THE 2021 SOCIAL SECURITY INCREASES

 

The Social Security Administration has announced the Cost-of-Living Adjustments (COLAs) for calendar year 2021.

“Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 1.3 percent in 2021.

The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020. (Note: some people receive both Social Security and SSI benefits).”

And

“The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800.

The  earnings limit for workers who are younger than "full" retirement age (see Full Retirement Age Chart) will increase to $18,960. (We deduct $1 from benefits for each $2 earned over $18,960.)

The earnings limit for people reaching their “full” retirement age in 2021 will increase to $50,520. (We deduct $1 from benefits for each $3 earned over $50,520 until the month the worker turns “full” retirement age.)

There is no limit on earnings for workers who are "full" retirement age or older for the entire year.”

 

Click here for the Fact Sheet of 2021 Social Security Changes.

 

The increase of the Social Security tax earnings threshold to $142,800 means the maximum amount of Social Security tax withholding for 2021 is $8,853.60.  And the maximum Social Security component of the self-employment tax for 2021 is $17,707.20.  

 

TTFN

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

 

I have finished the last of the GDEs – and I am done with 2019 tax returns for the year.  Thank God it’s over!

 

* A timely reminder from the NATP BLOG – “Don’t Miss the Oct. 15th Tax Extension Deadline”.

 

* And Kay Bell, the yellow rose of taxes, gives us “8 tax tips to meet the Oct. 15 filing extension deadline" at DON’T MESS WITH TAXES.

 

* October 15^th is the deadline for filing another government form – the FBAR (not to be confused with FUBAR, which is the official acronym for the US Tax Code).  Russ Fox of TAXABLE TALK discusses the form in “Just File the FBAR”.

 

The taxpayer, or rather foreign investor, if responsible for filing this form.  It is NOT a part of the 1040 filing and NOT the responsibility of your tax preparer.  I personally do NOT prepare FBAR forms for my clients – I have enough to worry about with the actual 1040.

 

* After voting for Joe Biden and the Democratic candidates for Congress on November 3rd you may also have to vote on a state tas issue.  The TAX FOUNDATION identifies "State and Local Tax Ballot Measures to Watch on Election Day 2020".

 

* Returning to the NATP BLOG we find some good advice for those who have tied, or will tie, the knot in 2020 in “A tax checklist for newly married couples”.

 

* The FORBES.COM "TaxGirl" Kelly Phillips Erb reports "IRS Extends Stimulus Check Deadline To November 21" -

 

“The Internal Revenue Service (IRS) has extended the deadline to register for your stimulus check to November 21, 2020. This new date gives you an additional five weeks past the previous October 15, 2020, deadline.”

 

* With all the natural disasters America is dealing with (besides the unnatural disaster of the Trump presidency) you should check the IRS “Tax Relief in Disaster Situations” page for updates if you are in an affected area.

 

* Ashlea Ebeling deals with an issue some taxpayers may be faced with in the pandemic at FORBES.COM - “Laid Off With Money Left In A Dependent Care FSA? Here’s Help”.

 

TTFN

THE SAD TRUTH

 

Prior to 2017 I never judged a person’s character, integrity or intelligence based on their political affiliation.  I may have disagreed with individuals, including family and friends, about politics – but it was philosophical and ideology and policy related.  Traditional Republican and Democratic and true conservative and liberal beliefs, ideology and policies, while differing, were all legitimate beliefs and options to issues and problems. 

A person may have been, in my opinion, wrong in believing in something or supporting a specific policy or program, but it did not make them any less of a person or any less intelligent. 

My only real concerns up until 2017 was with the so-called “evangelicals” of the “religious right”. 

But it is different today.  

Trump has proven himself with every word, tweet and deed that he is a totally worthless piece of trash, completely devoid of humanity and integrity, and completely devoid of ethics and morality.  It is so obvious that he is totally self-absorbed, ignorant, incompetent, delusional, and unstable and he clearly does not care about anyone or anything but himself.  He has no political ideology or philosophy.  His only belief of any kind is “Trump is great and Trump is good” and his only agenda is feeding his ego and lining his pockets.  This has been proven again and again beyond the shadow of any doubt.

