountants’ Full Employment Act”.As for the 2017 tax filing season, it once again ran smoothly.  Despite an advertised slight delay in the date the IRS would begin processing returns - Monday, Jan. 23rd - the season officially began for me, as it always has, on February 1st.    There were no auto, computer, equipment, or other issues.  The weather did impact the season on one occasion – a 30+ inch blizzard in mid-March literally buried my car and I could go nowhere for almost 2 weeks.  I have always said that I welcomed a huge snow storm in March so I could catch-up without interruption – and I got my wish this year.   I had no issues with late-issued corrected Consolidated 1099 Tax Statements from brokerage houses this year.  The returns of several clients who usually had to wait until late March to send me their “stuff” were done earlier than usual.  And more cost basis information was provided, to both taxpayers and the IRS, for long-term transactions.Despite the fact that Congress required that IRS Form 1098-T issued by colleges and universities actually contain the correct information necessary to properly claim education tax credits and deductions beginning with tax year 2016, the IRS erroneously delayed this requirement – so with only minor exceptions, 2016 Form 1098-Ts continued to be as useful as tits on a bull.The IRS did much better processing returns this year.  I did not hear of any excessive refund delays or other processing FUs.  NJ announced in January that no re[...]



The “Tax Cuts and Jobs Act” is NOT tax reform. Congress was correct not to include the term “Reform” in the bill’s title.The Act adds more complexity to the Tax Code than it provides simplification. And it retains most of the current complexity.Deductions, credits and loopholes that provide special treatment for specific actions, industries, and groups, the distribution federal government social welfare and other program benefits, and refundable credits still remain in the Tax Code.Here is, in my opinion, what true tax REFORM would look like (click on the title) –THE TAX CODE MUST BE DESTROYED![...]



The final BUZZ for 2017! * Jason Dinesen of DINESEN TAX TIMES lists his “Top 5 Blog Posts of 2017”.* While it is no surprise that “IRS Extends Due Date for Employersand Providers to Issue Health Coverage Forms to Individuals in 2018” there is really no reason for this.  “Insurers, self-insuring employers, other coverage providers, and applicable large employers now have until March 2, 2018, to provide Forms 1095-B or 1095-C to individuals, which is a 30-day extension from the original due date of Jan. 31.”You do NOT have to wait until you receive these forms to prepare your 2017 tax return, or to give your “stuff” to your tax preparer.  However, you DO NEED to have Form 1095-A in hand in order to properly prepare your Form 1040 (or 1040A).  This form should be mailed out by the end of January.* Jonathan Curry gives us a “Year in Review: Tax Bill Takes aTopsy-Turvy Road to GOP Victory” at TAX ANALYSTS.He reminds us about the last time the Tax Code was so drastically changed –“ . . . the last major tax reform effort, in 1986, which took nearly three years to complete after President Reagan issued his call for it and involved dozens of congressional hearings with testimony from hundreds of individuals . . .” The way tax reform, which the current bill actually is not, should actually be done.  Unlike Donald T Rump, Reagan was intelligent and competent, as were, to a degree, the members of Congress of both Parties at the time.FYI – my annual tax year in review post will appear tomorrow.* Tony Nitti tries to explain the truly convoluted mucking fess that is the new tax treatment of “pass-through” business income in “Tax Geek Tuesday: Making Sense Of The New '20% Qualified Business Income Deduction'” at FORBES.COM. It is obvious that the GOP Tax Act is most certainly NOT “tax simplification”.  TTFN[...]



