Friday, June 24, 2016

IT'S OK TO SAY NEVER


Despite what the title of the remake of the James Bond movie THUNDERBALL suggests, sometimes it is ok to say “never”.

Here are three times –

NEVER ignore a balance due notice or a request for information from the Internal Revenue Service or a state tax agency.  The problem will not just go away on its own.  What may eventually go away is your salary or your home.

But, on the other hand, NEVER assume a balance due notice from the Internal Revenue Service or a state tax agency is correct and just pay it.  More often than not – in my experience 2/3 to 3/4 of the time – a balance due notice from the IRS or a state tax agency is wrong.

If you receive a balance due notice or a request for information from the IRS give it to your tax preparer ASAP.  If you “self-prepared” the return in question (in which case the chance that the notice may be at least partially correct increases – especially if you relied on a “box” to prepare the return) review it carefully.  In such a case I suggest that you consult a competent tax professional before making any payment.

A client had received a balance due notice from the NJ Division of Taxation, which was wrong, during the year and just sent NJ a check.  I only learned about it during the tax filing season, and, after the season was over, have been attempting to get the money back from NJ.  Believe me - it is a lot easier to explain to the IRS or the state their error upfront than it is to get money back from the IRS or a state agency many months after paying the erroneous balance due.

And if you receive a balance due notice from the IRS or a state tax agency, whatever you do DO NOT call your tax pro and tell him or her “you made a mistake”.  The third never – NEVER, NEVER, NEVER assume that receiving a notice from the IRS or a state tax agency means your tax preparer made an error.  As I have said above, it is more likely that the IRS or the state tax agency made the error.

TTFN
 
 
 
 
 

Tuesday, June 21, 2016

THE NJ-1040 LETTER

 
You are paying too much New Jersey state income tax – and it’s nobody’s fault but your own!
 
Most NJ taxpayers concentrate on their federal tax return and spend minimal time on their NJ return, simply taking numbers from the 1040 and putting them on the NJ-1040.  As a result they are paying more NJ state tax than necessary, often paying tax on income that is not even taxed by NJ.
 
By becoming informed on NJ state tax law and using proper tax planning you can make sure that you pay the absolute least amount of NJ Gross Income Tax possible for your particular situation.
 
I have been preparing NJ-1040s for as long as there has been a NJ-1040, and federal income tax returns for even longer.  I have created a new newsletter titled THE NJ-1040 LETTER to share my knowledge and experience from over 40 years as a professional tax preparer to help you experience the joy of avoiding NJ state taxes.
 
Published 6 times a year (January, February, March, April, July, and October), each issue will contain valuable NJ state tax-saving advice and information, updates on NJ state tax law, NJDOT rules and regulations, court cases, and the special NJ property tax relief programs, and links to online resources to help you in planning for an preparing your NJ-1040.  Also included in each issue will be special forms, schedules, and worksheets to help you during the year and at tax time.
 
This is the only publication that I am aware of that deals exclusively with tax planning and preparation advice for the NJ-1040.
 
A one-year subscription to THE NJ-1040 LETTER delivered as a pdf email attachment is only $11.95.  A print edition sent via postal mail is also available for $24.95. 
 
Subscribers will be offered special discounts on other tax-saving reports throughout the year.
 
You can download a free copy of the premiere July 2016 issue by clicking here.
 
To order your subscription send your check or money order, payable to TAXES AND ACCOUNTING, INC, for $11.95 or $24.95 and your email or postal address to –
 
THE NJ-1040 LETTER
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428
 
TTFN
 
 
 
 

Monday, June 20, 2016

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


Arguing with dangerous buffoon Donald Trump is like debating a monkey.  No matter how researched or rational your argument is, the monkey will just throw poop at everyone and strut about like it won.

* I have created a unique newsletter of tax planning and preparation advice, strategies, information, and resources for the New Jersey state taxpayers titled THE NJ-1040 LETTER.  It is, I believe, the only publication devoted exclusively to NJ state income taxes.  Click on the title for a free copy of the premiere issue, and let me know what you think of it.

* Leslie Book reports on a recent Tax Court case where the taxpayer was royally screwed (much like the stockholders in Trump's casinos), proving that common sense logic is not always an effective defense, in “Paying Tax on the Same Income Twice, and Getting a Civil Penalty to Boot” at PROCEDURALLY TAXING.

