WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION

* Check out the December “issue” of THE LAKE REGION SOMETHING.  ‘Nuff said.   

* Taxpros, I still want to hear your comments on my TAXPRO TODAY editorial “Who Speaks for the Tax Preparer".

* Just a reminder – last Friday the IRS released the 2014 standard mileage allowance rates.  Click here.

* Don’t expect any more tax legislation this year – including the annual extension of the extenders.  CCH tells us “Camp Delays Release of Comprehensive Tax Reform Legislation to 2014” –

“With just over a week before the end of the first session of the 113th Congress, House Ways and Means Chairman Dave Camp, R-Mich., has acknowledged that he will not introduce comprehensive tax reform legislation in 2013. Following a closed-door meeting with other lawmakers on December 4, Camp told reporters that work on reform legislation will continue in 2014, but no measure will be marked up this year.”

And last week’s TAXPRO WEEKLY email newsletter from NATP had the following item -

“House Ways and Means Committee Chair Dave Camp, R-Mich., told reporters not to expect a tax reform bill or legislation to renew dozens of tax provisions scheduled to expire at the end of 2013, including:

•The state and local sales tax deduction.

•The deduction for mortgage insurance premiums as interest.

•The deduction for qualified tuition and related expenses.

•The $250 deduction for certain expenses of elementary and secondary school teachers.

•The Work Opportunity Tax Credit.

•The increase and expansion of §179.

•The Research and Experimentation Tax Credit.

•The MACRS 15-year straight line cost recovery for qualified leasehold, restaurant and retail improvements.”

Also on the list is the ability to make a charitable contribution via direct transfer from an IRA to satisfy your RMD requirement.

* Jamaal Solomon of THE TAX FACTOR has posted the second installment of his “Things I Can Learn About Taxes from a Newborn Child” series.

This installment has important advice for both taxpayers and tax preparers. 

 

Tax preparers are not on “24-hour call”.  We are available for tax business during normal business hours.  As JS states – “There is no such thing as a ‘tax emergency’ that needs to be handle on a Sunday afternoon”.

And tax preparers must set guidelines and boundaries for their clients.  You do not need to be available to your clients 24/7.  Do not worry about losing a client.  Clients that will pester you on a Sunday morning or at dinnertime are not worth the agita.

* Barbara Weltman lists “5 Rules for Deducting Business Meals” at ENTREPRENEUR.COM.  

* Did I mention this in a previous BUZZ?  TAX PROF Paul Caron has a BUZZ-like “Weekly Tax Roundup”.  Unlike the BUZZ, and Joe Kristan’s daily tax roundup, Paul’s weekly post has no commentary – just links to Paul’s pick of tax-related posts of interest from the week.

* Speaking of Joe Kristan, over at the ROTH AND COMPANY TAX UPDATE BLOG Joe talks at length about the new final regulations for the convoluted 3.8% surtax on net investment income in “Self-rental, Business Sales Benefit from New Net Investment Income Tax Regulations”.

Just a reminder, in case this tax myth is still making the rounds of emails (I heard fellow patrons at a local bar spewing this nonsense a few months ago) – the surtax on net investment income for higher income taxpayers is NOT a 3.8% sales tax on the sale of your personal residence!

* Tom Herman gives us a good year-end reminder to “Be Careful With the 'Wash-Sale' Rule: It Applies Both Before and After a Stock Sale” in the ASK DOE JONES blog at the Wall Street Journal.

Let me add another reminder/warning – an automatic dividend reinvestment is a purchase and can trigger a wash sale.

 

And the wash sale rules do not apply if you sell an investment at a profit.

* TAXPROF Paul Caron reports that “ District Court Upholds IRS's Authority to Charge PTIN Fees”.

The question is not whether or not the IRS can charge tax preparers a fee to renew their PTIN (Preparer Tax Identification Number) – the question, as I ask at TAXPRO TODAY, is “Why Is There Still an Excessive PTIN Fee?” when it is no longer needed to fund the IRS mandatory RTRP regulation regime that was shot down by the court.  $10 maybe – but not $63.

THE FINAL WORD –

I noticed a tv ad from our friends Henry and Richard recently.  They want you to come into their office now.

But they do not want you to come in to discuss year-end tax planning strategies, which would be a legitimate reason to visit a tax preparer at this time of the year.  They want you to come in to get an expensive paycheck loan, a variation on their usurious Refund Anticipation Loans of the past. 

