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THE WANDERING TAX PRO



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: 2018-04-22T06:21:39.154-04:00

 



THANK GOD IT'S OVER!

2018-04-17T05:00:10.001-04:00

TAX SEASON'S OVER!MY FACE IT HAS A BIG SMILE.AND SO IT'S OFF TO THE SHORE,1040s NO MORE.AT LEAST FOR A WHILE.Today I honor the memory of Maurice "Moe" Barry -http://www.forbes.com/sites/peterjreilly/2011/09/10/the-wandering-tax-pros-911-tribute/#1c628ad91a14 TTFN[...]



WHERE THE FAKAWI - #1

2018-02-19T09:15:48.480-05:00

The floodgates have opened!As always happens, prior to my annual 30+ year traditional visit to Monmouth County NJ for “house calls” as returns arrive I get them done and out promptly.  But once I return from my trip the “do be done” box begins to fill.  I now have 18 returns in that box, and 1 in the “red file” (to be done). The season has gotten off to a good start – I am at least on par with last year’s work completion, and may be somewhat ahead.  I will have a better picture at the end of February.  No major client issues have arisen yet – and minimal returns have spent any time in the “red file” so far.  No weather or equipment issues either.FYI, my phone has not been on during these past first weeks of the tax filing season.  So every day I have been “behind closed doors” – although I have been checking emails regularly throughout the day and responding promptly where appropriate.  To be perfectly honest I have enjoyed being able to work without interruptions.  I may put the phone, but not the answering machine, on going forward, but have not decided yet.  I have become spoiled.  In any case – the best way to contact me is always via email at rdftaxpro@yahoo.com – even on Wednesdays.  Before I go - a holiday message.  On this President's Day let us remember past Presidents who had intelligence and competence and cared about America and its people, as we struggle to deal with the current one, who clearly does not.OK – back to the 1040s!TTFN  [...]



THE TWELVE DAYS OF TAX SEASON

2018-02-01T05:00:08.824-05:00

And now what you have been waiting a year for – my annual posting of:--------------------THE TWELVE DAYS OF TAX SEASONOn the first day of tax season my client gave to me a Closing Statement for the purchase of a home.On the second day of tax season my client gave to me 2 W-2 forms.On the third day of tax season my client gave to me 3 mortgage statements.On the fourth day of tax season my client gave to me 4 Salvation Army receipts.On the fifth day of tax season my client gave to me 5 Form K-1s.On the sixth day of tax season my client gave to me 6 1099s for dividends.On the seventh day of tax season my client gave to me 7 cancelled checks.On the eighth day of tax season my client gave to me 8 useless items.On the ninth day of tax season my client gave to me 9 medical bills.On the tenth day of tax season my client gave to me 10 stock sale confirms.On the eleventh day of tax season my client gave to me 11 employee business expenses.On the twelfth day of tax season my client got from me a finished tax return, 11 employee business expenses, 10 stock sale confirms, 9 medical bills, 8 useless items, 7 cancelled checks, 6 1099s for dividends, 5 Form K-1s, 4 Salvation Army receipts, 3 mortgage statements, 2 W-2 forms, and a Closing Statement for the purchase of a home.And, of course, on the thirteenth day of tax season the client gave to me a corrected Consolidated 1099 from Wells Fargo Advisors!--------------------And so the 2018 Tax Filing Season – my 47th - officially begins.  Open the floodgates and bring on the 1040s!As is my custom, due to the demands of the filing season I will be taking my annual “tax season hiatus” from posting to THE WANDERING TAX PRO and THE TAX PROFESSIONAL. Between now and April 17th I will barely have time to relieve myself let alone blog!  Nor will I have time to respond to comments. If a comment requires a response I will do so after April 17th.DO NOT EMAIL ME OR SUBMIT COMMENTS WITH SPECIFIC QUESTIONS ABOUT YOUR 2017 TAX RETURN!  ALL SUCH ITEMS WILL BE PROMPTLY DELETED UPON DISCOVERY!I am NOT accepting any new 1040 clients (or any other kind of tax preparation clients). So, don’t email me asking if I can prepare your 2017 tax returns.  THE ANSWER IS A MOST DEFINITE "NO". I will be publishing a WHERE THE FAKAWI post occasionally here at TWTP to keep my clients up-to-date on my progress during the season and to report changes or additions to my tax season policies and procedures. Clients can also keep track of my tax season progress by following me at TWITTER (@rdftaxpro).I realize that I am abandoning you at a time when you may need me the most – but I need to make a living!I find it a bit amusing that the period of time when TWTP gets the most “hits” is during the tax filing season when I am not posting.“Talk” to you when it is all over!TTFAW [...]