It is literally impossible for me to conceive how anyone with any intelligence could support and defend Trump – unless they were a racist and a bigot or they had no conscience.  It has nothing whatsoever to do with political ideology or philosophy.

Sadly, supporting and defending Trump’s Presidency does make you less of a person or less intelligent.

For the rest of my life I will judge a person’s character, integrity and intelligence based on whether or not they continually supported and defended Trump and voted for him in 2020. 

And it has nothing whatsoever to do with political ideology or philosophy.

BETTER LATE THAN NEVER - NJ PASSES STATE BUDGET

 

New Jersey recently passed its 2020-2021 budget, several months late due to the pandemic.  Here is the updated word, from the NJ Division of Taxation website, on the property tax relief programs and state income tax.

“2019 Senior Freeze (Property Tax Reimbursement)

The Governor's budget fully funds the 2019 Senior Freeze program. Payments are expected to be paid to eligible taxpayers beginning on October 15, 2020.

2017 Homestead Benefit

2017 Homestead Benefit payments will be paid to eligible taxpayers beginning in May 2021.  {The 2017 Benefit was applied for in 2019 and would normally have been distributed in May of 2020 - rdf.}

2020 Income Tax Rate and Withholding Instruction for Income Between $1 Million and $5 Million

New legislation enacted September 29, 2020, made several changes to the New Jersey Gross Income Tax Act as part of New Jersey's Fiscal Year 2021 budget. The new law increases the Gross Income Tax rate for income between $1 million and $5 million and provides a new withholding rate for the remainder of 2020.

Effective January 1, 2020, the tax rate on that income bracket increases from 8.97% to 10.75%, regardless of filing status. Income over $5 million is already subject to this rate.

Effective immediately, employers must withhold Income Tax at the rate of 21.3% from salaries, wages and other remuneration in excess of $1 million, but not in excess of $5 million, during the taxable year. This higher withholding rate allows taxpayers affected by the rate increase to "catch up" on their withholdings for the year since the new tax rate is retroactive to January 1.

The Division of Taxation will not impose interest or penalties for insufficient payment of estimated tax and/or withholdings that may be due before September 29, 2020, if the underpayment is a result of the new tax rate.”

BTW – did you know I have written the only book available (that I know of) on tax planning for and preparation of the NJ-1040 state income tax return – THE JOY OF AVOIDING NJ TAXES?  The cost of this valuable resource for NJ taxpayers is only $10.95 delivered as a pdf email attachment.  A print version, sent via postal mail, is also available for $15.45.  An e-book version is also available for Kindle from Amazon.com.  Click here for details on this book.

FYI, the pdf or print version includes several valuable schedules and worksheets but the e-book version does not.  Email me proof of purchase of the e-book version from Amazon.com and I will send you the forms and schedules as a pdf email attachment free of charge. 

And members of NATP get a 25% discount on the pdf or print version (not the e-book version)!  Just include your NATP membership number with your order.

TTFN

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

* Did you make a political contribution this year?  The TURBO TAX BLOG answers the question "Are Your Political Campaign Contributions Tax Deductible?" (highlight is mine) -

“Though giving money to your candidate of choice is a great way to get involved in civic discourse, donations to political candidates are not tax-deductible. According to the IRS: ‘You can’t deduct contributions to organizations that aren’t qualified to receive tax-deductible contributions, including political organizations and candidates.’ This includes Political Action Committees (PACs) as well.”

 

If you donated to Biden/Harris or a Democratic candidate for Congress – thank you!  If you donated to Trump or a Trump enabler, I expect by now you know what I think of you.

 

* Tony Nitti explains in detail the rules for deducting real estate losses in “President Trump Used Rental Losses To Reduce His Taxable Income: But Can You?” at FORBES.COM.

 

Before getting into the meat of the post Tony makes a sad but true observation (highlight is mine) -

 

“And likewise, if the returns show —as they do — a terrifying cocktail of debt, tax avoidance, and conflict of interest — not a soul who has supported President Trump is suddenly going to say, ‘this is where I draw the line’.”

 

*  Jason Dinesen tells you “What to Do When YourEx Wrongly Claims the Kids” at DINESEN TAX TIMES.

