Saturday, December 22, 2007

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

* CCH reports that the House voted unanimously to approve the Mortgage Forgiveness Debt Relief Act of 2007 (HR 3648), which creates a three-year exception to current law so homeowners caught in the current subprime FU do not have to pay federal taxes on debt forgiveness from mortgage loans. George W signed the bill into law on December 20th.
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* Joe Kristan of ROTH AND COMPANY TAX UPDATE BLOG reports –
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When you are on hold for the IRS practitioner helpline, they play selections from "The Nutcracker." So much for 'kinder and gentler'."
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Speaking of Joe Kristan, his “Thanks Santa, But Go Away” post provides an excellent commentary on the rush to action by Congress in the past week, with five (5) tax-related bills being sent to George W for signature – all of which, as he points out, and rightfully so, represent bad tax policy. Joe makes very good points in his individual comments on each of the 5 bills.

The common element of all of these bills seems to be that Congress does not think – it just reacts! And more often than not the reaction is not in the best interests of the country, but in the best interests of the Congress-person’s press secretaries, or the lobbyists who are throwing money at the Congress-persons, and most times solely for expediency sake.

* I have come across two recent surveys related to tax preparation.
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The National Society of Accountants biennial survey of nearly 8,000 qualified tax preparers showed that average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return increased less than 2 percent during the past two years -- rising from $201 to $205. The average fee charged by tax pros for an in the Middle Atlantic region (NJ, NY, PA) was $209.
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The average cost to prepare a Form 1040 and state return without itemized deductions was only $115, up from $110 two years ago.
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Most accountants bill on a flat-fee basis for tax preparation, with some billing on an hourly basis. Hourly fees for tax services average $122.12 nationally. The Middle Atlantic (NJ, NY, PA) average was $139.07.
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I hope my clients are reading this!
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Bankrate, Inc. commissioned GfK Roper to conduct a random survey of Americans' attitudes about taxes. The survey found that sixty percent of Americans think the tax system is skewed to benefit the rich. This despite the documented findings to the contrary discussed here in previous posts. Furthermore, three in ten Americans disclosed that they feel clueless about tax preparation and planning.

* Kay Bell of DON’T MESS WITH TAXES reports in her post “Bad News for Those Who Owe, Too” that the IRS will be grabbing the money from checks received for balances due on 2007 returns immediately as a “direct debit”. The IRS payment should show up as an “ACH” withdrawal and not a check on your bank statement. So you better have the money in the bank when you mail your check to “Sam” next year!

Oi vey! So no good news for taxpayers for tax year 2007– your refund will take longer to get to you and the money you owe will be taken by the IRS sooner!

* The NATP TAXPRO WEEKLY reports:
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The IRS has issued Notice 2008-05 clarifying the definition of a qualifying relative for purposes of claiming a dependency exemption. In general, to be considered a qualifying relative of a taxpayer, the individual cannot be a qualifying child of any other taxpayer. The IRS has clarified the definition of "any other taxpayer" (such as a parent) to exclude persons who are not required to file a tax return and do not file a tax return, or only do so to claim a refund of withheld tax.
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This ruling is a major shift from what we have come to understand in the way of claiming dependency exemptions. One of the most common instances of this situation involves a taxpayer who lives with another person for the entire year and that person has a child who is not the taxpayer's child. Assume that the child's parent does not work and the taxpayer provides over half the support for both the child and the child's parent. This ruling clarifies that the taxpayer is eligible to file as head of household, claim the child tax credit, and the dependency exemption.
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Prior to this clarification, it was widely understood that in this situation, the taxpayer was not entitled to the dependency exemption, the head of household filing status or the dependency exemption because the child was the qualifying child of the parent, and thus could not be the qualifying relative of the taxpayer
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TTFN

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