Friday, July 28, 2017

SAD TO SAY GOOD-BYE

Participants in the infant myRA program, created under President Obama, just received the following email:
 
“The myRA Program will be phased out and your account will be affected.
 
Dear XYZ:
 
We're writing to inform you that the U.S. Department of the Treasury has decided to phase out the myRA retirement savings program and the program is no longer accepting new enrollments. Please read the important information below to learn what this means for your account.
 
Your Account Status
 
Your account remains open and you can continue to manage your account until further notice. The funds in your account remain in an investment issued by the U.S. Department of the Treasury. We'll be in touch over the coming weeks with next steps and relevant deadlines regarding the transfer or closure of your account. In the meantime, we want you to know that any myRA with a zero ($0) balance as of September 15, 2017 or later, will be subject to possible automatic closure beginning on September 18, 2017.
 
Actions you should take now:
 
Update your contact information
 
We recommend you log in to your account to make sure your contact information is complete and up to date. You can also update your information by contacting customer service.
 
Transfer your myRA to another Roth IRA
 
Your myRA is a Roth IRA. You have the option to transfer your myRA into another Roth IRA that you select. To do so, you will first want to identify or open an account at the new Roth IRA provider where you will continue to save and invest. Then, by working with a new Roth IRA provider you select, you can transfer your myRA balance to your new Roth IRA. This will allow you to continue saving without paying current income taxes on earnings, maintain the preferential tax treatment of a Roth IRA, avoid tax withholding that may apply to a distribution, and avoid penalties.
 
If you choose not to transfer your balance to another Roth IRA, you can make a withdrawal for the amount of your myRA balance by calling customer service. You can also withdraw funds online by signing into your account. To maintain all of the benefits of a Roth IRA, you must deposit funds paid to you (as well as any tax withholding) into another Roth IRA within 60 days of the distribution. Failure to do so may result in tax liability and penalties related to withdrawn earnings that would have been avoided by working with your new Roth IRA provider to transfer your account balance.
 
Visit irs.gov/rollovers for more information regarding Roth IRA transfers or rollovers, or visit myRA.gov to learn more about withdrawing funds from myRA.
 
Upon transfer of your myRA balance to another Roth IRA or distribution to you of your myRA balance, Comerica1 will no longer be custodian to your myRA.
 
For more information about this announcement or if you have additional questions, visit myRA.gov.
 
Sincerely,
 
myRA Customer Support”
 
I verified this on the myRA website.
 
It is sad that this program is being killed.  At this point I do not know if it is because of lack of sufficient participation or idiot Donald T Rump’s continual policy of undoing any good done by his predecessor out of spite.
 
I will report on future developments with this issue here as they arise.
 
TTFN
 
 
 
 
 

Wednesday, July 26, 2017

STUPIDITY IS MORE DANGEROUS THAN MALICE!

"Stupidity is a more dangerous enemy of the good than malice. One may protest against evil; it can be exposed and, if need be, prevented by use of force. Evil always carries within itself the germ of its own subversion in that it leaves behind in human beings at least a sense of unease. Against stupidity we are defenseless; reasons fall on deaf ears; facts that contradict one’s prejudgement simply need not be believed–in such moments the stupid person even becomes critical–and when facts are irrefutable they are just pushed aside as inconsequential, as incidental. In all this the stupid person, in contrast to the malicious one, is utterly self-satisfied and, being easily irritated, becomes dangerous by going on the attack."
 
 Dietrich Bonhoeffer, Letters & Papers from Prison, 43


STUPIDITY IS MORE DANGEROUS THAN MALICE.
 
DONALD TRUMP IS STUPID!
TRUMP SUPPORTERS ARE STUPID!
 
DONALD TRUMP IS DANGEROUS!
 
 
 
 
 
 
 
 
 
 
 


TAX ASPECTS OF DIVORCE

In the cover article of the Summer 2017 issue of the National Association of Tax Professionals’ quarterly TAXPRO JOURNAL I discuss in detail “The Tax Aspects of Divorce”.
 
The article includes the following statements –
 
The U.S. Tax Code trumps the divorce agreement when it comes to who is able to claim a child as a dependent on the tax return.”
 
