Tuesday, June 30, 2015
ALERT - MY GMAIL ACCOUNT HAS BEEN HACKED. DO NOT OPEN ANY ATTACHMENT ALLEGEDLY SENT FROM MY GMAIL ACCOUNT. IN THE FUTURE PLEASE VERIFY WITH ME AT MY YAH00 EMAIL ACCOUNT BEFORE OPENING ANYTHING.
* As if the IRS wasn’t in enough trouble, over at her DON’T MESS WITH TAXES blog Kay reports “IRS Gave Tax-Owing Companies Contracts Worth $19 Million” -
“. . . according to the Treasury Inspector General for Tax Administration (TIGTA), the IRS has violated the federal law that prevents it from doing business with businesses that haven't paid their taxes. The IRS also ignored the other portion of that law, enacted in 2012, that prohibits agency contracts with companies that have been convicted of felonies.
In total, during fiscal years 2012 and 2013 the IRS awarded 57 contracts to 17 corporations that weren't eligible because of their tax debts or prior legal sanctions.”
* John Koskinen was appointed as Commissioner of the IRS to fix the agency after the Tea Party scandal became public. He was described at the time as “an executive who has built his reputation on turning around troubled enterprises”. However things have actually gotten worse at the IRS since his appointment.
Granted the idiots in Congress bare some responsibility for continually cutting the budget – but Koskinen has not proven himself to be an effective administrator.
It has gotten so bad that, according to FOX NEWS, “Republicans Weigh Impeachment for IRS Commissioner”.
My colleague Joe Kristan, author of THE ROTH AND COMPANY TAX UPDATE BLOG, gave Koskinen’s predecessor Doug Shulman the title of “the Worst IRS Commissioner Ever”. The current Commissioner is certainly a close second, if he has not already taken over the title.
* The TAX POLICY BLOG of the Tax Foundation provides us with “A Quick Primer on Personal Income Taxes (with gifs!)”
THE FINAL WORD –
One of my clients is on the list of “N.J.'s Best Burger: 3 Great Spots in Jersey City and Hoboken”!
The Park Tavern on West Side Avenue in Jersey City opened, and became a client of my mentor Jim Gill, in 1972 – the same year that I began as an “apprentice” tax preparer with Jim.
Friday, June 26, 2015
* Fellow tax pros – Have you reviewed, and commented on, my discussion of the proposed “Tax Practitioners Bill of Rights” at THE TAX PROFESSIONAL yet? And have you checked out the MAILBAG Page lately?
* Check out my article “Claiming Dependents: What Happens When Your Kids Fly the Coop?” at HOW MONEY WALKS.
* So long, farewell, auf wiedersehen, good night. Another blog bites the dust. I say good-bye to BOB’S BABBLINGS, but not without providing the answer to my Trivia Challenge.
* Now here’s an appropriate item for a BUZZ post (as Joe Kristan has suggested) – William Perez gives “Tax Advice for Cannabis Entrepreneurs” at ABOUT.COM
* Don‘t know what to get your child as a graduation present. Here’s an idea from Beverly DeVeny of THE SLOTT REPORT – “Give the Graduate a Gift of a Roth IRA”.
Of course the graduate must have earned income - and at least $5,500 to make the maximum contribution.
* And the beat goes on. Jason Dinesen gives us “Part 11: Meet the ‘Single Penalty’” in his series on “Marriage in the Tax Code” at DINESEN TAX TIMES.
If you ask me there should be neither a Single Penalty or a Marriage Penalty in the Tax Code!
* The IRS posts a “Last-Minute Reminder: Report Certain Foreign Bank and Financial Accounts to Treasury byJune 30".
* In case you were wondering, “Yes, Your 529 Plan will Affect Financial Aid”. So says Kathryn Flynn at SAVING FOR COLLEGE.
* I can’t believe that anyone takes self-important fool Donald Trump seriously. But it seem that he will be included in the first Republican debate! I guess they figured the debate needed some comic relief.
THE FINAL WORD –
I recently saw an excellent production of DAMN YANKEES at the Forestburgh Playhouse in (where else?) Forestburgh NY.
The number that opens the second act, THE GAME, could only be sung in the context of the 1950s. Individual members of the Washington Senators sing about how they fought temptation – women, liquor, etc - because they “thought about the game”. Do any of today’s players actually think about the game? Doing so certainly has not helped them fight off temptation? Basically they just think about themselves, as do most professional team athletes today.
The concept of a player selling his soul to the devil, however, would certainly play today.
Tuesday, June 23, 2015
* Fellow tax pros – Have you reviewed, and commented on, my discussion of the proposed “Tax Practitioners Bill of Rights” at THE TAX PROFESSIONAL yet?