The problem with this case, and, I believe, the main reason the taxpayer lost, was the fact that he appeared “pro se” - "on one's own behalf" – representing himself and therefore proving himself to be the proverbial fool.  As much as I dislike, for the most part, the legal profession, the taxpayer would probably have won if he had been competently represented, which it appears Leslie suggests in the post.

Of course, if you read the facts of the case, there would have been no double taxation if the taxpayer had properly deducted as a refund the monies he gave back to the original payer in the year he did so.  But, considering the inherent cheapness that his representing himself in court betrays, I wonder if he was similarly penny wise and pound foolish by not paying a competent tax professional to prepare his tax returns.

* Kay Bell provides a timely warning in “Beware of scams in wake of Pulse mass shooting” at DON’T MESS WITH TAXES.

* Jim Blankenship, always working on GETTING YOUR FINANCIAL DUCKS IN A ROW, explains “Net Unrealized Appreciation” –

This widely misunderstood section of the IRS code can be quite a benefit – if it happens to fit your situation.”

* Sarah Benner tells us “HSA Rules Get Tricky Once You Hit Age 65” at THE SLOTT REPORT.

* Thinking of forming a non-profit organization?  Over at DINESEN TAX TIMES Jason Dinesen continues his discussion of “501(c)(3) vs. 501(c)(4) vs. 501(c)(7)” with “Part 2” -

In this part, I’ll give the same explanation I give to clients who ask me which status is best for them when they’re trying to start a not-for-profit.”

* Speaking of non-profit organizations (I just had to sneak this in) – “Donald Trump Accused of Using His Charity as a Political Slush Fund”.

As fellow tax blogger TAX PROF Paul Caron has suggested –

Trump's foundation should be rigorously audited and all its political dealings exposed, exactly as the Clinton's tax-exempt foundations have been treated since their creation.”

* Back to Jason Dinesen – he also provides assistance to confused taxpayers in “Help! I Just Got a Form 5498” at DINESEN TAX TIMES –

The good news is, Form 5498 seldom directly affects the tax return, so in most cases you won’t need to amend or do anything with the form.”  

* I am truly interested in your thoughts and comments on my newsletter BOBSERVATIONS.

* This just in –

The City of Philadelphia has reduced the City Wage Tax rate effective July 1, 2016. 

• The new Wage Tax rate for residents of Philadelphia is 3.9004% (.039004).

• The new Wage Tax rate for non-residents  of Philadelphia who are subject to the Philadelphia City Wage Tax is  3.4741 % (.034741).

What does this mean to you?

Any paycheck that you issue with a pay date after June 30, 2016 must have Philadelphia City Wage Tax withheld at the new rate.” 

THE FINAL WORD

Right on, Conan O’Brien!

These are weapons of war and they have no place in civilian life.”

People need to understand that the 2nd Amendment has absolutely nothing to do with a person’s “God-given” civil right to own an assault rifle.  The 2nd Amendment was passed because many of the Founding Fathers were concerned about the potential dangers of a peacetime standing federal army, which the Constitution gave the Congress the power to "raise and support”.  They wanted to secure and protect the individual state militias.  Guaranteeing the right of the people to keep and bear arms was as a check on the standing army.

As I tweeted last week – damn the NRA and the gun lobby!

When are the idiots in Congress, and state legislatures, going to do something about this other than pray?

To echo the sentiments of another tweet from last week – I pray for a new Congress.

TTFN
 
 
 
 
 

Tuesday, June 14, 2016

A TAX POTPOURRI

(1) One of the reasons I am called the “Wandering” Tax Pro is because once the tax filing season ends I enjoy travel via all methods – car, bus, plane, ship and train (not necessarily in that order). 
 
Over the past 30+ years my annual travel itinerary has often included several totally tax-deductible domestic vacations to attend tax-related conferences, conventions, and other CPE offerings.
 
You can deduct expenses that are “ordinary and necessary” for your business. An “ordinary” expense is one that is common and accepted in your specific trade or profession and a “necessary” expense is one that is helpful and appropriate. 
 
One “ordinary and necessary” business expense for which you can claim a tax deduction is the cost of education that is (1) expressly required by an employer, by law, or by government regulation, or (2) maintains or improves skills required in your current trade or business. If a conference or convention falls under this category the associated registration and travel expenses are deductible.
 
I have written a special report - POSITIVELY TAXES: A TAX DEDUCTIBLE VACATION - that explains in detail how to make your next vacation tax deductible by attending a job or business related conference or convention, and includes worksheets to help you keep track of your deductible expenses.
 