And –
 
A local judge cannot overturn federal tax law.”
 
A reader sent me the following email in response to the article -
 
The Tax Aspects of Divorce was very informative.  I do have a question, however.  In NATP’s Taxpro Journal it’s Page 13, first column, first paragraph.  The US Tax Code will trump a divorce agreement has been the way I was educated, but I’m a little confused about the last sentence in that paragraph which says ‘A local judge cannot overturn federal tax law.’  My understanding has been that the noncustodial parent who has been awarded the dependency exemption of the child can file a civil lawsuit against the now custodial parent to regain the dependency exemption.  That was verified by NATP & attorneys in my office. 
 
I’d appreciate it if you could just clarify that for me.”
 
Here is my reply to my fellow tax pro –
 
“Glad you found my article informative.
 
In answer to your question –
 
A non-custodial parent cannot claim a dependency deduction for a child unless the custodial parent provides a signed Form 8332.  The IRS will no longer accept the appropriate pages of a signed divorce agreement or decree with the exact same language as the Form 8332 as an alternative to a signed Form 8332.
 
It is my understanding that no divorce agreement or decree, and no local court judge’s decision or instructions, can force the IRS to allow the non-custodial parent to be able to claim a dependency exemption without a signed Form 8332.  A civil lawsuit award cannot in itself grant a non-custodial parent the dependency exemption.  Only a signed Form 8332 can grant a non-custodial parent the dependency exemption.
 
It is again my understanding that if a divorce agreement or decree says the non-custodial parent is entitled to the exemption, but the custodial parent does not provide a signed Form 8332, the “injured” parent can turn to a local court for relief and the court can require the custodial parent to provide a signed Form 8332 and penalize the custodial parent financially or legally for not doing so, or require the custodial parent to pay to the non-custodial parent the equivalent of the tax savings – but the local court cannot instruct the IRS to allow the non-custodial parent to claim the dependency exemption without a signed Form 8332.  
 
In my article I state –
 
‘If the divorce decree clearly states that the non-custodial parent is entitled to the deduction, but the custodial parent refuses to sign the Form 8332, the non-custodial parent must go back to the Court and get it to order the custodial parent to sign the form.  When negotiating a divorce settlement that gives the dependency deduction to a non-custodial parent there should be specific terms that require the signing of Form 8332 and outline what will happen if the custodial parent refuses to do so- such as the withholding of alimony payments or child support, or some other penalty.’
 
If you have any documentation or reference that indicates a local court can force the IRS to allow a non-custodial parent to claim a dependency exemption without a signed Form 8332 please let me know.”
 
As an aside – FYI the original article I submitted to NATP included the following paragraph in the beginning –
 
Do you remember L.A. LAW?  While you would want Arnie Becker as the divorce attorney, the divorce agreement should be reviewed by Stuart Markowitz before it is signed.  For a more contemporary cultural reference - you would want David Lee as the divorce attorney, but have the final agreement reviewed by Will Gardner.”
 
However, despite my protest, this paragraph was deleted from the final published article.
 
So fellow tax pros – am I right?  Any thoughts and comments?
 
TTFN
 
 
 
 
 
 
 

Tuesday, July 25, 2017

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

* Jim Dinesen paraphrases Star Trek’s Dr McCoy and tells it like it is in “I’m An Accountant, Not a Miracle Worker” at DINESEN TAX TIMES -
 
“. . . clients are shocked and offended that I can’t just magically make the taxes go away.
 
I’m the bad guy because they are unhappy with how the tax return turned out.
 
Here’s the thing: I ain’t the miracle man. Once December 31st comes and goes, there’s virtually nothing I can suggest that will reduce your tax burden. Once the year ends, whatever happened happened.”
 
* Attention tax pros - check out this week’s THE TAX PROFESSIONAL post “Triple Check All Returns”.  And please share it with fellow tax preparers. 
 
* From Tina M. Kleckner EA‘s new blog - “A Good Reminder of Business vs. Hobby Activities”.
 
* Kay Bell reports “Colorado has collected more than half a billion in pot taxes” at DON’T MESS WITH TAXES.
 
You can bet other state politicians are taking note of this news.
 