 

The bottom line of Jason’s post (this time the highlight is Jason’s, not mine) – “Drill this into your head: THE IRS DOESN’T CARE ABOUT YOUR DIVORCE DECREE!”

 

* From THE TAX FOUNDATION – “10 Common Tax Myths, Debunked”.

 

One myth they missed – all CPAs are Form 1040 experts.

 

* Another list, this one from Kay Bell at DON’T MESS WITH TAXES – “6 tax moves to make this October”.

 

* One more from Kay before I go – “Garage sale proceeds typically aren't taxable”.

 

You wouldn’t think people are having garage sales during the pandemic, but apparently some people and organizations are.  At the end of her post Kay provides links to 5 articles that discuss “how to hold COVID-safe yard sales”.

 

THE LAST WORD

 

NO sympathy.

 

NO care or concern.

 

NO thoughts and prayers.

 

I DO NOT wish Trump a speedy recovery. 

 

To be honest, I am actually pleased that Trump has been infected.  I would be a hypocrite, like the Republicans in Congress, if I did not acknowledge this pleasure.  If there is anyone who deserves to be infected with COVID-19 it is Trump.

 

Trump’s infection, and the infection of those in his circle of enablers and explainers, is a direct result of Trump’s, and his Administration’s, incompetent handling of the virus and Trump’s, and his Administration’s, total disregard for necessary health and safety precautions and total disregard for how their actions affect others. 

 

You get what you give.  Trump has never shown any genuine sympathy or concern for anyone in any situation, especially the victims of this virus.  He does not deserve to get any sympathy or concern from anyone.

 

TTFN

THE BOTTOM LINE

 

Trump’s debate performance has once again proven beyond a shadow of doubt that he is a totally worthless piece of trash, completely devoid of humanity, integrity and intelligence.

The term literally is over-used today – but it is very literally impossible for any individual with any degree of intelligence to listen to Trump speak and think he is fit to hold ANY office or position of power anywhere.  

After last night it is more obvious than ever - anyone who continues to support Trump and his Administration and will vote for Trump for President is either a moron, a racist or has absolutely no conscience - or, like Trump himself, all three.

TRUMP'S TAX RETURNS AND DEPRECIATION - THE RETURN OF MY CONTROVERSIAL TAX REFORM PROPOSAL

The New York Times has revealed that Trump used excessive business losses to avoid, and evade, federal and state income taxes.

A portion of the losses come from fraudulently claiming personal expenses as business deductions.  Trump has clearly cheated on his tax returns and should be indicted for tax fraud.  But a large percentage of Trump’s losses comes from depreciation of real estate - a perfectly legal but not, in my personal opinion, “legitimate” business tax deduction.

While it is truly a controversial opinion, as I have said often in the past, here and elsewhere, I sincerely believe that we should do away with the business tax deduction for the depreciation of real property - fixed property, principally land and buildings.  The depreciation of real property is a “phantom” expense and distorts the economic reality of the investment activity.  It allows an investor with an actual economic profit to claim a deductible tax loss and avoid, or in my opinion evade, income taxes - at least temporarily (depreciation must be "recaptured", sometimes at a lower tax rate, when the property is sold).

Let me repeat my argument.

According to the IRS, depreciation is “an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property”.

Let us look at depreciation from the point of view of the Income Statement of a business or rental activity. Basically, if you purchase an asset that will last more than one year you spread the cost of the asset over its “useful life”. You purchase a new computer. You certainly do not purchase a new computer each year – you expect that it will continue to provide service for several years. So, you divide the cost of the computer over a period of years to reflect this fact, and to properly report the “economic reality” of the purchase.

If you deducted the full cost of the computer in the year of purchase this would distort the true cost of doing business. Since you generally purchase a new computer every five years, deducting the cost over a five-year period “more better” represents the cost of operations. But you do not purchase a new office building every 27.5 or 39 years because the old building is obsolete or no longer functions.   

