I recently received the November 2008 issue to find that it is now called BOTTOM LINE WEALTH, and combines personal finance with tax issues. It is still an excellent publication.
The November issue has some items of interest that I would like to share with you.
Dr. Allen Sinai’s column ON THE ECONOMY deals with “What A New President Can Do”. He tells us that “newly elected presidents have often played a decisive role in shifting the US economy” and discusses what Kennedy, Reagan and Clinton did to fix inherited problems in the economy. The highlights below are mine.
“When John Kennedy was inaugurated in 1961, the country was in a recession. In an attempt to rev up the economy, Kennedy increased government spending and proposed cutting taxes. The eventual tax reductions stimulated consumer spending and business investment, and the economy entered a strong expansion.
When Ronald Reagan took office in 1981, the economy was stagnant while inflation was high. Reagan responded with big tax cuts and a massive increase in defense spending. The combination set off a boom that ran from 1982 through 1988.”
You will note that in both these cases, according to Sinai, tax cuts resulted in a stronger economy.
Slick Willy’s actions were a bit different.
“After taking office in 1993, Bill Clinton changed the economy’s course, balancing the budget and reducing the deficit. With Washington borrowing less, interest rates declined. That allowed consumers and businesses to take out loans, spend and prosper. Clinton presided over the best decade the US economy ever had.”
In Clinton’s situation balancing the budget and reducing the deficit did the trick.
Just something to think about when deciding on who to vote for this November.
The issue’s TAX BITES column tells us that “A new identity theft assistance unit has been set up by the IRS to help taxpayers facing identity theft problems” which is known as the Special Victims Assistance Unit (was it named by a fan of the LAW AND ORDER franchise?). For more information click here.
I wish to take exception to two of the “10 Questions to Ask…A Tax Preparer” suggested in an article by Martin S Kaplan CPA.
Question #3 is “Are you a licensed CPA? Enrolled Agent? Tax Attorney?” Kaplan tells us to “stick with tax preparers who have one of these designations”.
I have written several times, here at TWTP and in guest posts and comments elsewhere, that a CPA is not necessarily the best choice, and certainly not the most cost efficient, to prepare your tax return. While there are CPAs out there who are experienced in individual income taxes (several of them write tax blogs) and may even charge reasonable fees, just because a person has the initials CPA after his name does not mean that he is an expert when it comes to federal and state income taxes. You will notice the initials after the Kaplan’s name.
As for a tax attorney – if you think a CPA is expensive…! You certainly do not need a tax attorney to prepare a 1040. When you may need a tax attorney is if you are in deep doo doo (technical term) with the IRS.
Now an Enrolled Agent – there Kaplan is on the money.
Question #5 is “Do you use a computer to review returns before filing?” Here Kaplan says, “Some old-timers still don’t use tax-preparation software. Avoid these preparers. The Tax Code is simply too complex to do without software to double-check the tax preparer’s math and call potential errors and omissions to his attention.”
As one of the old-timers to which Kaplan refers I say “poppycock” (another technical term)! As I learned at a recent IRS Tax Forum class on the most frequent 1040 errors (see my post “IRS Nationwide Tax Forum 2008") relying on tax-preparation software causes a multitude of problems. One must manually check the math of all returns – especially software-generated returns.
I agree that the Tax Code is complex, which is why I keep up-to-date on the tax law by daily visits to tax blogs and other online resources and by attending several federal and state continuing education classes throughout the year. At many of these classes, after I identify myself as still preparing tax returns by hand, I am often told that I am the only person present (along with the one or two others in the room who also do manual returns) that actually knows tax law or how to prepare a tax return.
While taxpayers should obviously never rely on a “box” to properly and accurately prepare their tax returns, neither should tax preparers. Software-generated tax returns are only as good as the knowledge and experience of the person entering the data, and, I cannot say this often enough, need to be manually checked for math and other errors before being given to the client for filing.
While Kaplan’s article is flawed, the November issue of BOTTOM LINE WEALTH also has articles on investing and Social Security scams with great information.
I highly recommend this newsletter as being an excellent, and very reasonably-priced, source of tax planning and preparation as well as investment information.
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FYI, I have not been solicited or paid by Bottom Line Publication in any way to write this post. I did it all on my own.