Saturday, December 20, 2014

HE FINALLY DID IT!


It’s official—President Barack Obama signed H.R. 5771, The Tax Increase Prevention Act, into law on December 19th. 
 
This Act extends the “tax extenders” that expired on December 31, 2013 through December 31, 2014. 
 
TTFN

Friday, December 19, 2014

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



* Tax pros, PLEASE check out the December “issue” of THE TAX PROFESSIONAL and let me know your comments on my “Soapbox” editorial.

* At MAINSTREET.COM I provide some more year-end tax advice in “Tax-Wise Holiday Giving: Generosity That Warms Your Heart and Protects Your Money” and discuss the Senate finally passing the tax extenders bill in “Senate Passes the Tax Extenders Act Finally: How It Benefits You”.

* Jason Dinesen goes into more detail on how he is “Changing the Way I Work with Business Clients” at DINESEN TAX TIMES.

While I have prepared Schedule C’s for sole proprietors over the years based on just a worksheet of income and expenses provided at tax time, with no year-round “relationship”, I have never prepared a corporation or partnership business income tax return or report based solely on a year-end worksheet or spreadsheet. 

In most cases I have personally maintained the general ledger.  For two active full-time corporations I have been the year-round accountant and “full-charge bookkeeper” for the business.  In all cases I have prepared any payroll tax returns and at the very least reconciled the balance sheet, whether or not required on the federal return (a balance sheet has always been required on the NJ state returns).

My practice has always primarily been a 1040 practice.  I have not solicited corporate or partnership accounts, and have only prepared corporate and partnership returns for existing 1040 clients (with the exception of the two full-time corporations mentioned above).

I agree with Jason that business entity returns have an increased potential for agita and aggravation, including federal and state preparer penalties, and that this potential has increased in more recent years.  And I think his changes are good ones. 

Recently I have been looking back over my 40+ year career and thinking about what, in hindsight, I would have done different.  If I were starting out today I would truly limit my practice to 1040s, and would NOT prepare corporate or partnership business income tax returns - although I would, out of necessity, provide bookkeeping services and prepare payroll tax returns.

* I agree with the advice given by Jim Blankenship in “Retirement vs College Saving in a Nutshell” at GETTING YOUR FINANCIAL DUCKS IN A ROW –

“. . . a general rule of thumb with regard to this conflict is to put money aside for retirement first, and college second.”

* Trish McIntire returns to blogging at OUR TAXING TIMES after a too-long absence with an overview of “The New ABLE Accounts”.

I came across a list of the qualified disability expenses for the ABLE account at another source.  They include:

• Education
• Housing
• Transportation
• Employment training and support
• Assistive technology and personal support services
• Health, prevention and wellness
• Financial management and administrative services
• Legal fees
• Expenses for oversight and monitoring
• Funeral and burial expenses
• Other expenses approved by the IRS

* Jean Murray’s weekly ABOUT.COM email newsletter on business taxes deals with holiday topics.

* TAX MAVEN Diane Gilabert explaims “How Roth IRA Conversions can Optimize Year-end Tax Planning” –

In the right situation, a Roth IRA conversion can permit a client to preserve tax benefits that might otherwise expire unused.  And the long-term benefits of a Roth IRA as compared to a traditional IRA are compelling.”  


His 7 principles are –

1. Economic growth, entailing cuts in tax rates.
2. Fairness, through broadening the tax base.
3. A simpler tax code to reduce compliance costs.
4. Permanence, to avoid the large number of tax provisions that expire.  
5. Competitiveness, by reducing the high tax rates on businesses.  
6. The promotion of savings and investment.
7. Revenue neutrality.

I support all 7, and am glad he included #4. 

I am also glad that the conversation on substantive tax reform remains alive, although I do not hold any hope for true substantive tax reform any time soon.

* Michael Cohn reports that “Congress Requires Self-Preparers and Consumer Tax Software to Check for Improper Tax Credits” at ACCOUNTING TODAY (highlight is mine) –

The $1.1 trillion spending bill passed by Congress this week and signed into law by President Obama on Tuesday contains a provision directing the Treasury Department to implement uniform standards for taxpayers claiming refundable credits such as the Earned Income Tax Credit to stem improper payments.