Here’s some good advice – just say no to H+R’s, or anyone else's, paycheck loans.  And, during the upcoming filing season, just say no to overpaying H+R to prepare your tax returns.

TTFN

HERE'S A THOUGHT - A FEW MORE CENTS ON A VOLUNTARY CREDENTIAL FOR TAX PROS

Here is a thought.

 

As I mentioned in my post on the “Should the RTRP Survive? My More Than 2 cents Worth”, the Accreditation Council for Accountancy and Taxation, a non-profit independent testing, accrediting and monitoring organization established in 1973, currently offers the Accredited Tax Preparer (ATP) and Accredited Tax Advisor (ATA) credentials.  The ATP is for 1040 preparers and the ATA is for preparers of estate and trust and business entity returns.  The Council also offers two additional accounting-related credentials.

 

Both designations require the applicant to pass a 100 question multiple-choice test, and the ATA also requires five years of experience in tax preparation, compliance, tax planning and consulting, of which 40% must be in tax planning and consulting.

 

The exams are conducted by PSI, an independent organization that provides assessment and evaluation programs for businesses, state governments and professional associations. PSI develops a range of assessments for pre-employment selection, evaluation, placement, and licensure and certification.  The cost of the exam for each credential is $200 plus a $50 registration fee.

 

ACAT offers online ATP and ATA preparatory courses and practice exams.

 

Maintaining the ATP credential requires 72 hours of CPE during each three-year cycle or 24 CPE hours per year.  The 72 hours includes at least 68 hours in taxation or related subjects (accounting, finance, technology, business law) or subjects that relate to your particular area of practice or employment plus 4 hours in ethics (better than 2 hours per year).  The ATA credential calls for 90 hours of CPE during each three-year cycle or 30 CPE hours per year, again 4 of the 90 being in ethics.  I personally believe these CPE requirements are more appropriate than those under the IRS mandatory RTRP regime.

 

There is an $80 annual renewal fee for each credential, or $125 if you possess both.  Neither credential allows the holder to practice before the IRS.

 

ACAT is “affiliated” with the National Society of Accountants (the “other” NSA). The NSA website explains that the ACAT was “established in 1973 by NSA”.  I expect the ACAT is administered by an NSA staff person. 

 

If the IRS does not decide to go ahead with a voluntary RTRP program after it loses the appeal of Loving v IRS, I have proposed an independent industry-based organization to administer a voluntary RTRP-like tax preparer credential in my ACCOUNTING TODAY editorial “It’s Time for Independent Certification for Tax Preparers”.  The ACAT could be this organization by severing its direct ties to NSA to become a truly independent organization and expanding its affiliations to include, along with NSA, the National Association of Tax Professionals, the National Society of Tax Professionals, and any other existing legitimate non-profit tax preparer membership organizations, with representatives of these organizations given seats on its Board of Directors.

 

While the IRS would not necessarily endorse the ACAT credentials, nor would it allow those possessing these credentials to practice before the Service, it could be asked to acknowledge that the ATP and ATA designations are legitimate in representing the level of tax competence and currency of those who possess and maintain them. 

 

The bottom line - why go through the long and expensive process of creating a totally new organization when one already exists.

 

I have not discussed this idea with any ACAT or NSA representatives, but certainly welcome their comments on this idea.

 

So what do you think?

 

TTFN

THIS JUST IN - 2014 STANDARD MILEAGE ALLOWANCE

The IRS has announced the new 2014 standard mileage allowance rates for business, charitable, medical, and moving use of an automobile.

 

Effective January 1, 2014, the standard mileage rates are –

 

• Business Mileage = 56 cents per mile

 

• Medical and Moving Mileage = 23.5 cents per mile 

 

• Charitable Mileage = 14 cents per mile 

 

The portion of the business standard mileage rate that is treated as depreciation is 22 cents per mile.

 

The 2014 business and medical and moving rates are a half cent less than those that apply for 2013 mileage.

 

The charitable rate is set by the idiots in Congress, and has remained unchanged at 14 cents per mile for a dog’s age, with only a brief temporary increase for charitable travel related to Hurricane Katrina recovery.

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

A meaty BUZZ today!

* Have you seen the December “issue” of THE LAKE REGION SOMETHING yet?  If not, why not.  If you have, please tell your family and friends about it.  

* Taxpros, I want to hear your comments on my TAXPRO TODAY editorial “Who Speaks for the Tax Preparer?".