* BTW – you can click here to sign a petition in support of the National Society of Accountants created “Tax Practitioner Bill of Rights”.
* No new post up yet at BOB’S BABBLINGS. If you missed it, check out last Monday’s post and enter my Trivia Challenge.
* Kay Bell tells us “Uber Ruling Underscores Contractor vs. Employee Conflict” (Uber is the name of a company, and not an adjective) at DON’T MESS WITH TAXES and advises “Make sure you are classified correctly, since it affects your taxes”.
* Kansas taxpayers be warned. Trish McIntire reports on “The Largest Tax Increase" in the history of the state of Kansas at OUR TAXING TIMES.
* CCH reports “Proposed Regulations Issued on ABLE Act Program Requirements (IR-2015-91; NPRMREG-102837-15)”.
FYI, ABLE is the “Achieving a Better Life Experience Act of 2014”. CCH explains –
“The ABLE Act permits states and state agencies or instrumentalities to establish and maintain a new type of tax-favored savings program through which contributions may be made to the account of an eligible disabled individual to meet qualified disability expenses. These accounts also receive favorable treatment for certain means-tested federal programs.”
Friday, June 19, 2015
* Fellow tax pros - I have a new post at THE TAX PROFESSIONAL that discusses the proposed “Tax Practitioner’s Bill of Rights”. What do you think?
If you haven’t seen last week’s post yet do so now!
* On a similar topic – Michael Cohn reports at ACCOUNTING TODAY that “Senators Introduce Bill to Enhance Taxpayer Bill of Rights”.
Senators Chuck Grassley, R-Iowa, and John Thune, R-S.D. have introduced the Taxpayer Bill of Rights Enhancement Act of 2015. Apparently the act is more a reaction to the “IRS Scandal”, which Prof Paul Caron posts is now in its 771st day (can you say “obsession”). It doesn’t look like it addresses the rights identified in my TAX PROFESSIONAL piece.
* Have you entered by Trivia Challenge at BOB’S BABBLINGS yet? Why not?
* The CCH TAX NEWS HEADLINES tells us “House Appropriations Panel Approves $10.1-Billion FY 2016 Budget for IRS” (highlight is mine) –
“The measure, which passed by a vote of 30 to 20, includes $10.1-billion to fund the IRS for FY 2016, which represents a cut of approximately $838 million, compared to FY 2015.”
This appropriation, which comes on top of FY 2014 cuts to the IRS budget of $526 million, would “would fund the IRS at 2004 levels”.
The FY 2014 budget cuts have caused IRS taxpayer service to be abysmal. Cutting another $838 Million would make it almost non-existent.
This is another reason (as if I needed one) why I will never refer to the members of Congress without identifying them as idiots. These fools continue to force additional inappropriate tasks on the Service, as in the case of Obamacare, but do not provide the proper funding for these tasks.
When the idiots in Congress give the IRS additional tasks it should provide additional specific earmarked funding to pay for them.
I believe that fiscal mismanagement of the budget cuts have added to the drastic reduction in taxpayer service. I think that IRS management purposefully applied much of the budget cuts to taxpayer service to anger the public into complaining to Congress – but that is just my opinion.
* Jeff Stimpson quoted me in his TAXPRO TODAY piece “Retro Grade: What Went Right and Wrong This Tax Season”.
* Jason Dinesen is up to “Part 10: Filing Statuses Arrive in 1948” in his series on “Marriage in the Tax Code” at DINESEN TAX TIMES.
* And Jason begins a new series of blog posts on “Choosing a Business Entity” by defining some “Basic Terminology”.
* Jason gives us a BUZZ trifecta with “Same-sex Marriage and Paycheck Withholdings – An Unpleasant Surprise on 2014 Tax Returns”.
Jason correctly observes –
“Contrary to what the H&R Block and TurboTax commercials imply, there’s no magic that a preparer can work to give people a bigger refund — tax refunds are almost always determined by how much tax was withheld from wages during the year.”
The examples, and the solution, in Jason’s post apply to “traditional” married couples as well as same-sex married couples.
* Thankfully I will not have to deal with this aspect of Obamacare, but in case you do Barbara Weltman asks “How Many Employees Do You Have?" At BARBARA’S BLOG.
What am I talking about? As Barbara explains –
“Under the Affordable Care Act, you can’t rely on a head count. You need to determine an average each month throughout the year for purposes to know whether you’re subject to the employer mandate.”
* That tonsorially-challenged fool is at it again. Political cartoonists and comics everywhere are giving thanks to God. Tony Nitti tell us “Donald Trump Announces Bid For Presidency”.