The language contained in the recently passed federal appropriations bill directs ‘… the Department of the Treasury to ensure that the same questions are being asked of taxpayers whether they are preparing their returns with a paid tax preparer or via do-it-yourself methods such as paper forms, preparation software, or online preparation tools’.”

This clearly refers to Earned Income Credit claims.  The article references “the TIGTA report, which estimated EITC improper payment rates ranged from $16 to $19 billion for the fiscal year ended Sept. 30”.

The piece does not suggest just how this will be implemented.  Will “self-preparers” be required to prepare and separately sign a form similar to the 8867 (Paid Preparer's Earned Income Credit Checklist)?  I look forward to seeing how this will take “form”.

Of course the best way to do away with the tax fraud resulting from refundable credits like the Earned Income Credit and the Additional Child Tax Credit is to remove them from the Tax Code!

BTW – I like the comment.

TTFN

Thursday, December 18, 2014

THERE ARE A LOT MORE THAN 20 REALLY STUPID THINGS IN THE US TAX CODE!



The title of Robert W Wood’s FORBES.COM blog post - “20 Really Stupid Things In The U.S. Tax Code” - grabbed my attention immediately.

My first reaction - only 20?

Robert’s opening paragraph is a wonderful, and spot on, description of the mucking fess that is the current US Tax Code –

The U.S. tax code is the most complex in the world by any measure. It is chock full of perks to special interests, political pork and social engineering. Like a hodgepodge built with spare parts and constant add-ons, some of the results it produces are pretty unjust. In short, our tax code cries out for reform in practically a primal scream.”

The 20 “really stupid things” to which he refers are highlights from retiring Oklahoma Senator Tom Coburn’s “Tax Decoder”, which reveals more than 165 “giveaways” worth over $900 billion in 2014 and more than $5 trillion over the next five years.

Here are some of the 20 items listed by RWW, followed by my comments –

1. In 1913, our whole tax law was 27 pages. It’s now over 4 million words, 9,000 bloated pages. From 2001-2012 alone, there were 4,600 changes, more than one a day.”

The one and only purpose of the federal income tax is to raise the money necessary to run the government.  Period.  The majority of the growth from 27 pages to 9000 pages represents the “perks to special interests, political pork and social engineering” Robert references in his opening statement – which have absolutely nothing to do with raising the money necessary to run the government.

4. Many individuals pay nothing. Of 145 million personal tax returns in 2011, 54 million (more than a third) had zero tax liability or got refunds.

6. The Earned Income Tax Credit is plagued by fraud, up to 29% of all payments. The IRS paid out $125 billion in fraudulent refunds in the last 10 years, over $12 billion a year.

Here we see what I truly believe to be the biggest problem with the current Tax Code.  It should NOT to be used to “redistribute income” (the Tax Code is not Robin Hood) and should NOT be used as a way to deliver social welfare and other government benefits.  The Earned Income Credit and the refundable Child Tax Credit, the education tax credits and deduction, the energy credits, and many other “tax expenditures” do NOT belong in the Tax Code.

I am not saying that the government shouldn’t provide financial assistance to the working poor and college students, or provide encouragements for making energy-saving purchases and improvements. What I am saying is that such assistance and encouragements should not be distributed via the 1040.

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 energy credit and other such personal and business credits should be distributed via “Cash-For-Clunkers”-like direct discount or rebate programs funded by the budget of the appropriate Cabinet department.

10. The alternative minimum tax (AMT) is a complex parallel tax system that has grown like cancer. It’s results are hard to predict and can be perverse. If you win a lawsuit and pay contingent legal fees, you can end up taxed on more money than you received. AMT can ruin your stock options too.”

The dreaded Alternative Minimum Tax, referred to years ago by a colleague (I forget who – it was back in 2007) as “the poster child for complication, frustration, indiscriminant penalization, and a disregard for the best interest of Americans”, should be abolished. 

The existence of the dreaded AMT is a prime example of the laziness of the idiots in Congress.  When told in 1969 that 155 individuals with Adjusted Gross Income of more than $200,000 (over $1 Million in today’s dollars) paid “0” tax on their 1967 tax returns, rather than responding by acting logically, and eliminating the loopholes in the Tax Code that allowed the high income individuals to avoid paying tax, the idiots reacted and created the complicated alternative tax system.