(2) It has always been important for frequent gamblers to keep detailed “contemporaneous” records of gambling activity to minimize the tax cost of winnings, but recent developments have made this even more vital. 
 
Gross gambling winnings must be reported as “other income” on Line 21 of your Form 1040.  Gambling losses, to the extent of reported winnings, are allowed as a “Miscellaneous” Itemized Deduction.  If you report gambling winnings of $10,000 on Line 21 of your Form 1040 the most you can deduct as gambling losses on Schedule A is $10,000.  Allowable gambling losses are deducted in full, and are not subject to the 2% of AGI exclusion.     
 
Losses from any type of wagering transaction can be deducted against your reported gross gambling winnings. If you win in the slots your deduction is not limited to losses from slot machines. You can deduct losses from the lottery, 50-50s, bingo, table games such as poker and blackjack, charity raffles, horse racing, keno, etc., up to the amount of your total winnings.
 
I have also written a special report – POSITIVELY TAXES: MINIMIZING REPORTED GAMBLING WINNINGS - that explains the basics of how gambling activity is taxed describes in detail how recent Tax Court case decisions allow you to reduce the amount of gambling winnings you must report, and reduce the tax cost of your gambling activity to a minimum, via proper documentation of your casino visit wins and losses.  It also contains valuable worksheets.
 
(3) For years now I have been telling clients and readers that it is your “Adjusted Gross Income”, or AGI, and not your net taxable income that is the most important number on your tax return.
 
Why is AGI so important?  Many tax deductions and credits are reduced, phased-out, or altogether eliminated based on your AGI, or in some cases a “Modified” AGI, and several items of income are increased, and some deductible losses are reduced, as this number grows.
 
There are “above the line” deductions and “below the line” deductions.  Above the line deductions reduce your Adjusted Gross Income and your Net Taxable Income.  Below the line deductions, which include the Standard Deduction, Personal Exemptions, and itemized deductions, reduce Taxable Income, but not Adjusted Gross Income.
 
A below the line deduction of $1,000 will reduce your tax liability by the amount of your marginal tax rate.  For a taxpayer in the 25% a below the line deduction of $1,000 will reduce the tax liability by $250.  But an above the line deduction of $1,000 can reduce the tax liability by substantially more than $250.  It is actually possible for a reduction of only $5 in AGI to reduce your tax liability by $500 or more!
 
Guess what?  I have written a special report – POSITIVELY TAXES: REDUCING ADJUSTED GROSS INCOME – that discusses how to reduce your 2016 AGI during the year and when preparing your Form 1040 and minimize your tax liability.  In it I explain how a reduction of $5 in AGI can reduce your tax liability by $500 or more.
 
The above referenced special reports are the first 3 items in MY NEW DOLLAR STORE (a work in process) -  and are available to you, as you might expect, for only $1.00 each sent as a pdf email attachment, or $2.00 each for a print edition sent via postal mail.
 
If you enjoy reading THE WANDERING TAX PRO and have found it helpful to you over the years one way you can say “thank you” is by purchasing one of the above POSITIVELY TAXES reports.
 
To order send your check or money order, payable to TAXES AND ACCOUNTING, INC, for $1.00 or $2.00 for each report you want and your email or postal address to –
 
MY NEW DOLLAR STORE
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428
 
BTW – I also have more extensive and detailed TAX DEDUCTION GUIDES available for $2.00 or $4.00 each.  Click here for more information.
 
TTFN
 
 
 

Monday, June 13, 2016

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

* Have you seen the premiere issue of my new FREE monthly tax planning and preparation newsletter ROBERT D FLACH’S THE 1040 LETTER yet?  What are you waiting for?  You are welcome to share it with friends and family and colleagues, co-workers, and clients.

* Arielle O'Shea explains “How to Roll Over a 401(k) to an IRA” at NERDWALLET (highlight is mine) -

When it comes to a 401(k), you can take it with you.

In fact, you probably should, in the form of a 401(k) rollover. But making the most of the money you’ve built up means performing the rollover correctly. Here’s the four-step process for how to roll over a 401(k) to an IRA. As with any big decision, it’s always good to know your options before you go all in, so let’s start there.”

* A good lesson about how to properly conduct business as an LLC from Paul Neiffer at FARM CPA TODAY - “LLC Does Not Provide Legal Protection (if you mess up)”.

While Paul discusses it from a farm perspective his advice applies to all LLC activities.