Here is an excellent comment that was submitted to the post regarding the IRS excessive due diligence requirements for taxpayers who claim the EITC on a client’s return –

“The IRS needs to implement some safeguards of their own, such as not sending 10+ EITC refunds to the same address!  They could practice some due diligence and professional responsibility.”

* PNC Wealth Management has released the “Christmas Price Index 2013: Cost of '12 Days of Christmas' Items”.

* A MAINSTREET.COM item of mine from last December that bears repeating – “How to Give at the Holidays With Tax Day in Mind”,

* A timely post for the holiday season from YAHOO FINANCE last month by Adam Levin - “4 Ways to Avoid Charity Scams”.

* Jason Dinesen keeps us up to date on the tax consequences of same-sex married couples after the death of DOMA at DINESEN TAX TIMES.  His latest post on the subject, “Same-Sex Marriage, IRAs and After-Tax Basis”, deals with an issue that had not occurred to me.

Another negative affect, for the taxpayer, of the requirement that same-sex couples legally married in a state that permits such marriages must file as married filing joint or separate is the fact that the deduction for IRA contributions may be reduced.  On the other hand, it opens up the possible availability of a deductible spousal IRA.

Thanks and a tip ‘o the hat to Jason for continuing to report on this topic via his “Life After DOMA” series.

* Speaking of Jason, he also offers a review of year-end moves involving “Stock Losses and Taxes”. 

* Fellow twit @Eligabiff from Bloomington, Indiana recently tweeted –

“Stopped at the gas station this morning where they cashier was giving out incorrect tax advice.  He didn't appreciate my corrections.”

I often hear members of “the great unwashed” spouting incorrect, and often bad, tax advice, and clients often pass along to me incorrect tax advice they received from friends, family, and co-workers. 

This just enforces the best tax advice I can give anyone - DO NOT ACCEPT TAX ADVICE FROM ANYONE OTHER THAN A PROFESSIONAL TAX PREPARER!

* Deborah L. Jacobs year-end tax post “12 Smart Money Moves To Make Before The End of 2013” at FORBES.COM contains the usual advice, which I have provided earlier this year at MainStreet.com.  However it does include two items that I have not mentioned and that needs repeating –

“4. Take required distributions from your own IRA.”

And -

“5. Take required distributions from an inherited IRA.”

It is very important that, if you are required to take a Required Minimum Distribution (RMD) for 2013, you actually take the RMD before the end of the year to avoid a substantial penalty.

And, as I point out in “Year-End Tax Advice: Essential 2013 Knowledge” at MAINSTREET.COM, if you are required to take an RMD in 2013 -

“Taxpayers age 70½ and older can directly transfer up to $100,000 tax-free from an IRA account to a charity. This charitable transfer can be used to satisfy your required minimum distribution for the tax year.”

* In “Shopping for Tax Extenders" at the TAX ANALYSTS BLOG Clint Stretch observes – “Like children asking if Santa is coming, taxpayers want to know whether expiring tax provisions will be extended by the end of the year.”

Clint goes on to list “Five factors suggest that the answer is almost certainly no”.

* CCH has published a special Tax Briefing on “Final Net Investment Income, Additional Medicare Tax Regulations”.

* RUBIN ON TAX reminds us that “Recording of Mortgage Necessary for Qualified Residence Interest Deduction”.

Author Charles Rubin references a Tax Court case -

“Two individuals borrowed money from the mother of one of them. A mortgage was prepared to secure the debt, but it was not recorded in the public records.”

The deduction was denied because -

“Code Section 163(h) prohibits an interest deduction for personal interest, but provides an exception for qualified residence interest.  The statute requires that to be qualified residence interest, the debt must be ‘secured by the residence’.”

And –

“Treas. Regs. § 1.163-10T(o)(1), which requires that a mortgage be “recorded, where permitted, or is otherwise perfected in accordance with applicable State law.”

If you are getting a home mortgage from a family member be sure to officially record the mortgage with the county!

* An older post from Jim Blankenship (discovered via a tweet) at GETTING YOUR FINANCIAL DUCKS IN A ROW about “Boosting Your Social Security Benefit” answers a question often asked of me.

* To end this installment, “Here's What Congress Actually Accomplished This Year”, according to YAHOO NEWS.