The 20, and the many more in Coburn’s report, include many examples of ridiculous corporate loopholes which lobbyists paid the idiots in Congress to pass.  They have absolutely nothing to do with proper tax administration – they just unfairly benefit specific industries.

All industry-specific loopholes should be removed from the Tax Code.  Businesses, whether they be treated in the Code as corporations, partnerships, or sole proprietorships, should be taxed on net book income with minimal, if any, adjustments.  There should be a “dividend paid deduction”.  If corporations want to reduce their income tax liability they can distribute profits to shareholders in the form of dividends and claim a tax deduction.  

As I said in the BUZZ reference to Coburn’s “Tax Decoder”, I will continue to refer to the members of Congress as idiots as long as they continue to act like idiots – but I will also acknowledge a Congressperson who actually says something smart (a rarity).

Coburn tells us -

Ideally, Congress would throw out the entire tax code and start over, but at the very least the code should be made simpler, fairer and flatter.”

I believe that “at the very least” we need to shred the current Tax Code and start from scratch.  Start with “everything is taxable” and “nothing is deductible” and add back only those exclusions and deductions that are absolutely appropriate.

Coburn is correct in saying that the code should be simple, fair, and flat.  Most importantly, when writing a new Tax Code the idiots in Congress must “keep it simple, stupid!”  The simpler the better.  Simplicity for simplicity’s sake.

Will this ever happen?  I expect not in my lifetime, and certainly not before I have completed my 50th tax filing season and officially retire.

TTFN

Wednesday, December 17, 2014

FINALLY!


This just in.

In “The 2014 Tax Breaks You'll be Able to Take” CNN’s Jeanne Sahadi tells us –

Congress on Tuesday night extended dozens of expired "temporary" tax breaks for 2014.

It took the Senate, by a 76 to 16 vote, until the week after Congress was supposed to adjourn to pass the bill, which the House had already approved.

The bill will now be sent to President Obama, who is expected to sign it.”

Since the “tax extenders” were only extended for 2014 they will once again expire in 2 weeks.  We can only hope that the idiots in Congress will not wait until next December to deal with these tax benefits, many of which should not be extended, for 2015 and beyond – but I wouldn’t bet on it.

No word from the IRS yet on the delay to the start of the “tax filing season” that this irresponsibility will cause.

RANDOM COMMENTS ON TAX PREPARATION


Here are some random comments on two topics based on the report I discussed on Monday that resulted from the GAO undercover operation.

(1) The report included some statistics.  One table – Individual Taxpayers’ Estimated Use of Paid Preparers, by Various Groupings, Tax Year 2011 – indicated that 59% of taxpayers who claimed the Earned Income Credit used paid preparers, while the percentage for taxpayers not claiming the EIC was 55%.

In discussing the various fees charged by the 19 “fast food” chain offices visited by the undercover agents, the report stated “Paid preparers provided various reasons for the amount of the tax preparation fee, including (1) the EITC form is the most expensive form to file . . .

The rules for claiming the Earned Income Credit are indeed complicated, and it makes sense that many taxpayers who qualify, or think they do or may, turn to paid tax preparers for guidance. 

And it is true that, while it may not be the most expensive form to file (I would say Schedule C and Schedule D could cost much more – depending on the specific situation), because of the new overly-excessive due diligence requirements forced upon tax preparers, the fee for claiming the Earned Income Credit can be higher than the fees to file other forms and schedules.

The Earned Income Credit is in reality a federal welfare program.  Those who legitimately qualify for this credit are by definition lower income individuals.  Claimants may indeed truly need the additional monies provided by the refundable component of the EIC to properly care for their dependent children. 

Yet by distributing this welfare benefit via the Tax Code claimants are forced to pay a premium fee to tax preparers, very often truly justified because of the additional work involved, to request the benefit - money that they may not be able to afford to pay, or that could be better used elsewhere.

When applying for the traditional Aid to Families with Dependent Children welfare benefits are the families required to pay the county an application fee?  I think not.

The Earned Income Credit and the refundable Additional Child Tax Credit DO NOT belong in the Tax Code!