2017 STATE TAX FORM UPDATE

2018-01-31T05:00:09.878-05:00

All state returns (that apply to me and my clients) are now finally up and available at the appropriate state tax agency website.The 2017 NJ-1040 form was finally made available at the NJDOT website forms page at 11:00 AM on Monday.  As expected, there was no change to the physical format or layout of the form, except for the addition of Line 12c on Page 1 to indicate if the taxpayer and/or spouse or civil union partner is eligible to the Veteran Exemption (although the word exemption is misspelled “exeption”).From NJDOT – items that will be accepted to document a claim for the new Veteran Exemption:* DD-214 - Certificate of Release or Discharge from Active Duty* DD-256 - Discharge Certificate* WD AGO 53 - Enlisted Record and Report of Separation Honorable Discharge* WD AGO 53-98 - Military Record and Report of Separation Certificate of Service* WD AGO 55 - Honorable Discharge from the Army of the United States* NA Form 13038 - Certificate of Military Service* NAVCG 553 - Notice of Separation from U.S. Coast Guard* NAVMC 78PD - U.S. Marine Corps Report of Separation* NAVPERS 553 - Certificate of Separation/Discharge from U.S. Navy* County Veteran ID Card - Veteran identification card issued by any of the New Jersey counties* Federal Veteran ID Card - Veteran identification card issued under the Veterans Identification Card ActJust a reminder – regardless of when you submit your 2017 NJ-1040 to the state, refunds will not begin to be issued until March 1st.As for the New York State resident (IT-201) and non-resident (IT-203) returns - the only change to the physical format or layout of the forms appears to be the addition of a Line 60o (IT-201) or 57o (IT-203) to add a new voluntary contribution option for the Veterans’ Home Assistance Fund”, and the addition of a line 79a (IT-201) and 69a (IT-203) to allow taxpayers to allocate via direct deposit all or a portion of their refund to NYS Section 529 college savings accounts via the new Form IT-195.The NYS standard deduction and tax rate schedules have been adjusted as per the annual COLA.  There have been a fee changes and additions to obscure state credits, but nothing that would affect any of my clients.The "What's New for 2017" section of the NY state income tax instruction booklets says "A recent law change amended and expanded the definition of NYS source income", but does not explain just how.  When I found out just what the state is talking about I will post it here in a subsequent post.The biggest issue facing those who file New York State income tax returns going forward – both residents and non-residents – involves the changes made beginning in 2018 via the GOP Tax Act, specifically the “conformity” of the state return to the federal return and a NYS requirement that taxpayers who claim the federal Standard Deduction also claim the NYS Standard Deduction.The current NYS Standard Deduction for a single filer is $8,000, compared to the $12,000 federal amount for 2018.  And for a married couple is it $16,050, compared to $24,000.  While NYS does not allow a deduction for state and local income tax or sales tax, it does permit a full deduction for real estate taxes, now limited to $10,000 on the federal return.  Many NJ residents filing a NYS non-resident return and NYS residents pay more than $10,000 in real estate taxes.  And the loss of Miscellaneous Expenses subject to the 2% of AGI exclusion reduces both federal, and conforming NYS, itemized deductions.It has been suggested that if NYS continues to conform to the new federal rules beginning in 2018 taxpayers who file NYS returns could see a $1.5 billion increase in state tax.New York is not alone in having to fact this problem.  If the 41 states with an income tax almost all of them at least partially base taxable income on the federal return.  New Jersey and Pennsylvania are exceptions – they do not follow the federal return and have minimal allowable deductions.&n[...]



THEY LIKE ME, THEY REALLY LIKE ME!

