Thursday, July 21, 2016

ANSWERS TO YOUR IRA QUESTIONS

I want to explain just about everything you always wanted to know about an Individual Retirement Account.
 
And I do just that in my new report POSITIVELY TAXES: JUST ABOUT EVERYTHING YOU ALWAYS WANTED TO KNOW ABOUT AN IRA.
 
And I do it for only $1.00!
 
This new report is part of my DOLLAR STORE of tax planning and preparation reports, which also includes –
 
·         POSITIVELY TAXES – A TAX-DEDUCTIBLE VACATION  
 
·         POSITIVELY TAXES – MINIMIZING REPORTED GAMBLING WINNINGS  
 
·         POSITIVELY TAXES – REDUCING ADJUSTED GROSS INCOME  
 
·         POSITIVELY TAXES – TAX ASPECTS OF DIVORCE  
 
The IRA report discusses –
 
·         IRA Basics
·         The History of the IRA
·         The Traditional IRA
·         The ROTH IRA, and
·         The Saver’s Credit
 
The reports are $1.00 each send as a pdf email attachment.  You can also get a print version sent via postal mail for $2.00 each.
 
If you have found my THE WANDERING TAX PRO to be helpful you can help support its continued life by buying one or more of my special reports.  
 
To order send your check or money order, payable to TAXES AND ACCOUNTING, INC, for $1.00 or $2.00 per report and your email or postal address to –
 
MY DOLLAR STORE
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428
 
TTFN
 
 
 
 
 
 
 

Wednesday, July 20, 2016

A VERY SAD DAY



It is truly a sad day for the Republican Party, for America, and for the world.

A dangerous, unstable, irresponsible, and irrational reality television cartoon clown is the official Republican candidate for the office of President of the United States.

It is an example of the extent of the “dumbing down” of America.

Donald Trump is the “worst case scenario” of a person suffering from acute “narcissistic personality disorder”.  This disorder controls his life and makes him quite literally totally incapable of acting intelligently and rationally. 

Trump has said or done absolutely nothing since entering the campaign that would remotely suggest that he would make an acceptable President.  It is just the opposite.  Everything he says and does continues to emphasize his inappropriateness for any elected office.

He is, again quite literally, the absolute worst possible choice for President.  From the beginning of the campaign I have said I would vote for Homer Simpson for President before I would vote for Donald Trump.  Even if Hillary Clinton is really as bad as her worst critics make her out to be, she is still a far superior choice to reside at 1600 Pennsylvania Avenue.  Nothing would be worse for the country or the world than if Donald Trump were to win.

While a large percentage of the “great unwashed masses”, which make up Trump’s core followers, are not especially bright, it is inconceivable to me that the majority of Americans will elect this buffoon to the highest office in the country.

America pleasantly surprised me 8 years ago by electing a black man as President.  He turned out to be an honest and honorable, if not a particularly effective (partially because of the incompetence of the idiots in Congress), President.  While I did not agree with many of his policies, and did not vote for him, I did respect him.  I cannot believe that America has fallen so far in the past 8 years to elect this entitled and self-important racist white fool to replace him.

I truly believe that there are millions of intelligent, responsible, and caring Republicans who will not be able in good conscience to support or vote for Donald Trump.  Many have already said they will be sitting out this election – and will not vote. 

But these good men and women should not just not vote for Donald Trump when there is a legitimate viable alternative for conservative and Republican voters in the candidates of the Libertarian Party – former Republican Governors Gary Johnson and his running mate William Weld.

It is very important that in this unique election there is a strong turn-out for third-party candidates, like Johnson for Republicans and Jill Stein, presumed candidate of the Green Party, for Democrats who oppose Hillary.  We must send a loud message to the Republican and Democratic Parties.

I pray that the majority of American voters are intelligent and conscientious enough to “just say no” to dangerous, unstable, irresponsible, and irrational Donald Trump.  If not we are all in deep trouble!

TTFN




 

Monday, July 18, 2016

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

"The United States is the only country where it takes more brains to figure your taxes than to earn the money to pay it." –
former Florida Senator Edward J Gurney

* Tax pros – the July 15th issue of TAXPRO BUZZ is here!  Click here to download.

* In “Tax Expenditures and Oversight” at 21st CENTURY TAXATION  Professor Annette Nellen discusses the recent Government Accountability Office (GAO) report on “Tax Expenditures: Opportunities Exist to Use Budgeting and Agency Performance Processes to Increase Oversight” (GAO-16-622).  Click here for the highlights and here for the full report.