As I “tweeted” to Kay Bell, I would vote for Homer Simpson for President before I would vote for “noted gasbag” (as Tony aptly describes him) Tronald Dump.
THE FINAL WORD –
Despite the sentiments of the popular song, back in the day when MTV was a legitimate cable station that actually provided legitimate entertainment, the musicians who appeared in the videos did really earn their money (although what they did with some of the money earned can be called into question).
Today it is truly the “featured participants” (I refuse to call them “stars”) of reality tv excrement that get “money for nothing”, and, with nonsense like THE BACHELOR, “chicks for free”
Wednesday, June 17, 2015
Over at the TAX JUSTICE BLOG Kayla Kitson lists “Four Reasons to Expand and Reform the Earned Income Tax Credit”.
I contend that there are at least as many reasons to take the Earned Income Tax Credit out of the Tax Code and instead distribute the benefits through normal existing welfare programs.
Let’s make one thing perfectly clear upfront – the Earned Income Tax Credit is a federal welfare program, perhaps the biggest federal welfare program currently in existence. The direct cost of the EITC to the U.S. federal government was about $56 Billion in 2012.
Actually it is not Kayla but the nonpartisan Congressional Research Service (CRS) that advocates expansion via a recently released “report that makes a strong case for making permanent EITC provisions that are set to expire in 2017 and also improving the credit for low-income workers without children.”
The first reason given for expansion is “EITC Increases Employment”.
I have my questions about this statement –
“There is strong empirical evidence that the EITC increases labor force participation among single mothers. In fact, one study found that 34 percent of the increase in employment for this group between 1993 and 1999 can be attributed to expansions of the EITC.”
As the report suggests in reason #4, which covers the “reform” area of the report, there is indeed “complexity in eligibility rules and credit formulas” for the EITC. In my opinion the only people who truly understand the workings of the EITC are tax professionals and tax cheats.
I really doubt that a person decides to go to work, or work more, because they are aware of the fact that they will receive a bigger refund check from Uncle Sam at tax time. A person decides to work, or work more, because he/she needs the money to feed their family.
In most legitimate EITC cases, at least initially, the qualified individual (I cannot really say qualified “taxpayer” because a large majority of EITC recipients are not tax “payers”) first learns about the EITC in the process of having their tax returns prepared.
I would like to see some concrete proof that individuals actually made the decision to go to work, or to work more, because of the EITC.
Here are my “Four Reasons to Remove the EITC from the Tax Code” –
1. The purpose of the federal income tax is to raise the money necessary to administer the government. Period.
It is not meant to be used for “social engineering” – distributing federal welfare or other social benefit programs or redistributing income – or to discourage or encourage specific behavior (other than possibly to encourage savings, investment, and growth).
2. The benefits of the EITC, and any other government welfare or benefit program distributed via the 1040 (tuition assistance, energy credits, etc), are not received “upfront” when it is needed.
The benefit is actually paid as much as a year “after the fact”. The credit for 2014 is based on 2014 income, but is not distributed until the spring of 2015 after the Form 1040 (or 1040A) has been filed and processed. But the benefit is needed when struggling to pay bills or put food on the table due to low income and reduced earnings, when actually paying for college or trade school, or when actually purchasing energy efficient products.
Unemployment benefits are paid while the person is actually unemployed. And traditional Aid to Families with Dependent Children is paid during the period of low income or un- or under-employment. You do not have to wait 6 months to a year to get your unemployment or traditional welfare payments.
Parents of college age children receive traditional Student Financial Aid at the time when the tuition and fees are due, and when books need to be purchased. You do not have to wait 6 months to a year to get your financial aid, after you have been forced to borrow money to pay for the tuition, fees, and books.
3. The actual cost of federal welfare, and educational assistance, energy incentives, etc, as a percentage of the total budget is distorted.
The costs of benefits distributed through the Tax Code are not counted as expenses of the actual program activity – they are reported as reduced income tax collection. It also distorts federal budget reporting by creating the infamous “47%”. If properly done there would be much fewer Americans not paying any income tax. Benefit recipients would actually be paying tax, but receiving more in direct federal benefits.
4. Probably the most important reason – Tax credits, especially refundable credits, are a magnet for tax fraud.
It has been determined, by various sources at various times, that 1/2 to 1/3 of all EITC claims are incorrect if not outright fraudulent. 1/3 of $56 Billion is almost $19 Billion in money stolen from the federal government. Similar error/fraud rates have been attributed to other refundable credits.