2018-01-29T08:41:21.029-05:00

I did some “horn tootin’” at my other blog – THE TAX PROFESSIONAL – this morning.  So let me continue the shameful tootin’ of my own horn here.  Sorry to be so “Trump-like” – although, unlike Trump, I actually have something to toot about here.I was just notified that I was honored to be selected as #24 on the list of “Top 25 Must-Read Accounting Blogs” at ACCOUNTING DEGREE REVIEW.In compiling the list, the editors “looked for accounting-related blogs that are active, regularly updated throughout the year with knowledgeable, useful, well-written, and engaging content.”I am certainly in good company on the list.FYI – the fact that I am #24 does not imply any ranking.  The blogs are presented simply in alphabetical order by title.Here is what they have said about THE WANDERING TAX PRO -“A wonderfully eccentric, 40-year accounting veteran, Robert Flach takes a down-to-earth approach with The Wandering Tax Pro blog. Writing in an informal, instantly-recognizable voice, Flach takes on current events, politics, and money with a sharp sense of humor and a 'mad as hell' fearlessness. Posts from 2017 have run heavy on the politics, with well-informed consideration (and occasional take-downs) of government shenanigans, especially with tax reform. His up-front title, ‘Like Frankenstein, The Tax Code Must Be Destroyed’, pretty much says it all.”I am truly honored by the selection and thank the site for the inclusion.[...]



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

2018-01-29T05:00:55.572-05:00

This will be the last BUZZ installment until after the end of my tax-season hiatus.  I will return with more BUZZ after April 17. * The word from Michael Cohn at ACCOUNTING TODAY – “IRS to openfiling season Monday {today – rdf} with some extra warnings”. The IRS may begin tax season today, but I do not begin my tax season until February 1st.  Don’t forget to return here on February 1st for the annual posting of THE TWELVE DAYS OF TAX SEASON!* Russ Fox of TAXABLE TALK reports that “IRS & FTB Give Tax Relief to Wildfire and Mudslide Victims in Southern California” -“The IRS extended impacted taxpayers’ deadlines that fell (or will fall) between December 4, 2017 and April 29, 2018 to April 30, 2018. This includes the Form 1040 deadline of April 17th (it will be April 30th for impacted taxpayers). This impacts individuals and businesses who are in Los Angeles, San Diego, Santa Barbara, and Ventura Counties who were impacted by the disasters.”* If you haven’t already found a tax professional to prepare your 2017 returns yet you can begin your search at my website FIND A TAX PROFESSIONAL.* More proof that politicians are idiots in “More States Considering Dubious SALT Charitable Contribution Workaround” from Jared Walczak of the TAX FOUNDATION. Jared correctly points out “what you really need to know” - " ·         Charitable contributions to government are only deductible, per IRS guidance, if the contribution “is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park).” By contrast, these contributions primarily serve a private purpose (reducing federal tax liability through recharacterization), as they do not yield any increased revenue for the state.·         When claiming the charitable deduction, the taxpayer must exclude contributions from which one benefits. For instance, if one purchases a $250 ticket to a benefit dinner, and the fair market value of the dinner is $50, then $200 can be deducted—not $250. In this instance, the taxpayer receives a benefit equal to the entire value of the contribution in lieu of taxes (the corresponding tax credit), wiping out any deductible share.·         Case law and IRS regulations generally require charitable intent for a contribution to be deductible, meaning that the individual does not receive a substantial benefit from the contribution. The sole purpose of the proposed contributions in lieu of taxes proposal is financial gain. (the U.S. v. American Bar Endowment, Hernandez v. Commissioner, Singer Co. v. U.S.)·         The IRS has broad authority to classify a payment or charge as a tax based upon its real nature. If it looks like a tax and acts like a tax, the IRS and the courts could simply say that it is a tax.”* Before I begin my tax filing season blog post hiatus at THE TAX PROFESSIONAL I do a bit of “Horn Tootin’”.   THE FINAL WORDWhat is the true “State of the Union”?A dangerous, deplorable and despicable ignorant and incompetent mentally unstable malignant narcissist, who continues to destroy the credibility, integrity and stature of the White House domestically and internationally on a daily basis, is the President.America will NEVER be great again until Donald T Rump, and all Republicans who publicly support and defend him, are removed from office.TTFN[...]