(2) The fee section of the report also states –

Often, paid preparers either did not provide an estimate of the fees upfront or the estimate was less than the actual fees charged.”

This is really not an issue – and should not be a criticism of the otherwise flawed preparers.  The only possible criticism is that the less than honest preparers may have given a low-ball upfront estimate to get the business, knowing full well that they would charge more.

To be perfectly honest, most of the time it is very truly literally impossible to know how much the fee for preparing a tax return will be until after the tax return has been prepared. 

The final fee depends on the number of forms and schedules needed and the time involved to prepare the return, and is certainly impacted by the level of organization of the client taxpayer.

When I was accepting new clients, and a prospective client asked me “how much will it cost to prepare my tax return?”, the only true and honest answer I could provide was “between $45 and $500”. 

To be fair, I could probably be able to “tighten” my fee range and perhaps offer a basic “good faith” non-binding estimate of “between $100 and $250” by looking at the prior years’ returns and the current year’s “stuff” and asking a few questions.  And, of course, I could provide an actual legitimate “quote” for truly simple “short forms”, reporting only W-2 income, minimal interest income, and no deductions or credits.

FYI - in my 40+ years of preparing 1040s, 99.5% of all returns described by potential clients as “easy returns” have NOT been easy returns.

The best a tax professional can do is provide a potential client with a fee schedule, listing the minimum fee or fee range for individual forms and schedules, and explain the guidelines used in determining the fee.

TTFN

Tuesday, December 16, 2014

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


Guess what arrived in the mail this past Saturday.  A delinquent client’s 2011 tax “stuff”!  So it looks like the first Form 1040 I prepare in calendar year 2015 will be a 2011 Form 1040.  I hope the 2012 and 2013 “stuff” will follow shortly.

* Tax pros, PLEASE check out the December “issue” of THE TAX PROFESSIONAL and let me know your comments on my “Soapbox” editorial.

* The AICPA is not giving up in its attempts to crush competition for 1040 preparation clients and to “put down” any program, voluntary or otherwise, that provides a tax preparer credential or indicates any form of competence or currency in 1040 preparation for “unenrolled” preparers.

Blake Treu reports at the FULLER TAX BLOG that “AICPA Appeals Lawsuit Against Tax Preparer AFSP Program to DC Appellate Court

“. . . the AICPA has filed the necessary documents to appeal the adverse ruling they received on their challenge of the Annual Filing Season Program newly initiated by the Internal Revenue Service.”

Blake goes on -

After the result was handed down by Judge Boasberg in the D.C. District Court in October, the AICPA responded claiming they were “shocked and disappointed” at the result, not understanding why their suit would not be evaluated on the merits of its claim. Although it seemed to me that the reasons were made perfectly clear in logically sound ways, the AICPA has decided to have another go at the issue in the Court of Appeals.”

Judge Boasberg correctly identified the AICPA’s true purpose in filing the original lawsuit, stating in his ruling that the CPA group did not have standing to sue because its members are CPAs and accounting firms and not the unenrolled tax return preparers who are the target of the IRS program –

“. . . the crux of [the AICPA’s] concern is apparent:  its membership feels threatened by the specter of increased competition from previously uncredentialed tax return preparers who choose to complete the program.”  

* Tax pros – are you preparing for the upcoming tax filing season?  Here is something that you should have – my compilation of TAXPRO FORMS, SCHEDULES, WORKSHEETS, CLIENT MEMOS AND HANDOUTS. 


* There is a new weekly post up at BOB’S BABBLINGS – I discuss the nearby Forestburgh Playhouse’s 2015 summer season.  And, of course, I always leave you laughing.

* Roger Wohlner, THE CHICAGO FINANCIAL PLANNER, lists “7 Reasons to Avoid 401(k) Loans”.

I want to especially emphasize the first and last reasons –

·   Leaving your job triggers repayment” and the amount not repaid is treated as a premature distribution

·   You will have less at retirement.”

* William Perez goes into detail on “Year-End Tax Planning Tips for Freelancers and Self-Employed Persons” at ABOUT.COM.

* "This Just In! Final Regulations On Reporting of Foreign Specified Assets On Form 8938!  So Manasa Nadig reports at THE BUZZ ABOUT TAXES.  