My first reaction was “absolutely nothing!”.  But I was wrong.  The idiots did actually pass some legislation.  According to the piece (the highlight is mine) –

“Congress' numbers are bad on all fronts. In addition to the most recent Gallup poll that put public approval of Capitol Hill at just 9 percent, Congress is poised to pass the fewest number of laws in 66 years.

As the last month of the year begins, Congress has passed fewer than 60 new laws since January.”

One of the bills they did pass was “To specify the size of the precious-metal blanks that will be used in the production of the National Baseball Hall of Fame commemorative coins."

Do we need any more proof that they are truly idiots?

THE FINAL WORD –

The HUFFINGTON POST reports “'Ironside' Canceled: NBC Pulls Plug On Blair Underwood Series”.

This show was not a “remake” or even an “update” of the original iconic Raymond Burr series.  As I had mentioned in my “Ramblings” item in the “issue” of THE LAKE REGION SOMETHING, “except for the title and the disability, this new ‘Ironside’ has absolutely nothing whatsoever to do with the original show”.  It was a totally different, and certainly inferior, program.

The reason for the existence of this new “Ironside” was the success of the new “Hawaii Five-0”, also a totally different program from the original.  The new HF0, however, again as I said in TLRS “is a good show that could stand alone without reference to the classic.  The main attraction is the interactions of the close-knit “team”, especially Alex O'Loughlin’s Steve McGarrett and Scott Caan’s Danny Williams.”

The new “Ironside” was an average, uninteresting police procedural with an uninteresting cast that did not have any real charisma or chemistry.  It’s only selling points were the title and Blair Underwood.

The original “Ironside” currently appears mornings at 11AM on the MeTV (Memorable Entertainment Television) nostalgia cable station.  It is followed on MeTV by the original “Hawaii Five-0”, and preceded by Burr’s equally iconic (perhaps more so) “Perry Mason”.  An unsuccessful “The New Perry Mason” with Monte Markham, true to the original series, appeared on tv for one season in the mid-1970s.

Let us hope that the failure of the new “Ironside” puts an end to unnecessary “re-imaginings” of classic 60s and 70s tv shows.

TTFN

SHOULD THE RTRP SURVIVE? MY MORE THAN 2 CENTS WORTH

Earlier this week, over at TAXPROTODAY.COM, a component of ACCOUNTING TODAY, staff writer Jeff Stimpson asked the tax preparer community “Should the RTRP Survive?”

 

Since I had already discussed the issue at ACCOUNTING TODAY in my earlier editorials “It’s Time for Independent Certification for Tax Preparers” and “What the IRS Should Do About the RTRP” I did not respond to Jeff’s request for comments.  But I will address the question here and now.

 

I do believe an RTRP-like credential for non-EA tax preparers (including CPAs, attorneys, and supervised employees thereof) should survive, but the IRS mandatory RTRP regulation regime should not survive.

I predict that it will not.  The IRS will lose its appeal of Loving v IRS and the original decision will be upheld – killing mandatory testing and regulation. 

 

And I do not believe that Congress will give the IRS the authority to revive mandatory testing and regulation via legislation.  As a result of multiple publicly aired FUs – TAX PROF Paul Caron’s posts on these FUs are now up to “The IRS Scandal, Day 209” – Congress is not going to give the IRS any more responsibility.  And besides, the current idiots in Congress can’t accomplish anything of consequence.   

 

As most of you know I have been preparing 1040s for more than 40 years.  I have never become a CPA because I had no desire to audit financial statements, and I have never become an Enrolled Agent (EA) because I had no desire to represent taxpayers before the IRS.  I have always been an “unenrolled” preparer.

 

Prior to the initiation of the IRS mandatory regulation I, or any ther paid tax preparer, have never been required to become “licensed” via testing or to take CPE in taxation.  I have, for about 30 years now, taken each year on average twice as much CPE in taxation as the 15 hours required under the RTRP regime.  I also have been “regulated” by the IRS in that I can be sanctioned and penalized by the Service for a variety of “indiscretions” under Circular 230.

 

When it appeared that the IRS mandatory regulation program was a fait accompli I supported the program as preferable to having mandatory regulation legislated by the idiots in Congress, but vocally campaigned for necessary corrections to the published regulations -  i.e. removing the exemption from testing and CPE in taxation for CPAs and attorneys who wanted to prepare 1040s for compensation, and supervised employees thereof, and instituting a “grandfathering” exemption from the initial competency test for “experienced” tax professionals.