Delivering government benefits through traditional venues would provide for more scrutiny and examination of claims by the appropriate agency. The IRS is not the appropriate agency. And tax preparers should not be forced to become Social Workers (often uncompensated because they do not properly charge EITC clients for the time involved) and determine if a person qualifies for federal welfare.
Here is an additional reason (as if more were needed). The complexity of the EITC, and of the various tuition tax benefits, almost requires claimants to seek paid professional help at tax time. And the recent excessive due diligence requirements for tax professionals preparing returns with an EITC claim could substantially increase the fees charged. So a low income individual, who truly needs the benefits of the EITC, is forced to pay a potentially substantial fee to be able to collect their federal welfare. When a person applies for Aid to Families with Dependent Children does he/she have to pay an “application fee”?
So it seems clear – at least to me - that the Earned Income Tax Credit does not need to be expanded. It needs to be removed from the Tax Code!
Monday, June 15, 2015
I can't go on, I can't go on no more, no!
I have lost all interest and motivation to do GDEs. I am basically sick of looking at 2014 Form 1040s.
Since I returned to my desk on April 20th I have completed and mailed out 45 of the 49 GDEs I requested on April 14th. And there are a few GDEs that the client themselves submitted but have not yet given me their “stuff”. Getting myself to finish the last two GDEs was like pulling teeth – I kept singing that song from ANNIE (the procrastinator’s hymn).
I will complete the very few currently red-filed GDEs (returns I have started, but found I needed additional information) as the missing information arrives – but I am not going to work on any new GDEs that arrive for the rest of the summer.
Obviously I cannot avoid 1040s altogether, as I must respond to IRS and state tax agency correspondence as it arrives. But I want to spend my summer writing about 1040s and not preparing 1040s.
And I want to spend my mornings sitting on the Observation Deck at Lake Wallenpaupack, or under the Narrowsburg Bridge in the Tusten Veterans Memorial Park, reading mystery novels.
I will return to GDE preparation in September.
Friday, June 12, 2015
* I actually could not come up with a topic for discussion for THE TAX PROFESSIONAL this week. Tax pros – any suggestions?
If you haven’t seen last week’s post yet do so now!
* And check out this week’s post at BOB’S BABBLINGS.
* Howard Gleckman tells it like it is in “Obama-Era Tax Reform: RIP” at TAX VOX (the blog of the Tax Policy Center) –
“If you still thought there was any chance Congress would pass tax reform before the next election, you can officially abandon hope.”
It seems I can no longer dream.
Howard reports –
“In an online interview published Sunday on Morning Consult, Senate Majority Leader Mitch McConnell (R-KY) hammered the last nail in the coffin. Asked about his priorities for the rest of the year, McConnell replied, ‘We’re certainly not going to be able to be doing big, comprehensive tax reform with this president. The president is not interested in revenue neutrality, and he’s not interested in treating all taxpayers the same, so I don’t think we’ll get there on comprehensive’.” -
The idiots in Congress have been talking big about the need for genuine and substantial tax reform for about 3 years now – but of course they have done absolutely nothing, and will do absolutely nothing until after the 2016 election (if even then).
It has always been obvious that BO never wanted genuine and substantive reform. His proposals have always been to further complicate the already mucking fess of the Tax Code with expanded refundable credits. He wrongly wanted, and wants, to continue the erroneous practice of distributing government welfare and other social program benefits via the 1040, and equally wrongly using the Tax Code to “redistribute” income.
Read my lips – the purpose of the income tax is to raise the money necessary to fund the administration of the government. Period!
The most we can hope for this year is that the idiots in Congress address the tax extenders before the end of the fall.
* Jason Dinesen continues his answer of the question “Are HRAs Always Appropriate for Sole Proprietors?” with “Part 3”.
* Tax attorney Darrin T. Mish deals with another important question at his IRS PROBLEM SOLVER BLOG - “How Easy Is It For Identity Thieves To Get Your Tax Information?”.
Personal tax return information is NOT public information. Transcripts should be available only to the taxpayer, the Executor of the estate of the taxpayer, and a duly authorized tax professional with a Power of Attorney. The IRS should not be allowed to provide taxpayer information directly to third parties for income verification. If a mortgage company needs a transcript of a tax return it must get it from the applicant.
* The following appeared in the Spring 2015 issue of the NEW JERSEY STATE TAX NEWS -
“The following jurisdictions are conducting tax amnesty programs. During the designated amnesty period, taxpayers have a chance to pay back taxes with reduced (or eliminated) penalty and/or interest. For more information, including eligibility requirements, or to obtain an application, visit the jurisdiction’s website.
Maryland 9/1/15 – 10/30/15 www.marylandtaxes.com
Missouri 9/1/15 – 11/30/15 http://dor.mo.gov/”