* Mikey Rox lists “7 Ways to Pick the Bank That's Right for You” at WISEBREAD.

I realize this is not a tax-related post.  But the title interested me.  In the past I have advised clients and readers to use for their personal banking the smallest local bank in town – a one branch bank if you can find it.  Your account will carry more weight and you will probably get better and more personalized service.

Do you agree with me?

* Alltop.com led me to a September post that I had missed from the PHILADELPHIA ESTATE AND TAX ATTORNEY BLOG titled “College Tuition: Discover How Grandparents Can Help Their Grandchildren and Save Taxes Too”.  

* From MAINSTREET.COM - “You Can't Deduct Your Wedding and Other Things You Shouldn't Be Expensing” by Nicholas Pell.

THE FINAL WORD –

A newspaper cartoon from last week explained the difference between a lawyer and a reptile.

A reptile does not bill by the hour.

TTFN

Monday, December 15, 2014

THE RETURN OF THE GAO UNDERCOVER OPERATION


In 2006 the Government Accountability Office (GAO) sent undercover operatives to 19 “commercial preparer” branch offices in a major metropolitan area posing as taxpayers looking to have their tax returns prepared.  Errors were identified in 19 of the 19 completed federal returns, some “significant”.  The GAO published the results of the undercover operation in “Paid Tax Return Preparers: In a Limited Study, Chain Preparers Made Serious Errors” (GAO-06-563T).  It is believed that this study started the ball rolling on what led to the IRS initiation of the now-dead mandatory RTRP tax preparer regulation program.

In 2014 the GAO did it again -

We had tax returns prepared for us at 19 randomly selected locations of several commercial preparers throughout a major metropolitan area.  We chose the major metropolitan area based on the criteria such as (1) location in a state that does not regulate paid preparers, (2) presence of multiple commercial preparers, and (3) location in a state that does not levy an income tax.  Our investigators posed as taxpayers and asked paid preparers to prepare, but allow us to file, our federal tax returns under one of two scenarios, as described later in this testimony {a “waitress scenario” and a “mechanic scenario” – rdf}.  The two scenarios incorporated a range of commonly used IRS forms and lines on the Form 1040.”

Once again the GAO again found “significant” preparer errors -
 
Refund errors in the site visits varied from giving the taxpayer $52 less to $3,718 more than the correct refund amount”.  However in this investigation “2 of 10 preparers calculated the correct refund amount”. 

The GAO found –

The quality and accuracy of tax preparation varied.  Seventeen of 19 preparers completed the correct type of tax return.  However, common errors included

·      not reporting non-Form W-2 income (e.g. cash tips) in 12 of 19 site visits;
·      claiming an ineligible child for the Earned Income Tax Credit in 3 of 10 site visits where applicable;
·      not asking the required eligibility questions for the American Opportunity Tax Credit; and
·      not providing an accurate preparer tax identification number.”

As a result of the operation the GAO issued the report “Paid Tax Return Preparers: In a Limited Study, Preparers Made Significant Errors”.

The report also indicates –

The fees charged for tax preparation services varied widely across the 19 visits, sometimes between offices affiliated with the same chain.”

Elaborating –

For the waitress scenario, the final fees charged for tax preparation ranged from $160 to $408.  For the mechanic scenario, the final fees charged for tax preparation ranged from $300 to $587.  For the two correct tax returns that were prepared, the final fee charged was $260 for the waitress scenario and $311 for the mechanic scenario.”  

What is significant about these two almost identical operations?  The paid preparers who were visited were “commercial preparers”.  The term “Commercial Preparers” is actually in the title of the first report.  And in the current report the GAO explained (the highlight is mine) –

We visited commercial paid preparers with 10 or more locations.  We did not visit any law firms, Certified Public Accountant (CPA) firms, or single-office tax return preparation businesses.”

Who are “commercial preparers” with multiple locations?  H&R Block, Liberty Tax Service, and Jackson Hewitt Tax Service – to name the biggest three.

The GAO report admitted (as usual, the highlight is mine) –

Because our 19 site visits are limited in size, results cannot be used to generalize our findings to the retail tax preparation industry.”