JUST SO YOU KNOW

2018-01-24T05:00:07.640-05:00

Just so there is no doubt about my opinion of the current President of the United States, let me be crystal clear.Donald T Rump is a deplorable and despicable human being.  He is a worthless piece of shit.He is an ignorant, incompetent, and delusional mentally unstable narcissist and sociopath who is totally unfit to serve as President.His every thought, word, “tweet”, and action is motivated and controlled by his extremely excessive narcissism and delusions of infallibility, and his desire for personal financial gain - and absolutely nothing else.He has no “political” agenda, nor any political beliefs or convictions.  His only agenda is, and has always been, (1) feed ego and (2) line pockets, in that order.  His one and only true belief is “Trump is great and Trump is good”.  As a candidate and as President he has rarely, if ever, made a completely truthful statement to anyone about anything.  It is impossible to believe a word that comes out of his mouth.Trump has never shown any respect for anyone or anything, and, despite the office he holds, he does not deserve any respect from anyone. I will constantly and consistently vocally and aggressively oppose and denounce Donald T Rump the man via any venue available to me until he is removed from office.  I do not oppose and denounce Trump because he is an alleged Republican or conservative – he is neither.  My opposition is not political – it is patriotism.  I join millions of Americans – Democrats, Republicans, and Independents, liberals, moderates, and conservatives – who oppose and denounce Trump and call for his immediate removal from office.Got it?TTFN[...]



A LITTLE THIS-A, A LITTLE THAT-A

2018-01-23T05:00:12.209-05:00

+ I owe an apology toMcDonald’s, Burger King, Wendy’s, Taco Bell, etc. for using them in a description of Henry and Richard and other commercial tax return mills of that ilk.I have always said that H+R et al “charge gourmet restaurant prices for fast food service”.  Basically, I am observing that Henry and Richard, and the others, ain’t cheap, or even reasonable, and the fees are certainly not commensurate with the service.  But comparing the service at tax preparation chains to that received at fast food chains is not fair – nor true.Prior to being diagnosed with diabetes I was a frequent patron of McDonald’s, Burger King and Wendy’s.  For the most part, I found the service provided by these chains to be most definitely “appropriate”.  And, again for the most part, I most certainly received value for my money.  Those who use tax preparation chains will NOT be able to say the same thing when describing their experience.And I must point out that nobody at McDonalds, Burger King or Wendy’s tried to force me to buy fries or onion rings that I neither wanted nor needed.So, more appropriately, H&R et al “charge gourmet restaurant prices for service that is inferior to the service you get at a fast food chain.”Of course, to be fair, I must always include in my assessment of tax preparation chains the following statement –It may actually be possible that the best tax preparer, at the best price, for your particular situation is an H+R Block, or other chain, employee.  But this is only because of the individual education, experience, ability, temperament, and other factors that are specific to that individual preparer or perhaps that unique and specific franchisee.Hey, it is better to be safe than sorry.  Bottom line - don’t use Henry and Richard or another chain to have your 2017 income tax returns prepared.  If you are looking to find a tax pro you can start here.+ Hey fellow tax pros – did you see Monday’s post at THE TAX PROFESSIONAL?+ This past Sunday was the first payroll I processed for a business client using the new tax withholding tables that were revised to reflect the changes of the GOP Tax Act.  I was curious to see if employees were actually getting any more money in their paychecks.The gross payroll – total wages paid - for 20 employees for the 2-week pay period was up about $3,600 from the January 8th payroll, but the federal income tax withholding was $1,050 less.  So, there actually was more money in the paychecks.However, the pay checks of the two highest paid employees, including the millionaire owner of the business, with the same gross income for the two payroll periods being compared, were increased by over $750 due to reduced federal income tax withholding.  Obviously, the increases in the paychecks of the lower paid employees were small. I do worry, being cynical, that the withholding tables are a bit too “generous” to try to prove that serial liar Donald T Rump was telling the truth for once when he said workers would see increased paychecks thanks to the Act.  I expect that, while individual paychecks will be slightly higher, 2018 tax return refunds may be lower, or balances due higher, especially for employees who live in New Jersey, as the employees of the above client do. I am not alone in my concerns.  In “Democrats raise concerns about IRS withholding tables” at TAXPRO TODAY Michael Cohn tells us (highlights are mine) -“The ranking Democrats on the tax-writing House Ways and Means Committee and Senate Finance Committee are worried the Internal Revenue Service might succumb to political pressure by releasing withholding tables this year that cause employers to withhold too little in federal taxes from their employees’ paychecks to make it appear the tax cuts are larger than they really are, with[...]