* Michael Cohn tells us “States gear up for sales tax holidays this summer” at ACCOUNTING TODAY.
 
* Here’s an interesting resource for anyone interested in the history of the 1040 – “U.S. 1040 Tax Forms, 1913 to 2006”.
 
* From Robert W Wood at FORBES.COM – “IRS Warns That Pay On Disability Is Often Taxable: Here's How To Tell”.
 
TTFN
 
 
 
 
 
 
 
 
 

Monday, July 24, 2017

OOPS THEY DID IT AGAIN, AGAIN!

 
The first wave of refund checks for the New Jersey Property Tax Reimbursement (aka “Senior Freeze”) program have been sent out.
 
New Jersey is consistently at the top of the list of highest real estate taxes in the country, so this reimbursement is a very important and needed benefit for many senior and disabled homeowners.
 
But, once again, as we expected, the DFBs (clean version is “Damned Fool Bureaucrats”) in Trenton have screwed NJ seniors and the disabled to balance the budget and continue to provide pork and entitlements for politicians.
 
Unfortunately, as happens every year, the income base for the PTR program has been reduced to $70,000, causing many seniors and disabled residents to lose out on this benefit.
 
$5.00 in income can cost qualified NJ homeowners several thousands of dollars in reimbursements.
 
According to the NJ State Tax News -
 
“Checks in the Mail -
 
In mid-July, the Division of Taxation began mailing checks for the 2016 Senior Freeze to qualified senior and disabled homeowners who filed applications by the original filing deadline of June 1, 2017. 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 October 18, 2017.
 
The State Budget has set the following qualifications for Senior Freeze payments: Applicants are eligible if their income did not exceed $87,007 for 2015 and $70,000 for 2016, as long as they meet all other requirements.
 
Residents whose income was more than $70,000 but was $87,007 or less will not receive checks for 2016. We will notify them that they are not eligible. However, those residents can establish a “base year” for future reimbursements by filing an application by the deadline. This also ensures that we will mail them applications next year.”
 
As the item suggests, qualified homeowners whose 2016 income is between $70,000 and $87,007 should still submit a PTR-1 or PTR-2 application to create or maintain a “base year” for potential future reimbursements.  If you have not already submitted a PTR application you have until October 18th to do so.
 
FYI, the income used for the PTR program includes gross Social Security benefits (before Medicare deductions) and otherwise tax-exempt municipal bond and US Government Obligation income.  However the amount of pension income to claim is the same as the taxable pension income that was, or would have been, reported on the NJ-1040.
 
The DFBs!
 
TTFN
 
 
 
 
 
 

Tuesday, July 18, 2017

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

* Kay Bell, the yellow rose of taxes, tells us “IRS to seek stay in PTIN fee collection court ruling while it ponders its additional legal options” at DON’T MESS WITH TAXES.

While Kay says the IRS and Department of Justice have not officially decided to appeal the decision that shut down the collection of a fee to apply for or renew a tax preparer’s “PTIN” (Preparer Tax Identification Number), IRS Commissioner Koskinen “said his agency is likely to appeal the PTIN ruling”.

Kay continues –

The reason the IRS is so committed to PTINs, noted the commissioner, is that the public, especially among the elderly and in low-income and immigrant communities, can be vulnerable to abuse by tax preparers.”

The Court affirmed the IRS authority to require a PTIN for all individuals who prepare tax returns for a fee and to maintain a PTIN registry.  But there is no need to add an excessive fee, partially going to an outside agency, for the PTIN.

Koshinen continues to want Congress to allow the IRS to regulate paid preparers.  The last thing I want is for Congress to create a tax preparer regulation regime.  The Commissioner said in his recent address "But there are enough [preparers] out there who either don't know a lot about what they’re doing or consciously are trying to take advantage of taxpayers."  I say there are enough Congresspersons out there who either don’t know a lot about what they’re doing or consciously are trying to take advantage of voters.

I see the need for a universally accepted tax return preparer credential to protect the public – but not mandatory and not administered by the IRS or the government.  It should be administered by an independent industry-based organization.

* My THE TAX PROFESSIONAL blog is back!  Check out this week’s post “Another Practice Tip and Some TAXPRO BUZZ”.