Another way to look at depreciation is from the Balance Sheet perspective. When you purchase an asset that asset has value to you. You trade the asset of cash for the asset of a computer. If you sold your business the value of the computer would be included in the value of the business. As an asset ages its value drops. A two-year old computer does not have the same value in the market as a comparable brand-new computer. Depreciation is used to reflect the drop-in value of the asset.  

A building has a life of much more than the 27.5 or 39 years over which depreciation is currently allowed. The building I lived in several years ago was 100 years old at the time, and is still going strong. And, for the most part, the value of real estate does not drop in value over the years. If properly maintained its value will generally increase. My parents purchased their first home for $13,000 and sold it many years later for $75,000 (and they were robbed). Granted real estate values can go down due to market conditions, but this is the exception and not the rule.  So, for all intents and purposes, the value of real estate does not “depreciate”.     

Real estate is an investment, just like stocks, bonds, mutual funds, etc. You invest in rental real estate because you expect the building to increase in value over time, often more so than stocks and mutual funds, and because it generates “dividends” in the form of net “in pocket” rental income. The deduction for depreciation of real estate is like allowing those who purchase stock to depreciate the purchase price of the stock as a deduction against the dividends paid out.  

Depreciation of real property is a “tax expenditure” – “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.’’  This deduction represents federal, and state, revenue losses in the millions, if not billions, each year.

So, what do you think?

TTFN

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

 

A day late – but hopefully not a dollar short.

 

* Obviously, the big tax story is the NY Times article on moron Trump’s taxes.  Kelly Phillips Erb, while not addressing or commenting on the specific details of the article, discuses “a number of issues raised in the piece that can be confusing for ordinary taxpayers like you and me” in “The Ordinary Taxpayer’s Guide To The Extraordinary Story Of Trump’s Tax Returns”.

 

* It is clearly obvious that Trump cheated on his taxes (he cheats on everything and everyone), wrongly claiming ridiculous amounts of alleged “business deductions” – including $70,000 for maintaining his pathetic comb-over (as I discussed here).  

 

But one item in the NY Times reporting that was quoted in the USA TODAY article “Top seven revelations from New York Times report on Trump income taxes” caught my attention –

 

"Mr. Trump paid alternative minimum tax in seven years between 2000 and 2017 – a total of $24.3 million, excluding refunds he received after filing. For 2015, he paid $641,931, his first payment of any federal income tax since 2010.”

 

The dreaded Alternative Minimum Tax (AMT) is actually federal income tax. 

 

It is implied, and I assume, that at least part of the AMT paid referenced above is included in the $$72.9 million refund that is still being contested by the IRS – so he very likely did not actually “pay” the tax.

 

It is important to state that I have not seen the tax returns referenced in the article.

 

* Kay Bell warns us about "A dozen disaster scam warnings" –

 

“Here are 12 scam avoidance tips, six for catastrophe victims and six for those who want to help.”

 

* And KB reports “Alabama counties blasted by Hurricane Sally get tax relief, deadlines extended until Jan. 15, 2021”.

 

* A reminder – questions about the 2020 IRS Economic Stimulus Payment can be answered at the Services’ “Economic Impact Payment Information Center“.

 

* If you were unable to transmit 2019 Form 1040s electronically via CCH software on September 15^th here is an FYI from CURRENT FEDERAL TAX DEVELOPMENTS – “IRS Will Treat Returns Impacted by CCH Outage Electronically Filed by September 17 as Filed on September 15”.

 

THE LAST WORD

 

How far the once “Grand Old Party” has fallen in my lifetime.

 

The Republican Party in 1956 (from the official Party platform) –

 

“We believe that basic to governmental integrity are unimpeachable ethical standards and irreproachable personal conduct by all people in government. We shall continue our insistence on honesty as an indispensable requirement of public service. We shall continue to root out corruption whenever and wherever it appears.”

 

The Republican Party in 2020 –

 

“We don’t care one ounce about integrity, honesty, honor, ethical standards or irreproachable conduct by elected or appointed government officials.  These things are not important.  The only thing that is important is maintaining the power, feeding the ego and lining the pockets of Trump and pandering to ignorant racists, bigots and white supremacists so they will vote for Republican candidates.”

 

Every Republican in Congress running for re-election must be defeated in November – especially McConnell and Graham.

 

TTFN