The results have absolutely no application to the “unenrolled” independent “single-office” tax preparer, like for example me.  They can only be applied to the multi-location “commercial tax preparer” community.

It comes as no surprise to me that (1) the preparers employed by Henry and Richard and others of their ilk frequently make serious and significant errors (my mentor had always wished an H&R Block office would move next door to us because we could make tons of money amending H&R prepared returns to fix their FUs) and (2) the fees charged by Henry and Richard and others of their ilk are high and erratic.

When the GAO made a presentation on the 2006 study at the IRS Nationwide Forum I asked the presenter if any of the 19 tax preparers visited had asked the undercover client for a copy of their prior year’s tax return?  When I was accepting new clients, the first thing I asked a newbie was to give me copies of their last 3 tax returns, as, I expect, do most if not all of my fellow independent “single-office” preparers.  The answer I was given was “no”.  None of the commercial preparers visited had asked to see a prior return.  
 
I emailed the same question to James R. McTigue, Jr, the GAO Director of Strategic Issues, and he responded -
 
Thank you for your interest and question.  I checked with my staff and this is not something that we specifically tracked.  Based only on their recollection a few may have asked for it, but we simply stated we didn’t have it.  This was not a problem for us in obtaining service.” 
 
As I posted about the 2006 operation here back in January of 2007 –

The GAO agents also discovered unethical sales practices related to Refund Anticipation Loans (RALs). The annualized interest rate for the RALs offered to the ‘taxpayers’ ranged from 380% to 470%.”  

Thankfully H&R, etc. no longer offer usurious RALs.

The GAO recommends –

If Congress agrees that significant preparer errors exist, it should consider legislation granting IRS the authority to regulate paid tax preparers.”

I do not concur (for one thing, the statement “if Congress agrees” precludes any such legislation – the idiots cannot agree on anything).  Mandatory regulation of paid tax preparers is not the answer.

My recommendation is for taxpayers.  It is nothing new - I have been saying it for years.  Do not go to Henry and Richard, Liberty, Jackson Hewitt, or any other “fast food” preparation chain to have your tax returns prepared.  Choose instead an independent “single-office” tax professional, “enrolled” or not.

For information and resources on how to find a tax preparer go to my website FIND A TAX PROFESSIONAL.

TTFN

Friday, December 12, 2014

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

 
Today's BUZZ is so meaty!
 
* Tax pros, PLEASE check out the December “issue” of THE TAX PROFESSIONAL and let me know your comments on my “Soapbox” editorial.

* On Thursday two of my articles appeared at MAINSTREET.COM -



* Also at MAINSTREET.COM - You Won't Guess The Most - and the Least - Corrupt States in America” by Robert McGarvey.  Surprisingly, it’s not New Jersey!
 
You knew New Jersey ranked near the top of the most corrupt states in America. Everybody knows that. But did you know that, hands down, the state with the most criminal corruption involving elected officials is Arizona?

The least corrupt - Massachusetts and Vermont.

There is illegal corruption and “legal” corruption (NJ is high on list of both).  “Legal” corruption is defined as “the political gains in the form of campaign contributions or endorsements by a government official, in exchange for providing specific benefits to private individuals or groups, be it by explicit or implicit understanding.”

Click here for the actual report referenced in the article.
 
* Any takers for $1.00 tax guides from MY DOLLAR STORE?  They make great stocking stuffers for adults.

* There is a new timely post up at BOB’S BABBLINGS – it discusses using “Debit Cards vs Credit Cards” when it comes to online holiday shopping (actually online shopping at any time of the year).

* Jason Dinesen embarks on a series of posts to elaborate on the items he listed in his previous post “5 Things About EAs” with “We’ve Been Around Since 1884” followed by, perhaps the most important “thing”, “We Don’t Work for the IRS”.

2014 marked the 130th anniversary of the Enrolled Agent designation, but the anniversary passed with little fanfare.”

The EA designation was created in legislation “informally called the ‘Horse Act’.”  Originally the Enrolled Agent acted as an agent on behalf of a citizen claims against the government for lost horses and other property damage during the Civil War.

Many, myself included, feel that the name Enrolled Agent should be changed.  Jason says –

. . . it’s not the name that’s the problem, it’s the lack of recognition. Nearly 90% of the public has never heard of an EA.”