* The CCH daily headline newsletter reports “White House Committed to Tax Reform This Year, Mnuchin Says”.

My reaction.  The occupant of the White House should be committed (to a mental institution).

I won’t be holding my breath for Congress to pass substantive tax reform this year.  The Republicans can’t seem to get anything done, thanks mostly to the idiot in the White House.

* My editor at the NJ TAXING TIMES told me, and other NJ tax preparers, about a great resource for tax pros and taxpayers – a “Glossary of Tax Terms” from the NJ Division of Taxation.  It is indeed comprehensive and the individual definitions include links to appropriate pages on the NJDOT website.

THE FINAL WORD

Wise words from former Presidents Clinton and Bush on why arrogant buffoon Donald T Rump will never be a competent or adequate President or leader, reported by CNN in “Bush and Clinton stress value of humility in Oval Office” -

Event moderator, billionaire David Rubenstein, asked the two at the scholastic leadership event in Dallas about what they viewed as the most important quality for someone who wants to be President. Both stressed the virtue of humility.

‘I think it's really important to know what you don't know and listen to people who do know what you don't know,’ Bush said.

Clinton -- who, like Bush, didn't mention President Donald Trump -- agreed that officeholders need to be humble, and warned that those ‘who are real arrogant in office’ have forgotten that history will be their judge.

‘If you want to be President, realize it's about the people, not about you,’ Clinton said. ‘You want to be able to say, 'People were better off when I quit.' ... You don't want to say 'God, look at all the people I beat.'"

Humility is an impossible quality for Trump to understand, let alone express.  And, in Trump’s deluded and unstable mind, everything is always about Trump, and never anyone else.

TTFN
 
 
 
 
 
 
 
 
 
 
 

Thursday, July 13, 2017

A TALE OF THE TAIL

One of the most important pieces of advice I have seen, and have given, over the years is “Don’t let the tax tail wag the investment dog”.

Do not make investment or financial decisions based solely on tax considerations. For years now I have been saying that the first criteria for evaluating any transaction, strategy, or technique you are considering should always be financial.  Taxes are second. 

Obviously you should be aware of, and take into consideration, the tax consequences of any planned transaction, and try to structure the transaction so that it results in the minimum federal and state tax cost.   

But remember - taxes are only pennies on the dollar.   

When discussing this issue I always tell the following story –

Many decades ago, when I was still an "apprentice" tax preparer, one of my mentor’s clients came in and proudly announced that his employer had offered to reimburse him for job-related mileage, but he turned it down because then he would not be able to deduct business travel on his Form 1040 (back then employee business expenses were deductible in full "above-the-line" as an Adjustment to Income). 

My mentor avoided the temptation to tell the client that he was a complete idiot, and attempted to explain, with great patience and tact, that it is much "more better" for someone to give you $1.00 tax free than it is to be able to save 30 cents by claiming a tax deduction. 

Similarly, there is no benefit in spending $1.00 needlessly to save 30 cents in taxes.  You have not saved 30 cents – you have actually lost 70 cents!  It doesn’t make sense to incur an expense solely because it is deductible.

TTFN
 
 
 
 
 
 
 
 
 
 

Tuesday, July 11, 2017

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

* My THE TAX PROFESSIONAL blog is back!  Check out this week’s post “The Good, the Bad, and the Ugly”.

* A good lesson to those looking for a tax pro in “Truth In Advertising Isn’t Always a Good Idea” from Russ Fox at TAXABLE TALK.

When shopping for a tax pro totally disregard advertising claims about refunds like ““The Largest Refund…Guaranteed!!!”.  Concentrate on the experience, quality and competence of the preparer.  An experienced and competent, and honest, tax preparer will work to make sure you pay the absolute least amount of federal and state tax possible – but will do it legally.

Start your search for a tax pro at FIND A TAX PROFESSIONAL.

* I prove reality is truly stranger than fiction and tell you about the proposed SWAMP Act in the July “issue” of THE LIBERTY TIMES.  Check it out.

* Jean Murray provides a detailed lesson in “How to Pay Yourself from Your Business” at THE BALANCE.