 

While I did not support the component of the Loving argument that suggested the cost of mandatory annual CPE was “prohibitive”, I did agree with the argument that the IRS does not have the authority to regulate all preparers, and was “pleased as punch” when the Institute for Justice was victorious.

 

I do believe that the IRS needs a central registry of paid tax preparers, which has been accomplished via the requirement that all paid preparers register with the Service and receive, and maintain, a Preparer Tax Identification Number (PTIN).

 

I also believe that there should be a voluntary industry and government accepted designation for the non-EA preparer, to provide much overdue “respect” for the “previously unenrolled” preparer and to identify to the taxpayer public those paid preparers who have demonstrated that they are competent (via testing) and current (via required annual CPE in taxation) in 1040 preparation.

 

During my decades as a paid tax preparer there have been several attempts at creating a legitimate tax preparer “credential” other than EA, most by individual tax preparer membership organizations.  But none of these attempts have succeeded because the credential did not have industry-wide or government acknowledgement or acceptance.

 

There currently exists the Accredited Tax Preparer (ATP) and Accredited Tax Advisor (ATA) credentials administered by the Accreditation Council for Accountancy and Taxation, which is affiliated with the National Society of Accountants.  While the requirements for attaining these initials may be legitimate, they have no real value because there is no industry-wide or government acknowledgement or acceptance.

 

While I believe a non-EA tax preparer credential would best be administered by an independent industry-based organization, I would accept a voluntary RTRP designation administered by the IRS as part of a two-tiered program that incorporates the Enrolled Agent credential. 

 

The RTRP designation should not be considered equal to the current EA designation.  Under a two-tiered voluntary program the RTRP would be a like a bachelor’s degree and the EA, with perhaps a better name, would be a master’s degree.  Under the original RTRP program many EAs unnecessarily sat for the RTRP exam in order to receive the lower designation because it was easier to explain to the taxpayer public what a Registered Tax Return Preparer was.  The designation Enrolled Agent has always been misunderstood by the public. 

 

I was pleased to see my tax-blogosphere buddies Jamaal Solomon of TAX FACTOR and Bruce McFarland, the MISSOURI TAXGUY, quoted in Jeff’s piece.  Both agree with me, as do just about all the tax pros quoted in the article, that there is a need for an RTRP-like designation, and both also agree it should be voluntary.

 

I do take exception to one of the comments in the article from Teddy Prioleau from Maryland.  He says “This {mandatory regulation by the IRS} began as a result of a great outcry from taxpayers caught in the middle of a very disconcerting situation between the IRS and, many times, a less-than-upstanding preparer who took liberties with the return.”

 

This is not true.  There was no public outcry, great or otherwise, for mandatory tax preparer regulation.  In all my years in the business I do not remember there ever being a call by taxpayers to license tax preparers.  The IRS initiated its regulation program in response to a Government Accountability Office (GAO) study which resulted in a report titled “Paid Return Preparers: In a Limited Study, Chain Preparers Made Serious Errors” and a similar TIGTA study.

 

I also disagree with Cynthia Jeanguenat of Virginia, who stated, “Oregon, California and New York have stringent regulation”.

While Oregon and California do indeed have stringent tax return preparer regulation regimes, New York State does not.  NY has been talking about instituting testing and CPE requirements for tax pros, but currently its tax preparer registration program is nothing more than another way to raise money.  It does not require any proof of competence or currency in state or federal tax law.  All it does is charge “unenrolled” preparers a $100 per year extortion fee for the privilege of being able to prepare NY state tax returns.

 

So there you have it – my more than 2 cents on the question “Should the RTRP Survive?”.  Any comments?

IT'S BACK!

The New Jersey chapter of the National Association of Tax Professionals’ annual 2014 “Famous State Tax Seminar” will be held once again at the Hilton Woodbridge in Iselin NJ on Saturday, January 11^th. 

 

This seminar is a must-attend for all tax professionals who prepare NJ state income tax returns.

 

Scheduled to speak at the seminar are returning favorites attorney Michael Feinberg, with another presentation on the NJ Inheritance Tax, and EA Kathryn Keane, who will provide NY state tax updates.  Susan Feeney will discuss NJ Sales and Use Tax and Alexis DeRosa from the NJ Division of Taxation will cover NJ state tax updates.

 

I miss the “Jim and Jake” show NJDOT updates from past years.  They were a hard act to follow.

