Saturday, July 21, 2007


* The Tax Foundation has added a new section to its website dedicated to the dreaded Alternative Minimum Tax (AMT). The new section includes the Foundation’s recent proposal for reforming the AMT, a history of AMT tax returns and liabilities from 1970 to the present, information on the % of tax returns subject to the dreaded tax by congressional district, state, major city and county. It also allows one to search for AMT posts on the Foundations Tax Policy Blog.

* BLUEPRINT FOR FINANCIAL PROSPERITY presents a “Comprehensive Guide to IRS Income Phase Outs Rules” – an excellent supplement to my post on “The Most Important Number on Your Tax Return”. It describes, with examples, how to calculate the “phase-out” of various deductions and credits based on your AGI (or MAGI).

* GOTT IN HIMMEL! Joe Kristan of ROTH AND COMPANY TAX UPDATES reported that Friday, July 13th was Germany’s “Tax Freedom Day” – the day the average German had earned enough to pay all his taxes for the year. As Joe points out, “That means the average German worker toils more for the government than for himself.” When you complain about how much taxes we pay here in the US remember that our “Tax Freedom Day” this year was April 30th.

As an aside, the first time I heard the phrase GOTT IN HIMMEL exclaimed was some 30+ years ago when my mentor Jim Gill told a client of German extraction, a head waiter in NYC who owned several rental properties in either Union City or North Bergen, how much he owed his Uncle Sam.

* KPE, the internet’s TAX GIRL, provides a list of state sales tax “holidays” in “Sales Tax Takes a Holiday”. These are periods when a state will exempt certain items from sales tax in order to encourage spending.

* The National Association of Tax Professionals email newsletter TAXPRO WEEKLY reports that the IRS has created a new tax form - Form 8919 Uncollected Social Security and Medicare Tax on Wages - that will be used by workers who are misclassified as independent contractors. In the past, misclassified workers used Form 4137 Social Security and Medicare Tax on Unreported Tip Income, to report their share of the social security and Medicare tax. The new form will simplify the reporting process for these workers. Trish McIntire of OUR TAXING TIMES goes into a bit of detail on this new form in “New Form 8919”. While checking out the IRS Draft Forms page I discovered another new form – Form 8917 Tuition and Fees Deduction to report information on an “above-the-line” adjustment to income for tuition and fees. In the past no supporting form was needed to claim this deduction.

TAXPRO WEEKLY also tells that National Taxpayer Advocate Nina E. Olson delivered a report to Congress this week that identifies the priority issues the Office of the Taxpayer Advocate will address in the coming fiscal year. The
National Taxpayer Advocate is required by law to deliver two reports to Congress each year. Through these reports, the Taxpayer Advocate Service identifies and proposes solutions for serious taxpayer problems. The Objectives Report, delivered each June, contains the goals and activities planned by the Taxpayer Advocate for the coming fiscal year. Among the key areas of focus will be improving taxpayer services, ensuring that taxpayer rights are protected in the IRS private debt collection initiative, and making the IRS offer-in-compromise program more accessible for taxpayers who are unable to pay their tax debts in full.

Here is a quote from the report’s introduction by Nina Olson – “It is likely that Fiscal Year 2007 will see the IRS begin using Private Collection Agencies to collect federal tax debts. I have opposed this program from the outset, on the grounds that it compromises taxpayer privacy and taxpayer rights, undermines the integrity and independence of the tax system, and costs more than hiring additional IRS collection employees. Despite our best efforts to protect taxpayers during the development of this initiative, I have no doubt that problems will arise.”

* Gina Gwozdz of GINA’S TAX ARTICLES, the subject of this week’s “Getting to Know You Tuesday” at TAX GIRL, tells you how to get a copy of a prior year’s tax return (cost = $39.00) or of a “tax return transcript” (cost = 0) in “
Obtaining a Copy of a Prior Year Return”.

* The WEB CPA WEEK email newsletter reports that former construction worker and Coast Guard employee Rhiannon O’Donnabhain is suing the Internal Revenue Service after she was disallowed from deducting $25,000 in medical expenses for her sex change operation. The IRS says that the operation was elective cosmetic surgery. Lawyers for O’Donnabhain say that she suffered from a medical condition known as “gender identity disorder”. Both a psychotherapist and a psychologist told her that a sex change operation was medically necessary. The US Tax Court has never ruled on this particular issue before.


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