Annette says (highlight is mine) –

It looks at the estimated $1.23 trillion annual cost of special tax deductions, exclusions, credits and preferential rates AND how there is basically no oversight of these costs relative to discretionary budget items.”

According to the report highlights the $1.23 trillion in tax expenditures distributed via the 1040 is “an amount comparable to discretionary spending”.

This lack of oversight is one of the reasons that government welfare and other social program benefits, like the Earned Income Credit, the refundable Child Tax Credit, the various educational benefits, the residential energy credits, etc, should not be distributed via the Tax Code.


* Speaking of federal social welfare programs that don’t belong in the Tax Code - in “Illustrating the Earned Income Tax Credit’s Complexity” the TAX FOUNDATION talks about another GAO report from earlier this year (highlight is mine) –

The Government Accountability Office (GAO) published a report in May of this year. It found that the program suffers from a high improper payment rate. For the fiscal year 2015, they found that $15.6 billion of the EITC’s $68.1 billion in total payments were considered improper, meaning the filer over claimed or wasn’t eligible. That’s almost a fourth of the entire program’s payments.

The GAO says that the program’s high payment error is a result of the program’s complex eligibility requirements.”

Once again the solution – take the EITC and other federal social benefit programs out of the Tax Code!

* A trifecta - NO! NO! A million times NO!  The million and two NOs is my response to Senator Seeks to Revive First-Time Homebuyer Tax Credit” from Michael Cohn at ACCOUNTING TODAY.

This credit, being refundable, was, as refundable tax credits are, a fraud magnet when it was in effect in the past. 

As Michael explains (highlights are mine):

The original credit was fraught with erroneous claims, and Congress had to add antifraud protections to the final extension of the tax break. A report in 2012 by the Treasury Inspector General for Tax Administration found the Internal Revenue Service disallowed nearly $1.6 billion in erroneous claims but said there was likely much more fraud that could have been caught if the IRS had been given expanded math error authority from Congress.”

If the idiots in Congress want to encourage homeownership via subsidies let the subsidy be provided as a direct government payment at the closing of the qualifying home purchase.

Read my lips – NO REFUNDABLE CREDITS!  NO DISTRIBUTION OF FEDERAL SOCIAL BENEFIT PROGRAMS VIA THE 1040!

* Kay Bell tells us that “NJ looking at ending Pennsylvania tax reciprocity” at DON’T MESS WITH TAXES.

As Kay explains –

With reciprocity, the taxpayer files a return and pays the tax only in the state where they live.” 

So NJ resident taxpayers who work in PA do not pay any PA non-resident state income tax on their PA-source wages – and do not have to file a non-resident PA state tax return.  The PA employer withholds (or is at least supposed to) and remits NJ Gross Income Tax from the PA source wages.  And, of course, vice versa with PA residents working in NJ. 

While this creates some extra work for the employer, and at times some extra work for the taxpayer or tax preparer when the PA employer erroneously withholds PA state income tax instead of NJGIT, I have always liked this arrangement and hope it continues.

* At her BANKRATE.COM tax blog Kay suggests “10 midyear tax moves to make now”.

#10 is “Hire a Tax Professional”.  Begin your search To find a tax professional click here.

* Jason Dinesen continues his tour of the 1099 forms with “A Little About 1099s:Types of 1099s (1099-LTC thru 1099-SA)”.

* It seems that the infamous “47%” is not 44%.  The Tax Policy center’s TAX VOX blog gives us “A Closer Look At Those Who Pay No Income Or Payroll Taxes”.   

* Forbes.com’s TAXGIRL Kelly Phillips Erb reports that “Back To School State Sales Tax Holidays Start Soon”.  Kelly provides “a quick list of states offering taxpayers a break this year”.

* Jim Blankenship deals with the issue of taking an “RMD from an Inherited IRA” at GETTING YOUR FINANCIAL DUCKS IN A ROW -

If you have inherited an IRA you are required to begin taking distributions from the account according to a set schedule.”

* Michael Cohn from ACCOUNTING TODAY reports that a new “Group Plans to Audit the IRS” –

The Tax Revolution Institute— a Washington, D.C.-based nonprofit that says it promote ‘justice and integrity in the tax system’—has created a new website, AuditIRS.com, where it hopes to collect personal experiences from taxpayers about their encounters with the IRS.”