* Jon Swaner of WTHITV10 tells us to “Expect Rough 2015 Tax Season”.

* Need more proof that (1) refundable tax credits are a magnet for fraud and should be banned from the Tax Code, and (2) the Tax Code should not be used to distribute federal welfare payments?  Just read “IRS Urged to Crack Down on Improper EITC and ACTC Payments” by Michael Cohn at TAXPRO TODAY (highlights are mine – and fyi, ACTC stands for the Additional Child Tax Credit, which can be refundable) -

Using IRS data, TIGTA estimated the potential ACTC improper payment rate for fiscal year 2013 is between 25.2 percent and 30.5 percent, with potential ACTC improper payments totaling between $5.9 billion and $7.1 billion. In addition, IRS enforcement data show the root causes of improper ACTC payments are similar to those of the EITC.

The IRS estimated that it paid $63 billion in refundable EITCs and $26.6 billion in refundable ACTCs for tax year 2012. The IRS also estimated that 24 percent of all EITC payments made in fiscal year 2013, or $14.5 billion, were paid in error.”

* E. Hans Lundsten and Joseph Marion, III explain how “Saving for College is Also Good for your Estate Plan” at JDSUPRA BUSINESS ADVISOR.

* Wednesday’s CCH daily TAX HEADLINES email newsletter reports “Coburn Releases Report “Decoding” the Tax Code

Sen. Tom Coburn, R-Okla., on December 9 issued a new report highlighting over $900 billion of “giveaways” throughout the tax code. More than 165 tax expenditures worth over $900 billion in 2014 and more than $5 trillion over the next five years are revealed in “Tax Decoder,” a new report about the tax code.”

Click here for highlights of the report and here for the full 320 page report.

I will continue to refer to the members of Congress as idiots as long as they continue to act like idiots – but I will also acknowledge a Congressperson who actually says something smart (a rarity).  The CCH piece quotes Coburn as correctly stating –

Ideally, Congress would throw out the entire tax code and start over, but at the very least the code should be made simpler, fairer and flatter.”

* I agree with Joe Kristan, who, in a response to my post on Donor-Advised Funds included in his Wednesday “TaxRoundup, 12/10/14: Extender bill lives, permanent charitable extender bill doesn’t. And: don’t just buy it; install it!” at the ROTH AND COMPANY TAX UPDATE BLOG, said -

For at least 99.99% of taxpayers, these are far better than setting up a private foundation.”

* Tax Mama Eva Rosenberg deals with the question “How Old Do You Have to Be to File Taxes?” at EQUIFAX -

Is there an age limit when it comes to paying taxes? No. Age has nothing to do with taxes; it’s all about income.”

I have dealt with this question from a different perspective over the years – “How Old Do You Have to Be to Stop Paying Taxes?”  The answer is the same.

As I have said many times before, you pay taxes if you have sufficient taxable income – whether you are 1 years old or 101 years old.  And you pay FICA tax (Social Security and Medicare) if you have earned income (W-2 or self-employment) – whether you are 1 years old or 101 years old.

* While we are still waiting for the idiots in the Senate to pass an extender bill, we hear from Laura Prabucki and William La Jeunesse of FOX NEWS POLITICS that “Congress Prepares to Extend Tax Breaks for Horse Owners, Film Industry and More” –

While you might lose money betting on the tracks, some race horse owners are making millions -- and with the help of the U.S. tax code, they can write off the cost of their thoroughbreds.

That's just one of 55 tax "extenders," worth up to $44 billion, currently being debated by Congress.”

The House has extended for one year ALL of the “tax extenders”.  While we hear about the “extenders” that affect the 1040 – the deductions for educator expenses, tuition and fees, and state and local sales tax among them – the full list includes loopholes for specific business activities. 

I certainly agree that many of these specialized loopholes should not be in the Tax Code – including the 1040 deduction as mortgage interest for mortgage insurance premiums – and really should not be extended.  But at this point there is no time for the idiots to pick and choose, with those members whose pockets are lined by the recipients of the individual specialized loopholes wasting more time fighting to keep the loophole that they are paid to champion, regardless of its “appropriateness”.  Just vote them all in or all out and be done with it. 

TTFN