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

2018-01-22T06:32:17.777-05:00

* Over at GO BANKING RATES Michael Keenan gives us the “Average Tax Return and Tax Refund Schedule for 2017”.One important date to note –   “Feb. 27, 2018: If you’re claiming the earned-income tax credit or need to apply for the child tax credit, you’ll have to wait longer. The IRS expects refunds for tax returns claiming those tax credits to be available starting Feb. 27, at the earliest. If you’re claiming either credit, that means the IRS holds back your entire refund — not just the portion connected to the specific tax credit.”* Staying with that topic – JDSUPRA lists “Six Reasons to Get Your Tax Return Prepared Early”, all good ones. * Ken Berry (not the actor – showing my age again) states the obvious in “2018 Tax Reform: Pass-Through Income Deduction More Complex Than Thought” at the CPA PRACTICE ADVISOR.   * Last week’s “Ask The TaxGirl” at FORBES.COM dealt with “Claiming A Tax Refund When You Owe Tax”. Some good stuff in KPE’s answer (highlights are mine) –“I am going to assume further that you filed your 2016 tax return early based on an estimate or last pay stub because you wanted your refund quickly.Not only is that a bad idea, it's against the rules: The Internal Revenue Service (IRS) specifically bars tax preparers from e-filing your tax returns without receipt of forms W-2, W-2G and 1099-R. And while there are some tax preparers who will do anything for a dollar, I would advise you to find a tax professional who is willing to explain what can happen to you when you file without the right documentation.”* And in another “Ask The Taxgirl” post KPE tackles “The $10,000 SALT Cap & Vacation Homes”.Kelly says that property taxes paid on a personal use vacation home can be included in the $10,000 maximum deduction.So, it appears you can deduct up to $10,000 in a combination of property taxes and state and local income or sales taxes on Schedule A for 2018 – 2025.  If the property taxes on your primary personal residence are $6,000, and you have a vacation property with property taxes of $3,000, you can deduct up to $1,000 of state and local income or sales taxes to come up with the maximum $10,000. * Let us make it a TaxGirl “trifecta” with the good news that “Mike 'The Situation' Sorrentino Expected To Plead Guilty To Tax Charges”.  Thankfully the government is spared the cost of a trial.No surprise about the tax evasion – and getting caught. All these reality tv "celebrities" (including the one in the White House) are merely self-absorbed and self-important idiots with limited intelligence.* Did you know that if you owe too much money to your Uncle Sam the IRS can revoke your passport, or deny your passport application or renewal?   Also at FORBES.COM, Robert W Wood explains “How Overdue Taxes Can Jeopardize Passports”.* The TAX FOUNDATION reports on the "Summary of the Latest Federal Income Tax Data, 2017 Update" - “data on individual income taxes for tax year 2015, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.”Curious about whether the wealthy are paying their “fair share” of taxes?  The summary points out that (highlights are mine) -“The top 1 percent paid a greater share of individual income taxes (39.0 percent) than the bottom 90 percent combined(29.4 percent).”And - “In 2015, the top 50 percent of all taxpayers paid 97.2 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.8 percent.”THE FINAL WORDSPart I -The ridiculous Turbo Tax tv ads seem to be saying that taxpayers should not be afraid to use TT software to prepare their tax returns.This is obviously not true.  Individuals who use a “box” to self-prepare their 1040 need to be afraid that the return [...]