Democrats have suggested that Trump is trying to hide something by refusing to release his returns. Some Republicans, including 2012 Republican presidential nominee Mitt Romney, have also said that Trump should release his returns.

Trump has said that he will release his returns once the IRS is finished auditing him, but the agency has said that an audit does not prevent taxpayers from releasing their own information.”

Of course he has something to hide – he does not make as much as he says he does, and he gives next to nothing (proportionate to his income) to charity. 

* And, returning to Kay Bell’s BANKRATE.COM tax blog, we also hear that someone has offered a “$5M ‘reward’ for Trump tax return” –

An anonymous individual has offered to donate that amount to a veterans' charity if the presumptive Republican presidential nominee will release his tax returns.

The inquisitive donor, who wants to keep his identity private, reportedly will even let The Donald choose the charity.”

THE FINAL WORD

Does this sound like anyone we know?

The late Theodore Millon, one of the co-developers of the Diagnostic and Statistical Manual of Mental Disorders, devised the subtypes of personality disorders and described the attributes of the “unprincipled narcissist” disorder as: deficient conscience; unscrupulous, amoral, disloyal, fraudulent, deceptive, arrogant, exploitive; a con artist and charlatan; dominating, contemptuous, vindictive. These personality attributes shape behavior patterns which, in the unprincipled narcissist, tend toward self-absorbed egotism. Symptoms include an excessive need for admiration, disregard for others’ feelings, an inability to handle criticism, and a sense of entitlement.”

We are just a few short weeks from when Chief Birther Donald Trump, an unscrupulous, amoral, vindictive, con man, sweeps into Cleveland and becomes the scariest and most profoundly unqualified person to ever be nominated by a political party in the history of the United States.”


TTFN
 
 
 
 
 
 
 
 

Thursday, July 14, 2016

AN UPDATE ON THE NEW JERSEY PROPERTY TAX RELIEF PROGRAMS

This just in, from the summer edition of the NEW JERSEY STATE TAX NEWS (highlights are mine) -
 
The State Budget for Fiscal Year 2017 provides funding for the Property Tax Reimbursement (Senior Freeze) Program.  In mid-July, the Division of Taxation began mailing checks for the 2015 reimbursement to qualified senior and disabled homeowners who filed applications by the original filing deadline of June 1, 2016. We will issue checks as quickly as possible to homeowners who file their applications between the original June 1 deadline and the extended deadline of Oct. 17, 2016.

Only applicants whose 2015 income was not more than $70,000 are eligible, provided they met all other requirements. Residents whose income was more than $70,000 but was $87,007 or less will not receive checks for 2015. We will notify them that they are not eligible. Those residents can establish a “base year” for future reimbursements by filing an application by the deadline.”

So the cafones in Trenton once again screw seniors and disabled homeowners to balance the budget.

The newsletter also reports -

“The Division of Taxation will begin to mail 2014 homestead benefit applications in mid-September.   County Delivery Expected to Begin –

Atlantic, Bergen, Cumberland, Warren Sept. 15

Cape May, Mercer, Ocean Sept. 19

Monmouth, Somerset, Union Sept. 22

Hunterdon, Middlesex, Passaic, Sussex Sept. 24

Camden, Hudson, Morris Sept. 27

Burlington, Essex, Gloucester, Salem Sept. 29

TTFN







 

Monday, July 11, 2016

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


Paul quotes the report as saying (highlight are mine) –

Eligibility rules for refundable tax credits (RTCs) contribute to compliance burden for taxpayers and administrative costs for the Internal Revenue Service (IRS). These rules are often complex because they must address complicated family relationships and residency arrangements to determine who is a qualifying child. Compliance with the rules is also difficult for IRS to verify due to the lack of available third party data. The relatively high overclaim error rates for these credits (as shown below) are a result, in part, of this complexity. The average dollar amounts overclaimed per year for 2009 to 2011, the most recent years available, are $18.1 billion for the EITC, $6.4 billion for the CTC/ACTC, and $5.0 billion for the AOTC.”

The obvious solution to this problem – NO REFUNDABLE CREDITS!

* Hey neighbors in Northeast PA – have you seen my new blog WHAT’S THE BUZZ yet?  I provide links to what’s a happenin’ in the Lake Region and surrounding areas - theatre, entertainment, community activities, fund-raising events, and a lot more.