Paul lists what a court would look at to determine where liability exists if there is an accident, the first being –

Does the LLC have a bank account?  If not, the court will likely assume that there is no business since a business need a checking account.”

Paul is correct when he concludes – “For me, the most fatal flaw is not having a checking account”.  It is vitally important that you maintain a separate checking account for the LLC or any self-employed business activity.

Years ago a fellow blogger condemned me for giving bad advice when I said that every self-employed business activity must have a separate banking account.  Time, and every other reputable blogger and business advisor as well as the courts, have proven me to be right.     

* The TAX FOUNDATION has released “Options for Reforming America's Tax Code”.  I haven’t had a chance to read it yet – but may post about it when I do.

* Hey, if you haven’t already done so do me a favor and download the free sample issue of my other new monthly newsletter BOBSERVATIONS and let me know what you think.


* Fellow tax professionals – join me in the campaign to reform the mucking fess that is the US Tax Code by joining TAX PROFESSIONALS FOR TAX REFORM.   

* TaxGirl Kelly Phillips Erb tells us the “IRS Taxpayer Transcript Service Back Online” at FORBES.COM       

The Internal Revenue Service (IRS) has announced that the ‘Get Transcript’ tool is back online and it has a more rigorous e-authentication process. The process, according to IRS, will significantly increase protection against identity thieves impersonating taxpayers to access tax return information through the website.”

* Over at DINESEN TAX TIMES Jason Dinesen begins a discussion of “501(c)(3) vs. 501(c)(4) vs. 501(c)(7)”  with “Part 1”.

The discussion concerns the different types of tax-exempt non-profit organizations.

* And Jason adds “Net Operating Loss” to his Glossary post series.

* Another FYI - news from the NYS Department of Taxation and Finance – “New ‘One-Stop Shop’ Webpage Highlights Variety of Tax Credits and Incentives Available to Business Owners

* Russ Fox of TAXABLE TALK reports on a major state tax agency FU in “Withholding Notice Snafu in California” –

The Franchise Tax Board, California’s income tax agency, apparently issued a boatload of withholding mismatch notices. Some (but not all) of those notices appear to be in error; additionally, the FTB’s phone and chat lines have been swamped.”

Some good tax advice worth constant repeating – NEVER assume a balance due notice you receive from the IRS or a state tax agency is correct.  If you receive correspondence from the IRS or a state tax agency send it to your tax professional immediately.

* Not to be outdone by the west coast, the east coast also FUs on tax notices.  Kay Bell gives us the word that “CT DMV computer mess messes up 50,000 auto tax bills” at DON’T MESS WITH TAXES.

THE FINAL WORD

Right on brother Josh Barro at BUSINESS INSIDER! 


They say there are five stages of grief: denial, anger, bargaining, depression, and acceptance.

Establishment Republicans went through all of them with regard to Donald Trump, and now have come all the way back around to denial.

They're not in denial that he will be their nominee, like they were last fall and winter. They're in denial about who he is. They believe, if he is handed immense power, he might turn into a reasonable person.

Here's a news flash for anyone who is thinking this way: Donald Trump was an impetuous child yesterday, he is one today, and he will be one tomorrow.”

And (highlight it mine) -

Trump loves arbitrary exercises of power. Given the power of the presidency, who is to say he won't become even more unstable and dangerous? Why would anybody assume that handing him massive power would make him more responsible rather than less?

The only defensible thing is to look at this man and say he cannot possibly be made president. Anyone who supports him on the basis that he might change for the better is engaging in pathetic self-deception — and proposing to risk the country's entire future on a foolish bet.”  

And one more development about Trump just released – from USA TODAY “Hundreds allege Donald Trump doesn’t pay his bills”.

Republican leaders need to grow some balls – call a spade a shovel – and just say NO to dangerous buffoon Donald Trump!

TTFN
 
 
 
 
 

Thursday, June 9, 2016

GROW SOME BALLS!

Sorry for another strictly political post – but I feel it is important.
 
Republican leaders and politicians, on both the federal and state level, must grow some balls. 
 
They must not begrudgingly accept and support dangerous buffoon Donald Trump as a legitimate candidate for President.  They must listen to their conscience and intelligence, if they possess either, and, like Mitt Romney, who apparently cares about the future of the Party, the country, and the world, acknowledge that Trump is not fit to be President and reject his candidacy, despite the fact that he will most likely be the official Party nominee based on primary voting results.
 