WHAT'S NEW ON THE 2017 NJ-1040

2018-01-19T05:00:48.226-05:00

While the actual 2017 NJ-1040 is not yet available at the NJDOT website, the 2017 Instruction Booklet and just about all other 2017 forms and schedules can now be accessed there.Based on the instructions there appears to be only one change to the composition of the actual NJ-1040 form.  In the section for exemptions a new Line 12 (c) has been added for the new $3,000 Veteran’s Exemption.  The appropriate amount – $3,000 if the taxpayer or a spouse qualifies, or $6,000 if both spouses qualify – is included in the deduction on Line 29 for exemptions.A taxpayer who is “a veteran honorably discharged or released under honorable circumstances from active duty in the Armed Forces of the United States, a reserve component thereof, or the National Guard of New Jersey in a federal active duty status” by the last day of 2017 is eligible for a $3,000 exemption on his or her NJ state income tax return.  This exemption is in addition to any other exemptions the taxpayer is entitled to claim and is available on both resident and nonresident returns. The exemption can be claimed by both spouses on a joint return if they qualify, but the exemption cannot be claimed for a domestic partner or dependents. You must provide a copy of Form DD-214, Certificate of Release or Discharge from Active Duty, or other appropriate documentation, such as a Form DD-256 or a driver’s license with veteran status, which is a license which has the word “VETERAN” on it.   the first year you claim the exemption. This form does not need to be provided in subsequent years.  The United States National Archives and Records Administration can assist with obtaining a copy of your DD-214.You can certify for the exemption in advance by sending a copy of your DD-214 and a Veteran Exemption Submission Form to the Division before you file, which may help process your return faster. Mail a copy of your DD-214 and the submission form to The New Jersey Division of Taxation, Veteran Exemption, PO Box 440, Trenton, NJ 08646-0440 or fax your DD-214 and the submission form to 609-633-8427.If you do not pre-certify before you will need include a copy of your DD-214 or other acceptable documentation with the filing of your NJ state return. Back to the NJ-1040 – the only other change is there is a new fund to which you can contribute a portion of your refund on Line 64 – the New Jersey Yellow Ribbon Fund (Code = 23).    One thing that I was unsure about prior to seeing the 2017 instructions concerned the “Other Retirement Income Exclusion”.  I was not sure that this was available up to the new increased basic “Retirement Income Exclusion” amounts, or if it remained at the old limits.  The instructions clarify that the increased Retirement Income Exclusion amounts – now $30,000 for Single and Head of Household filers, $40,000 for Married, or “Civil Union” couple, Filing Joint Return filers, and $20,000 for Separate filers, twice what it was on the 2016 NJ-1040 – also apply to the "Other Retirement Income Exclusion".  The introductory letter from NJDOT Acting Director John Ficara in the 2017 instruction booklet says -“The pension and/or other retirement income exclusion amount is being increased over a four-year period. This year, you may be eligible for an exclusion of up to $40,000.”And the “Worksheet D: Other Retirement Income Exclusion” shows the new increased Retirement Income Exclusion amounts in the calculation.So even if you have absolutely no pension income, if you, and/or your spouse or civil union partner, were 62 or older on December 31, 2017, your gross income on Line 26 is $100,000 or less, and your total income from wages, self-employment, partnerships, and sub-S corporations is $3,000 or less, you do not have to pay any NJ [...]



FYI - THE NEW KIDDIE TAX

2018-01-18T07:42:53.493-05:00

Under the GOP Tax Act, effective with tax year 2018the “Kiddie Tax” is no longer calculated based on the parent’s income, and the income of siblings is also no longer a part of the calculation.The “old” law added a child’s “excess” net investment to the net taxable income of the parent(s) when calculating the tax, and the income of all dependent children was taken into consideration in the calculation.I must point out - there is no change to the Kiddie Tax for the 2017 tax return that will be prepared in the next few months.  The 2017 Kiddie Tax is calculated in the same way as the 2016 Kiddie Tax.And a reminder - the Kiddie Tax applies, in 2017 and 2018, to dependents who are a full-time college student under age 24.The Earned Income – W-2 income and net earnings from self-employment - of a dependent “child” subject to the Kiddie Tax is taxed at the Single tax rates.  Net unearned income – basically investment income - in excess of $2,100 is taxed using the tax rates for Estates and Trusts.Here is the new tax rate schedule for 2018 for Estates and Trusts -If taxable income is = the tax is:Not over $2,550 = 10%Over $2,550 but not over $9,150 = $255 plus 24% of the excess over $2,550Over $9,150 but not over $12,500 = $1,839 plus 35% of the excess over $9,150Over $12,500 = $3,100.50 plus 37% of the excess over $12,500 While this initially appears to result in higher taxes on the “excess” investment income of dependent children, like what you’re liable to read in the Bible, it ain’t necessarily so.  It depends on the amount of income subject to the kiddie tax and the parents' tax bracket.This change does, however, somewhat simplify the calculation of the Kiddie Tax, which, as a tax preparer, has always been a bit of a PITA in the past, especially when the income of several dependent children was involved.TTFN[...]