Now that the idiot in the White House has officially signed the Tax Cuts and Jobs Act (officially, it appears, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”), let me discuss some of what this means for taxpayers for 2018.First - contrary to what Donald T Rump has said (a statement that must be made all too often today, considering that idiot Trump is a serial liar) – the GOP Tax Act did not repeal Obamacare!  What it did was repeal the “individual mandate” – the requirement that every American must purchase or obtain “adequate” health insurance for every member of his or her household for the entire year.  And it repealed the penalty assessed on the tax return for not having adequate full-year coverage.  But this is effective with tax year 2019.  The individual mandate and the penalty is still in effect for tax year 2018.  You will be penalized on your 2018 Form 1040 if every member of your household does not have adequate health insurance coverage for all of 2018 and you do not qualify for a statutory exemption.  The penalty does not disappear until 2019.When it comes to recordkeeping –(1) It is still important to keep track of medical expenses, and medical mileage, for 2018.  Perhaps even more so, as the AGI exclusion is returned to 7½% (down from 10%) for all taxpayers, regardless of age, for 2018 (and 2017) only.  NJ taxpayers must keep track of medical expenses, whether or not they have been able to claim a federal deduction, because you can deduct unreimbursed medical expenses on the NJ-1040 if the total exceeds only 2% of your “NJ Gross Income”.  And you can deduct health insurance premiums deducted from your paycheck on the NJ-1040.  While these payments may be considered “pre-tax” for the federal return, they are NOT pre-tax when it comes to reporting NJ state wages.  And NJ taxpayers do not have to reduce the medical deduction claimed on NJ-1040 by reimbursements and payments from employer-sponsored Flexible Spending Accounts (FSA) or Health Savings Accounts (HSA), for the same reason.(2) Under the GOP Tax Act, the following expenses are no longer deductible on Schedule A for tax years 2018 through 2025 -* Job-related moving expenses, except for members of the Armed Forces who move due to a military order.   And employer moving expense reimbursements, again except for military personnel, are no longer excluded from income and will be included in taxable wages reported on Box 1 of your W-2.* Investment interest* Unreimbursed employee expenses (including union and professional dues, continuing professional education, job-related subscriptions and publications, home office expenses, uniform expenses, business use of your car, travel expenses, meals and entertainment expenses, license fees, tools used for work, and job search expenses) – except for the $250 adjustment to income for the unreimbursed expenses of K-12 educators.* Tax preparation and advice costs and expenses relating to tax audits* Investment fees and expenses, including safe deposit box rental fees* Legal expenses for the collection or protection of income.* Hobby expensesSo, unless you need to do so for employer reimbursements, you no longer need to keep track of business expenses or mileage, or the other items listed above, for 2018.  Of course, business expenses are still fully deductible by self-employed sole proprietors who file a Schedule C or C-EZ and for farmers filing a Schedule F.  For business entities, including Schedule C f[...]



I am in the process of proofing the January 2018 issue of ROBERT D FLACH’S 1040 INSIGHTS and getting ready to “go to press”.This issue discusses –* “year-beginning” tax moves to make, * information returns that will begin to appear in the mail in January, * the changes to the 1040 that will affect most taxpayers that are in the new Tax Cuts and Jobs Act, * using a “box” or online service to prepare their tax returns, and * the Social Security changes for 2018.  You can order a copy of this issue for only $2.00 – a special discounted price for this issue.  It will be sent to you as a pdf email attachment.  Send your check or money order for $2.00, payable to Taxes and Accounting, Inc, and your email address to –TAXES AND ACCOUNTING, INCFOBERT D FLACH’S 1040 INSIGHTSPOST OFFICE BOX AHAWLEY PA 18428For information on subscribing to this newsletter click here.TTFN[...]



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Today is Christmas Eve.  Every year on Christmas Eve I spend the day typing W-2s - mine and for my clients.  This year is no different.Tonight - a leisurely and bountiful meal at my favorite local restaurant.HO! HO! HO![...]