* Over at DINESEN TAX TIMES Jason Dinesen gave us a present for 4th of July – “From the Archives: Rare Home Office Deduction Win in Tax Court” – which discusses de minimis personal usage of office space.

* And another blast from the past from Jason – he answers a question that has never been asked of me in “From the Archives: Do Extreme Couponers Pay Tax?”.

The answer –

There are no income tax implications to using coupons, whether you use one or two coupons or you go extreme and use hundreds of coupons at one time. Coupons reduce your basis in the things you purchase.”

* Jean Murray of ABOUT.COM warns “Beware of Fake Employer ID Application Sites”.

There is absolutely no reason to pay a service to get a federal Employer Identification Number.  You can very easily do it yourself – or have your tax professional do it for you.

* Jamaal Solomon, aka Stikks of STIKKS TALKS TAXES, has been running a post series on a list of the “Top 10 Taxpayer Bill of Rights”.  He began with “#10 The Right to a Fair and Just Tax System” and has so far worked his way to “#3 The Right to Pay No More than the Correct Amount of Tax

* Pardon me while I take a break for some horn-tootin’.  Click here to check out my library of books, reports, and newsletters with federal and state tax planning and preparation advice, information, and resources.


* FYI - Beginning June 30 and running through August 30, the Alabama Department of Revenue (ADOR) is offering an amnesty program for delinquent state and state-administered local taxes for a 3-year look-back period of from January 1, 2012 through December 31, 2014.

Click here for more information. 

THE FINAL WORD

I am going to make a political prediction.

Dangerous buffoon Donald Trump will not be elected President – and I think deep down he knows this.

Trump’s ego demands that he always be a winner and never a loser.  Once he wins the Republican nomination at the convention, and unfortunately I think he will, he will be a winner.  But after that it will be all downhill and he can only end up a loser – and I expect a big loser.

To maintain his ego, and his self-perceived status as a winner, Trump will find some reason to drop out of the race after his convention win.  He will leave the race while he is a “winner” and maintain his fantasy.

And his dropping out will make all of us winners as well.

Do you think this is possible – or just wishful thinking?

Just in case the idiot does decide to run after the convention - Republicans & conservatives, there is a valid alternative!

Read this –


TTFN
 
 
 
 
 
 

Friday, July 8, 2016

FROM THE TAX COURT – PUTTING YOUR KIDS ON THE PAYROLL

Another recent court case emphasizes the fact that it is vital that you keep detailed documentation of your deductions, regardless of what the deduction is.

John and Lisa Fisher, TC Summary Opinion 2016-10 deals with the deduction for wages paid by a parent’s company to minor children. 

The Fishers were lawyers with three children under age 9.  Lisa Fisher had her own law practice.

During the summer Lisa brought her kids to her office and had them do shredding, mailing, photocopying, and answer phones (to be perfectly honest, I would not have a child under age 9 answering my office phone or using a shredder).  She claimed a total of $29,000 in “wages to minor children” on her 2006, 2007, and 2008 Schedule Cs.

During these years Fisher did not keep any payroll records or issue W-2s to the children.  She did not actually give money to the children, either in cash or by check.  The “wages” were paid via contributions to 529 college savings plans for the kids.

The IRS disallowed the deduction, and the Court agreed because the Fishers did not substantiate the deduction via proper documentation.  The Court could not determine the actual amount paid to each child each year because there were no records of the hours worked or the rate of pay.

Surprisingly, the Court felt that the children actually did some work for Fisher and allowed a deduction of $250 per child per year.

The moral of the story - as I point out in my THE NEW SCHEDULE C NOTEBOOK (see my post “The Bargain of the Summer!”) -

It is very important that you “cross your t’s and dot your i’s” when it comes to documenting a deduction for dependent wages. You must make sure you pass the “duck test” (if it waddles like a duck and quacks like a duck . . .). Forget that these are your kids and treat them as you would any other employee.

• Create a written job description for each position held by your child outlining the duties and responsibilities involved.

• Pay the kids on an hourly basis.

• Use a time card or sheet to document hours worked and work performed.

• Write a company check as payment each week or every-other week.

• Even though the wages are not subject to FICA and FUTA tax and possibly state unemployment and disability contributions, file all appropriate quarterly payroll tax returns, such as the federal Form 941 (you can indicate that the wages are exempt from FICA on the form), submit an annual federal Form 940 indicating the amounts paid as “exempt”, and issue a W-2 in January to report the wages paid.