INFORMATION RETURNS

2018-01-17T05:00:29.323-05:00

Soon you will be receiving the information forms you will need to prepare your 2017 tax returns in the mail – W-2s, 1099s, 1098s, K-1s, etc.   Here is a list of the forms you could be receiving –Income Related Documents:•  Form W-2 = wage and salary income•  Form W-2G = gambling winnings•  Form 1099-A = foreclosure of a home•  Form 1099-B = sales of stock, bonds, or other investments•  Form 1099-C = canceled debt•  Form 1099-DIV = dividends•  Form 1099-G = state tax refunds and unemployment compensation•  Form 1099-INT = interest income•  Form 1099-K = business or rental income processed by third party networks•  Form 1099-LTC = benefits received from a long-term care policy•  Form 1099-MISC = self-employment and other various types of income•  Form 1099-OID = original issue discount on bonds•  Form 1099-PATR = patronage dividends)•  Form 1099-Q = distributions from an education savings plan•  Form 1099-QA = distributions from an ABLE account•  Form 1099-R = distributions from retirement savings plans•  Form 1099-S = proceeds from the sale of real estate•  Form 1099-SA = distributions from health savings accounts•  Form SSA-1099 = Social Security benefits•  Form RRB-1099 = Railroad retirement benefits•  Schedule K-1= income from partnerships, S corporations, estates, or trusts  Deduction Related Documents:•  Form 1097-BTC = bond tax credit•  Form 1098 = mortgage interest•  Form 1098-C = charitable contribution of vehicles•  Form 1098-E = student loan interest)•  Form 1098-MA = homeowner mortgage payments•  Form 1098-T = tuition for higher educationMedical Coverage Documents:•  Form 1095-A = Health Insurance Marketplace Statement•  Form 1095-B = Health Coverage•  Form 1095-C = Employer-Provided Health Insurance Offer and Coverage  The Form 1095-B and 1095-C are NOT necessary to prepare your returns - so do not hold up doing so, or giving your “stuff” to your tax preparer, until these arrive.  These forms may not arrive in the mail until mid-March.  However, Form 1095-A is most definitely needed to prepare your return. Most information returns are required to be delivered to you by January 31st.  However, Form 1099-B, Form 1099-MISC reporting attorney fees and “substitute payments”, and Form 1099-S are required to be delivered by February 15th.  The deadline for filing partnership returns, and corresponding K-1s, is now March 15th, but the partnership may request an automatic extension until September 15th.Brokerage houses (Merrill Lynch, Wells Fargo, UBS, etc) will usually provide a “Consolidated 1099 Statement” that combines the information of 1099-DIV, 1099-INT, 1099-OID, and 1099-B.  There is an excellent chance that the brokerage will issue at least one, if not two, corrected statements.  The final corrected 1099 may not arrive until mid-March.Many states no longer send out Form 1099-Gs for state tax refunds and unemployment compensation.  You will need to go to the website of your state's tax department or unemployment agency to download these forms.  State tax refunds are not necessarily taxable, but unemployment compensation is.As you receive information returns you should check the amounts reported on the forms against your own records.  And it is important to verify that the Social Security numbers on all forms are correct.  If you discover an error, or something you don’t understand[...]



ATTENTION NEW JERSEY TAXPAYERS

2018-01-16T05:42:06.994-05:00

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[...]



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

2018-01-15T06:06:49.333-05:00

* 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 shitho[...]



TRUMP MUST GO!

2018-01-12T05:00:35.567-05:00

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[...]



JUST SAYING – INCREASING THE MARRIAGE TAX PENALTY

2018-01-11T05:43:05.542-05:00

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 CAN HAVE A ROTH IRA YOU SHOULD HAVE A ROTH IRA

2018-01-10T05:00:55.883-05:00

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/s[...]



LOOKING FOR A TAX PROFESSIONAL?

2018-01-09T05:00:02.894-05:00

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[...]



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

2018-01-08T07:13:26.497-05:00

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, www.tigta.gov, or call TIGTA at 800-366-4484;You can also file a complaint with the Federal Trade Commission at www.FTC.gov.  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[...]



WHO MUST FILE A 2017 TAX RETURN?

2018-01-05T05:00:59.599-05:00

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 [...]



SIMPLIFICATION AND COMPLEXITY FOR TAXPAYERS

2018-01-04T05:00:41.198-05:00

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[...]



A VERY IMPORTANT MESSAGE FOR JOURNALISTS AND BLOGGERS

2018-01-03T05:50:46.524-05:00

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[...]



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

2018-01-02T05:00:34.973-05:00

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[...]



HAPPY NEW YEAR!

2018-01-01T01:00:38.473-05:00




LET US PRAY THAT 2018 
BRINGS THE REMOVAL 
OF MENTALLY UNSTABLE 
MALIGNANT NARCISSIST 
DONALD T RUMP 
FROM 
THE WHITE HOUSE!





LET US PLEASE CALL A SPADE A SHOVEL!

2017-12-29T10:00:03.101-05:00

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[...]