You're a mean one, Mr. Trump.You really are a heel.You're as cuddly as a cactus,You're as charming as an eel,Mr. Trump.You're a bad banana with a greasy black peelYou're a monster, Mr. Trump.Your heart's an empty hole.Your brain is full of spiders,You've got garlic in your soul, Mr. Trump.I wouldn't touch you with aThirty-nine and a half foot poleYou're a vile one, Mr. Trump.You have termites in your smile.You have all the tender sweetness of a seasick crocodile,Mr. Trump.Given the choice between the two of youI'd take the seasick crocodile.You're a foul one, Mr. Trump.You're a nasty wasty skunk.Your heart is full of unwashed socks,Your soul is full of gunk,Mr. Trump.The three best words that best describe youAre as follows, and I quote"StinkStankStunk…Ain’t it the truth![...]



Just so you know – while “technically” the Standard Deduction amounts are almost doubled, the net tax benefit, to taxpayers, if there are any, is nowhere near equal to almost doubling the Standard Deduction.  This is due to the elimination of the Personal Exemption deduction.  While, to make up for this, qualified children get the equivalent of a $1,000 credit via the doubling of the Child Tax Credit, and "non-child" dependents get a $500 credit, the individual taxpayer and spouse get NO TAX CREDIT to replace the loss of the deduction. The Standard Deduction for a single taxpayer goes from $6,350 to $12,000.  But when you factor in the loss of the Personal Exemption of $4,050, the actual tax deduction goes from $10,400 to $12,000.  This is only $1,600 more – nowhere near a 50% increase in net the net deduction.The increase in tax benefit for a non-itemizing married couple filing a joint return goes from, effectively, $20,800 to $24,000, or an increase of $3,200 – again nowhere near 50%.And the $500 credit for children age 17 and older and other dependents does not make up for the loss of a $4,050 per dependent deduction.  And, as has been frequently discussed everywhere, the limitation on the itemized deduction for taxes will substantially increase the net taxable income of many taxpayers in highly taxed “blue" states like New York, New Jersey and California.  To be fair, it is true that the actual tax rates are lower and the income brackets expanded – so this may make up for some of the increase in net taxable income.  More net income is taxed, but at a lower rate.  So, while there are good things in the Act that I do support, and many taxpayers will end up with some more money “in pocket” as a result, the Tax Cuts and Jobs Act is by no means a MASSIVE tax cut for anyone other than taxpayers like Donald T Rump and his family.Just saying.TTFN[...]



One vote down, and one to go (or actually two, as the House must vote again) – as of this writing! Two votes down - one to go.Complying with the changes in the Tax Cuts and Jobs Act will create a new nightmare for both taxpayers and tax preparers.On one hand there is some reduced required recordkeeping.  Doing away with the deduction for employee business expenses means that taxpayers who are not reimbursed for expenses by employers under an accountable plan will no longer need to keep track of business mileage and other expense during the year.But on the other hand, there is the new limitation on the mortgage interest deduction.   Only interest on $750,000 of “acquisition debt” – money borrowed to buy, build or “substantially improve” a property - can be deducted on new mortgage loans initiated after December 15, 2017.  For existing mortgages, the $1 Million limitation is “grandfathered”.  Home equity interest is no longer deductible.  Period.  The House bill had grandfathered all existing mortgage debt, including home equity debt, under the “old” law – but I believe the final bill does not grandfather home equity debt.  I actually support limiting the tax deduction to acquisition debt.  Personal interest, like credit card finance charges and auto and pension loan interest, is not deductible.  Home equity interest is personal interest.  Home equity loans may be used to finance capital improvements, but then the debt is actually acquisition debt.    Under the current law taxpayers are required to keep separate track of acquisition of home equity debt.  Taxpayers frequently refinanced existing mortgages either to get additional money for non-acquisition purposes or to consolidate existing acquisition and equity debt loans.  The Form 1098 issued by banks and mortgage companies did not differentiate between the two types of interest.  I expect at least 80% of homeowners did not separately track the two types of debt.  This was not a problem in many cases, considering the $100,000 principle limitation on the home equity interest deduction.  But now this is truly essential.Going forward, taxpayers can maintain, or banks and mortgage companies can be required to issue, separate loans for acquisition debt and home equity debt.  And keep these types of debt separate by avoiding the combining of, or not being allowed to combine, the two types of debt instruments when refinancing.  But what about existing mortgage loans?  Here is where the real nightmare will truly occur.It is the taxpayer, and not the tax preparer, who is required to keep track of the two types of debt.  But what is the tax preparer’s responsibility when the majority of taxpayers do not do this?     In my earlier post “Implementing the Possible New Mortgage Deduction Rules” I said -“A new Form 1098 should be created to separately report –1. Total mortgage interest received for the year on all ‘grandfathered’ mortgage debt.2. Year-beginning principle balance of all ‘grandfathered’ mortgage debt.3. Total mortgage interest received for the year on ‘new’ acquisition debt on the purchase of, and capital improvement to, the mortgagee’s primary personal residence on up to $500,000 {now $750,000 – rdf} in principle.4. Points paid on the first $500,000 of principle on the purchase of a primary pers[...]