• If you have other employees make sure the kids’ wages are included on the quarterly and annual payroll tax returns.”

As an aside, I have always wondered why the IRS in their attempts to “control” all tax preparers felt that lawyers did not have to take any tax test or maintain any tax CPE to indicate to the Service and the public that they know anything about preparing federal taxes, and this case is a good example that many do not.

TTFN





Thursday, July 7, 2016

THE TAX CODE NEEDS TO BE REWRITTEN FROM SCRATCH

I am a tax professional who has been preparing Form 1040s for compensation for individuals in all walks of life since 1972.  As a tax preparer I know full well that the United States Tax Code has grown into what I frequently refer to as a “mucking fess”.  

The major reason for tax return errors, by both paid tax preparers and taxpayers who “self-prepare”, is the excessive complexity of the Tax Code.

The current Tax Code needs to be shredded and totally rewritten from scratch.

I also strongly believe that the one and only purpose of the Tax Code is to raise the money necessary to fund the government.

The new Tax Code must –

(1) Be simple – easy for everyone to understand.  Simplicity for simplicity’s sake. 

(2) Be fair and equitable - treat all taxpayers equally.

(3) Be consistent – treat specific conditions, situations, and activities, and maintain specific definitions and descriptions, the same in all instances.

(4) Encourage savings, investment, and growth.

(5) Index for inflation all allowable deductions and credits.

The new Tax Code must not –

(1) Be used for social engineering, to redistribute income or wealth, or to deliver social welfare and other government benefits.

(2) Encourage or discourage certain economic decisions (other than savings, investment, and growth), or provide exclusive benefits for specific industries, business activities, or classes of taxpayers.

(3) Contain any refundable credits, or any phase-outs, exclusions or adjustments based on Adjusted Gross Income or Modified Adjusted Gross Income.  

(4) Contain any “alternative” tax calculation systems (such as the current “Alternative Minimum Tax”).

(5) Contain any temporary deductions, credits, benefits, or provisions.

This new Code would state “Everything is taxable, except . . .” and “Nothing is deductible, except . . .”.  Only those “excepts” – exclusions and deductions - that are absolutely necessary and appropriate, in the context of the “musts” and “must nots” listed above, should be added back.

One of the biggest problem with the current system is the inappropriate use of the Tax Code to deliver social welfare and other government benefits – hence its appearance as #1 on the list of “must nots”.  This practice is not only inappropriate, but it also invites and encourages tax fraud.

The Internal Revenue Service, and the tax professional community, should not be required to act as Social Workers and administer and verify government program benefit payments.

I am not saying that the government shouldn’t provide financial assistance to the working poor and college students, provide encouragements for purchasing health insurance, making energy-saving purchases and improvements and other “worthy” actions, .  What we are saying is that such assistance and encouragements should not be distributed via the tax return.

The benefits provided by the Earned Income Tax Credit and the refundable Child Tax Credit should be distributed via existing federal welfare programs for Aid to Families with Dependent Children. The benefits provided by the education tax credits and deduction for tuition and fees should be distributed via existing federal programs for providing direct student financial aid. The benefits provided by the Premium Tax Credit, the energy credits, and other such personal and business credits should be distributed via direct discount payments to the appropriate vendors or direct rebate programs funded by the budget of the appropriate Cabinet department.

Distributing the benefits in this manner is much better than the current method for many reasons:

1. It would be easier for the government to verify that the recipient of the subsidy, discount or rebate actually qualified for the money, greatly reducing fraud. And tax preparers, and the IRS, would no longer need to take on the added responsibility of having to verify that a person qualifies for government benefits.

2. The qualifying individuals would get the money at the “point of purchase,” when it is really needed, and not have to go “out of pocket” up front and wait to be reimbursed when they file their tax return.

3. We would be able to calculate the true income tax burden of individuals. Many of the current “47 percent” would still be receiving government benefits, but it would not be done through the income tax system, so they would actually be paying federal income tax.

4. We could measure the true cost of education, housing, health, energy and welfare programs in the federal budget because benefit payments would be properly allocated to the appropriate departments.

Fellow tax professionals who share my beliefs as outlined in this post – join me in TAX PROFESSIONALS FOR TAX REFORM and help me spread the word.

TTFN