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

FYI – while I was able to “power-up” my Vonage box I have been unable to get the system up and running. It is all Greek to me! So I am without a phone – incoming or outgoing – until my “professional” installation on August 25th! I don’t mind no incoming calls – the phone is unplugged this time of the year anyway – but I might want to make a call of two before then.

On to the BUZZ -

* Bruce has moved his THE TAX GUY blog – click here for his new “address”. I like the new look of the blog.

His post “This Week Started Off Bad. .”, under the “Tax something” heading at the end, reminds taxpayers that “No matter who prepares the return, the taxpayer is ultimately responsible for the accuracy of the return.”

* Professor Jim Maule of MAULED AGAIN continued his discussion of the new additional Standard Deduction for real estate taxes in the post “Is This How Tax Laws Are Created?”. {aside – if I had written the original posting I would have titled it “Why God Why” or “Why God, Why This Provision” – a Broadway musical connection} This time he includes the comments of two of his readers, Andrew Oh-Willeke (?) and a veteran tax pro from Jersey City.

Oh-Willeke agrees with Jim and I that the tax provision “doesn't make much sense from a tax complexity or economic necessity perspective", and agrees with me about the major beneficiary of this deduction being senior citizens who do not itemize

Jim’s bottom line - “If Congress truly cared about the impact of rising property taxes on elderly low-income homeowners, it would do something other than enact a provision that benefits a fairly small proportion of them. It would examine the reasons for those property tax increases, and if it did so properly, it would discover that it, yes, the Congress, is responsible for a substantial portion of the increase.”

Jim also takes on another provision of the ill-conceived housing bill – the refundable credit for “first-time” home buyers – in his subsequent post “Yet Another Questionable New Tax Provision”.

In commenting on the concept of the refundable credit he says –

“This nation has had an educational experience with refundable credits targeted toward low-income taxpayers. The earned income tax credit has spawned so many schemes, many fraudulent, and has caused such havoc among taxpayers and tax return preparers, that the Congress should beware of imitating it without taking steps to minimize the temptations it presents to the schemers who would manipulate it to their advantage. Will the IRS end up directing even more of its resources toward audits of low-income home purchasers as it has had to direct a disproportionate amount of its resources toward auditing the earned income tax credit?”

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While I agree, as Jim points out, “A useless credit isn't much of an incentive whether or not one agrees with the incentive”, I am against any type of refundable credit. I am especially against the refundable Earned Income Credit – and have written about it on various occasions (click here for one of them).

* Joe Kristan of the ROTH AND COMPANY TAX UPDATE BLOG has introduced us to a new tax blog – THE TAX LAWYER’S BLOG – written by Peter Pappas, “a Certified Public Accountant and Tax Attorney with over 25 years representing taxpayers before the Internal Revenue Service, United State's Tax Court, United State's District Court and Bankruptcy Court”, who Joe thinks is from Orlando, Florida.

The blog has a comprehensive posting on the famous Cohan (as in George M) ruling, and has begun a series of posts on “Absurd Tax Protester Arguments”.

* The Small Business Tax and Management website’s “Tip of the Day” for last Wednesday (8/13) advises “Received a notice from the IRS about an AMT discrepancy on your return? Don't assume the IRS is right.” According to the item, “The Treasury Inspector General for Tax Administration (TIGTA) has done a study and found the complexity of the AMT causes errors in determining and computing the tax.”

Just another reason why when you receive a notice from “Sam”, or any of your other “uncles” (i.e. state tax authority), you should send it to your tax preparer ASAP! At least half of all such notices I have seen over the years have been incorrect.

* Kay Bell provides an update on state sales tax holidays in “Sales Tax Holidays, Take Two” at DON’T MESS WITH TAXES.

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* The Tax Foundation’s TAX POLICY BLOG reported in “Thursday Video: Social Security (and Payroll Taxes) Turn 73 Years Old Today” that this past Thursday was -

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“the 73rd birthday of the Social Security system in the United States. Signed into law in 1935, the first payroll taxes were collected in 1937 and the first payment made in 1940. Although initially the system was designed to pay out benefits from a reserve fund, it was changed in 1939 to "pay-as-you-go"—payroll taxes that are collected are immediately paid out to current retirees. Taxes are split, with half deducted from employee paychecks and the other half paid by the employer. Consequently, early retirees enjoyed a large windfall: the first recipient, Ida May Fuller of Vermont, for example, paid $22.54 in payroll taxes but collected $22,888.92 in benefits before her death at age 100.”

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When I first started doing payroll in the mid 1970s the maximum wages subject to both Social Security and Medicare tax was $14,100 and the combined withholding rate was 5.85% each for employee and employer (maximum withholding = $824.85)! Just about every full time employee that I did maxed out on FICA tax. Click here for historical FICA tax info.

* Read TAX GIRL Kelly Phillips Erb’s lips – “The Check Is NOT In the Mail: A Second Stimulus Package Has Not Been Approved”. Thank God!

* This has nothing to do with taxes (it probably belongs in ANYTHING BUT TAXES – and may still end up there in some form), but I just had to mention it. There is a great line in the trailer for the new Oliver Stone biopic “W.” (about, of course, the life of Dubya). The elder George Bush is chastising his young son, the future President, for his wild drunken behavior. “Who do you think you are – a Kennedy?”

TTFN