Nobody actually asked me, but over the years I have been told by friends and family, and clients and colleagues that I should write a book.I have written several – but they have all been about taxes.Just in time for Christmas, my new book BOBSERVATIONS is Bob’s observations (obviously I am Bob) on life, liberty, and the pursuit of happiness, with the occasional rant, ramblings, and fine whine.  It is a compilation of articles, columns, and editorials I have written over the years that have appeared in my various attempts at newsletters and non-tax blogs.I do talk about taxes a bit, but mostly about popular culture, entertainment (television, movies and Broadway), and personal finance, taking to the soap box and getting serious for the final entries.  And it includes an item on how I lost 90lbs in 9 months!A copy of this book is only $4.99 – delivered as a pdf email attachment.  An e-book version for Kindle is also available from Amazon.  Click here for more information on this version.Send your check or money order for $4.99, payable to ROBERT D FLACH, and your email address to –ROBERT D FLACHBOBSERVATIONSPOST OFFICE BOX AHAWLEY PA 18428[...]



The big BUZZ of the end of last week was the result of the conference committee on the GOP tax bill.  I will not discuss the specific results here until a final bill has been passed and signed into law. * A reminder – did you see my post on the new 2018 standard mileage allowance rates?  Click here.* The first of what I expect to be many similar announcements – the DES MOINES REGISTER reports “Iowa tax refunds will be delayed again in 2018” - “Iowans can again expect longer wait times for state income tax returns in 2018, state officials said Monday.”The reason for this delay, and the many more that will no doubt be forthcoming, is clearly, as the news item explains, an attempt to “double down on fraud prevention”.  Despite the potential inconvenience from the delays, this “doubling down” is certainly a good thing.* Kelly Phillips Erb, FORBES.COM’s TaxGirl, has begun posting her annual “12 Days Of Charitable Giving” series.  The charities she has highlighted so far are - Respite Care CharlestonHelen Keller International* Jason Dinesen deals with the confusion in “What Tax Benefits Does Form 8332 Give?” at DINESEN TAX TIMES - “With a Form 8332, the non-custodial parent can claim the dependency exemption for the child and also claim the child tax credit — but no other tax benefits associated with the child. The CUSTODIAL PARENT remains eligible to use that child for tax benefits such as: head of household filing status, the earned income credit, and taking the credit for daycare expenses.”* Today at THE TAX PROFESSIONAL – "What Is Considered Prepaid Income Taxes?". * In light of the potential change to the Tax Code the TAX FOUNDATION asks “Does Your State’s Individual Income Tax Code Conform with the Federal Tax Code?”.As I have said in the past – changes in the GOP Tax Act will most definitely affect many state income tax returns.  Except for NJ and PA, coincidently the home of my clients and my home.  THE FINAL WORDSDid you know that at the beginning of each cabinet meeting Donald T Rump has the members sing the hymn “How Great Thou Art”?This is not to pander to his evangelical base, or to maintain the lie that he is actually a practicing Christian.  Trump actually thinks the song is about him! TTFN[...]