* Kay Bell celebrated the 4th of July by reminding us of the “Cohan Rule” in “America's Yankee Doodle Boy gives us a tax deduction rule” at DON’T MESS WITH TAXES.

Kay quotes from an archival post I had written about George M in her piece.


I do not oppose this move.  While I do not support the current Republican healthcare legislation, the mandate – i.e. the “shared responsibility penalty” - is one of the “bad” things about Obamacare (see my THE TAX PROFESSIONAL post referenced above).

What needs to be done is not Republican “repeal and replace” but Republicans and Democrats working together to fix what is wrong with Obamacare while keeping what is right.  But the words “working together” and “Congress” have not gone together for decades now.

Perhaps what we need to “repeal and replace” are the idiots in Congress.

* Elle Martinez deals with a timely topic with “Volunteering This Summer? Find Out if Your Work is Tax Deductible” at the TURBO TAX BLOG.

* The TAX FOUNDATION takes a look at “State and Local Sales Tax Rates, Midyear 2017”.

FYI –

Five states do not have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of these, Alaska and Montana allow localities to charge local sales taxes.

The five states with the highest average combined state and local sales tax rates are Louisiana (10.02 percent), Tennessee (9.45 percent), Arkansas (9.34 percent), Washington (9.20 percent), and Alabama (9.03 percent).

The five states with the lowest average combined rates are Alaska (1.76 percent), Hawaii (4.35 percent), Wyoming (5.26 percent), Wisconsin (5.42 percent), and Maine (5.5 percent).”

New Jersey is #26 and Pennsylvania is #33.  New York is #9 and California is #10.

* The CHECKPOINT NEWSTAND week-day daily email newsletter from July 10th discussed the National Taxpayer Advocate’s legitimate concerns about the IRS use of private collection agencies –

Finally, the NTA said that she believes IRS is misinterpreting Code Sec. 6306 by not requiring PCAs to solicit financial information from taxpayers, as they are supposed to do under Code Sec. 6306(b)(1)(C). That means PCAs will not collect financial information that could be shared with IRS to determine whether a taxpayer can pay the debt and still pay for basic living expenses. The NTA described the calling scripts for one of the PCAs as instructing the employee to give the taxpayer suggestions on how to come up with funds to pay their debt, such as borrowing from a retirement plan or taking out a second mortgage on a home. While IRS might make similar suggestions, IRS employees first gather financial information which reveals when a taxpayer is in economic hardship, and unlike PCAs, IRS has no financial incentive to ignore indications of financial hardship. PCAs do not gather this information, and their incentive structure doesn't encourage them to look for economic hardship.”

How many times do we need to say this – using private collection agencies is truly a stupid and inappropriate idea.  Just further proof that the members of Congress are idiots.  This program must be stopped!

* Jason Dinesen answers the question “How Does Business Bad Debt Work?” at DINESEN TAX TIMES.

The bad debt deduction is highly misunderstood, and JD sets us straight.

THE FINAL WORD


This Washington Post opinion piece by David Rothkopf tells it like it is (highlights are mine) 0

That is where we are now. The president’s tweeting hysterically at the media is just an element of this. So too is his malignant and ever-visible narcissism. The president has demonstrated himself to have zero impulse control and a tendency to damage vital international relationships with ill-considered outbursts, to trust very few of the people in his own government, and to reportedly rant and shout at staff and even at the television sets he obsessively watches.

Whether he is actually clinically ill is a matter for psychiatric professionals to consider. But when you take the above behaviors and combine them with his resistance to doing the work needed to be president, to sitting down for briefings, to reading background materials, to familiarizing himself with details enough to manage his staff, there is clearly a problem. Compound it with his deliberate reluctance to fill key positions in government and his wild flip-flopping on critical issues from relations with China to trade, and you come to a conclusion that it may be that Trump’s fitness to serve as president is our nation’s core national security issue.

Not only does the president diminish the office with his pettiness; he also shows disregard for constitutional principles including free speech, freedom of religion and separation of powers, and he operates as though he were above ethics laws. Daily he shows he lacks the character, discipline, intellect, judgment or respect for the office to be president of the United States.”

TTFN