 

The keynote speaker is once again Michael Bryan, Director of the NJ Division of Taxation.  As a personal aside, there were high hopes when Mr Bryan took over as Director.  However there has been no noticeable change to the Division, which still, unlike the IRS, unethically keeps silent on taxpayer overpayments hoping to keep the money for the state’s legislators to waste on pork and entitlements.

 

Thankfully this is one of the few tax CPE offerings that does not waste our time with 2 hours of ethics preaching.  The entire day is full of useful information.

 

Registration begins at 7:30 AM and the seminar runs from 8:00 AM to 4:25 PM.  Continental breakfast, lunch, and afternoon dessert is included.  The program qualifies for 8 hours of CPE.

 

The cost of the seminar is $200 for NATP members and $250 for non-members.  Click here to download the registration form.

 

I hope to see you there!

 

TTFN

NJ HOMESTEAD BENEFIT APPLICATION DEADLINE EXTENDED

I just discovered that the NJ Division of Taxation has extended the deadline for filing an application for the NJ Homestead Benefit from November 22^nd to December 31, 2013.

 

According to State Treasurer Andrew Sidamon-Eristoff -

 

“At this point, the Division has received just about half the total number of applications it expects will be filed for calendar year 2012 and it is unlikely that all eligible filers will meet the November 22 deadline.”  By extending the application deadline to December 31, we will give those who might have missed out the chance to apply and receive their benefit in 2014.”

 

To be eligible for a benefit for calendar year 2012, you must be a New Jersey resident who owned a principal residence on October 1, 2012, and paid property taxes on that home. You must also have reported $75,000 or less in New Jersey gross income for 2012 or, if you were disabled or age 65 or older on December 31, 2012, you must have reported gross income for 2012 of $150,000 or less.

 

For more information on the Homestead Benefit Program, or if you did not receive an application packet in the mail,  homeowners may call the Division of Taxation’s Homestead Benefit Hotline at 1‐888‐238‐1233 from 8:30 a.m. to 5:30 p.m., Monday through Friday. Homestead benefit information is also available on the Division’s website.

 

The benefit is now distributed as a credit on a quarterly real estate tax billing from your municipality – as it should be.  Checks are only issued if you have sold, or are planning to sell, your home.

A YEAR END TIP FOR MUTUAL FUND INVESTMENTS

Here is a year-end tax tip that I forgot to include in my series at the MainStreet.com Tax Center.

 

Mutual funds buy and sell stock and other securities throughout the year. Gains on these sales increase the "net asset value," or NAV, of the fund, and your shares in the fund increase in value.

 

Federal law requires that funds distribute net capital gains each year to shareholders. During the fourth quarter the fund manager will calculate the net gains for the year, declare a capital gain dividend, and distribute this dividend to shareholders. This is usually done in mid to late December. The shareholder will pay federal and state income tax on this distribution. After the distribution is made the NAV of the fund will drop.

 

Basically, if your shares are worth $10,000 on December 1st and the fund issues a $1,000 capital gain distribution on December 15th your shares will be worth $9,000 on December 16th. If you had purchased the shares on December 1st you would be stuck with paying tax on $1,000 without actually receiving a financial benefit from the $1,000. You started out with $10,000 but end up with $9,800 or so ($9,000 NAV plus $1,000 dividend received less federal and state income tax on $1,000 dividend).

 

If you want to purchase shares in a mutual fund during the fourth quarter of the year, wait until after the capital gain dividend has been issued, and the NAV has dropped, before purchasing the shares.

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION

* It’s here!  The December “issue” of THE LAKE REGION SOMETHING that is.  What are you waiting for – check it out now!

* Taxpros, have you read my TAXPRO TODAY editorial “Who Speaks for the Tax Preparer?” yet?  I would like to hear your opinion on this topic.

* Jamaal Solomon of THE TAX FACTOR is back with a series of posts on “Things I Can Learn About Taxes from a Newborn Child”.  Click here for Part One.

* Peter J Reilly from FORBES.COM was the first to being my attention to the court decision that struck down the ministerial housing allowance as an unconstitutional preference for religion.  

Richard R Hammar lists “Five Takeaways from Friday's Housing Allowance Ruling” at MANAGING YOUR CHURCH. 

For one thing, as I mentioned in an earlier BUZZ reference to this issue, the ruling does not affect 2013 clergy tax returns because the ruling “shall take effect at the conclusion of any appeals . . . or the expiration of the deadline for filing an appeal, whichever is later.’ An appeal by the IRS and Department of the Treasury would be to the Seventh Circuit Court of Appeals in Chicago, and could take up to a year to resolve.”