Republicans and conservatives do have a viable alternative to voting for the dangerous buffoon for President or choosing Clinton as, in their minds, the lesser of two evils.  They have the nominees of the Libertarian Party for President and Vice President - former Republican Governors with proven track records Gary Johnson, and Bill Weld.
 
According to the National Review –
 
Johnson is a self-made man, starting a handyman business in college that grew into a 1,000-employee construction firm. He ran for governor as a fiscal conservative in a blue state {New Mexico – rdf} , won handily, and can now boast that he cut taxes, vetoed hundreds of bills, presided over significant job growth, balanced the state budget, and created a substantial reserve fund.”
 
Wikepedia tells us Bill Weld “served as the 68th Governor {of Massachusetts – rdf} from 1991 to 1997. He was re-elected by the largest margin in Massachusetts' history in 1994”.  He was also
 
As both were Governors and not Congresspersons, voting for them would not be “rewarding” any of the idiots in Congress for incompetence and inaction.
 
Republicans can embrace and support their Congressional and state and local candidates, but openly reject Trump, and support, or at least vote for, the Libertarian candidate for President.
 
So, Republican leaders and politicians - grow some balls and call a spade a shovel.  For the sake of the country and the world publicly reject and denounce the candidacy of Donald Trump.
 
TTFN

Tuesday, June 7, 2016

ATTENTION PRIMARY VOTERS

When you go to the polls today vote responsibly.

Send a message that you cannot accept dangerous buffoon Donald Trump as a legitimate candidate for the highest office in the land.  Just say no to Donald Trump.

See these items before you vote -




 

AN INTERESTING TAX WITHHOLDING STRATEGY

I learned an interesting tax withholding strategy from a client who resides in a “life care” assisted living facility a couple of years ago.
 
First of all – what do I mean by a “life care” facility?  SENIOR HOMES.COM explains “What are Life Care Communities?” -
 
Life care is one type of Continuing Care Retirement Community (CCRC) that provides independent living, assisted living and nursing home care.”
 
And - 
 
Life care communities are different from other senior housing options in that they require a long-term, upfront financial commitment that, in turn, guarantees housing, services and nursing care all in one location through the end of life.
 
In contrast to fee-for-service contracts, life care residents pay a large initial deposit plus a monthly maintenance fee that stays nearly the same no matter how much care is needed.”
 
My client, a retired couple, paid a very, very substantial “up-front fee” (in the hundreds of thousands of dollars).  And each month their net Social Security and pension checks are paid directly to the facility as monthly “maintenance” fees.  A resident or a resident’s estate may receive a partial refund of the “up-front” fee is he or she leaves the facility or passes.
 
Residents of my clients’ facility receive a private room with bath, 3 meals served in the dining room, housekeeping, laundry, and all medical care paid for by the facility.  There are also planned trips and in house activities, 2 beauty parlors, an on premise bank, billiards, ballroom/theater, arts and crafts, exercise equipment and classes, library and chapel.  All this is included in the upfront and monthly fees.
 
So basically the couple has no living expenses, as just about everything, including all medical care and prescriptions, are provided by the facility without additional charge.
 
If the health of my clients deteriorates and nursing care is required it is provided within the same facility.
 
As I explain in my MEDICAL EXPENSE GUIDE you can deduct as a medical expense on Schedule A -
 
The ‘lump-sum’ entrance fee paid to a ‘life-care’ or ‘continuing-care’ facility that is specified in the residential agreement as a condition for the facility’s promise to provide lifetime care that includes medical care.  The qualifying amount may be deducted in full in the year it is paid, even though the medical care will be provided in the future.”
 
The husband, a retired municipal employee, receives a monthly pension from the State.  He has elected to have both federal and state income tax withheld from his monthly pension check.
 
A few years ago I told my client that, due to a pension exclusion and high filing threshold the state tax return, as long as his situation does not change, or he does not win the Publishers’ Clearing House sweepstakes, he will no longer need to file a state income tax return each year – and that he was only filing a state return to get a full refund of all the state income tax withheld.  I suggested that he stop having state income tax withheld from his pension.  I also told him that he could reduce the amount of federal income tax withheld.
 
My client told me that he wanted to get the federal and state refunds each year.  Since the facility got the total amount of his monthly pension and Social Security checks, and he no longer had a monthly income, he used the refunds from the excess withholding to get some in pocket “spending money”.  Unlike the monthly benefit checks, the refund checks went to him and his wife and he could cash these checks and pocket the money.
 
So – it is something to think about if you, or a relative, are in a similar situation.
 
TTFN