But what is most important to my one remaining clergy client is Richard’s third “takeaway” (the highlights are mine) -

“Third, a ruling by a federal district court judge in Wisconsin is not binding on other courts, and does not apply to minsters in other states. If the ruling is appealed and affirmed by the Seventh Circuit Court of Appeals, it will apply to ministers in that circuit (Illinois, Indiana, and Wisconsin). It would become a national precedent binding on ministers in all states only if affirmed by the United States Supreme Court (an unlikely outcome).”

My client, a minister who received a cash housing allowance, lives and works in Maryland – so even if this decision is upheld it will not increase his taxes.

* Trish McIntire provides a primer on “Dividends and Qualified Dividends” at ANSWER.COM.

 

* And at her OUR TAXING TIMES blog Trish explains “Refund Advances”.

Two things of great importance that she tells us –

“The first thing to understand is that these tax refund advances are loans.”

And (highlight is mine) –

“Which brings us to a common misconception, when you get a holiday advance of your tax return refund you are not filing your tax returns. This year, tax returns can't be filed until late January or when you have all you W-2s and 1099s. Whichever is later. You still need to file a tax return to get your refund.”

What Trish does not tell you – but I will – is that Refund Advances and Refund Anticipation Loans are BAD!  Whether holiday advances or true refund loans as part of your tax return filing, they should be avoided!  If nothing else, the interest rate and fees are often what I would consider “usurious”.

Tax return preparers should be barred by law from offering Refund Anticipation Loans!

If you really need money there are many less “offensive” ways of borrowing.  The only thing worse than a refund advance or refund anticipation loan is going to a loan shark!

* The MILWAUKEE CPA reviews “12 Smart Tax Moves to Make Now”.

* Jean Murray provides “Year End Tax Planning for Small Business Owners - Some Tips” at ABOUT.COM.

Her post links to another whose title is great advice - "Don't make financial decisions just for tax savings.".  Actually you should not make any financial decision just for tax savings.  Your first consideration should always be financial.  Taxes are secondary.

TTFN

TO PER DIEM OR NOT TO PER DIEM – THAT IS THE QUESTION

The federal government provides special “per diem” rates for meals and incidental expenses and lodging to use in lieu of claiming actual expenses when deducting the costs of a business trip.

These rates are based on the city where you “lay your head” at night.  If your business meeting is in New York City, but you stay overnight at a hotel in New Jersey to get a lower room rate, you would use the city or county in New Jersey to determine the appropriate per diem amount. 

Rates are set by fiscal year, effective October 1.  You can click here to find the appropriate per diem rates.

There is a per diem rate for lodging and a separate one for meals and “incidental expenses”.  Incidental expenses include fees and tips to porters, baggage handlers, maids, etc. and travel for meals – it does not include local travel for meals laundry costs.  The special per diem rate for incidental expenses only (for example when meals are provided by someone else) is $5.00. 

Under IRS Rev Proc 2007-63 self-employed taxpayers and employees claiming unreimbursed employee expenses cannot use the per diem for lodging. They must claim the actual lodging expenses paid - they can only use the meal and/or incidental expense per diems.  The lodging per diem is only for employers reimbursing employees for business travel.

You can choose to deduct either the actual expenses or the government per diem rate.  You can decide whether to deduct actual expenses or the per diem allowance on a trip-by-trip basis, but you must use the same method for all days within a single business trip.  If you elect to use the per-diem allowance you can claim 75% of the per diem amount on the first and last day of the trip.

As readers know, I recently attended the annual NATP year-end update symposium in Atlantic City NJ.  The per diem for Atlantic City is $66.00.  I kept track of my actual meal and tip expenses during the trip, which totaled about $260.00.  I arrived in AC on Sunday and left on Thursday.  4½ days (Monday, Tuesday, Wednesday = 3 days, and Sunday and Thursday = 2 days @ 75% = 1½ days) at the per diem rate of $66.00 is $297.00.  Obviously I will claim the per diem rate.  As an added bonus, by doing this I do not have to save receipts for my meals.

If I go back to AC for more classes in December, and my total meal and tip costs for a 5-day trip were $302, I would claim the actual expenses for this trip.

Regardless of which method you choose, only 50% of qualifying business meals (including the per diem for meals and incidental expenses) are deductible. 

TTFN