Wednesday, October 21, 2009

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION

* Kay Bell starts the BUZZ ball rolling with her post “Geithner Talks (a little) About Taxes” at DON’T MESS WITH TAXES.

Speaking at the Buttonwood financial conference held at Pace University in New York City last week, Treasury Secretary Timothy “Turbo Tax Screwed Up My Taxes” Geithner told those present that “. . . the Obama Administration must be careful not to withdraw economic stimulus programs too quickly. However, Geithner insisted that the White House isn't yet contemplating a second economic stimulus program.”

Kay goes on to report -

Asked about the prospects for tax reform, Sheppard reports that Geithner dodged the question and indicated that it would be far down the line. Economic growth and public confidence about the economy's future take precedence, he said, followed by deficit reduction, which would require tough political choices.

With those items before it on the policy to-do list, it's probably safe to say that Obama's stab at tax reform is going to suffer the same sad fate as did Dubya's tax revamp effort
.”

So I guess I rushed to get my comments on tax reform to the President’s panel by the October 15th deadline for nothing.

* Trish McIntire is up to Part V in her “Buyer Education” series at OUR TAXING TIMES. This one tells you “Your W-2's Can't Be Held Hostage...”.

She gives some good advice at the end -

So, my advice is to take a minute and make a copy of whatever you give to the preparer. If there is a problem and you choose to try another preparer, ask for your papers back. If the preparer refuses, you have a backup.”

I tell my clients to make and hold on to a copy of all their W-2s before giving me the tax “stuff”. This is because they may be asked by a variety of sources for a copy of their W-2. Despite my instruction, included in my January client letter, I always get a couple of calls or emails during the season asking me to fax or mail to them, or to someone else, a copy of their W-2(s).

* Professor Jim Maule provides an as usual scholarly post on “Why the Nation Needs Tax Education” at MAULED AGAIN.

Jim properly observes -

The fact is that very few Americans understand the federal income tax system. The premise is that only by understanding the tax system can Americans not only pay no more and no less than what they legally owe in taxes but also comprehend the sorry state of national politics and economics that threaten the well-being of the nation and its citizens.”

Who is to blame!

Thanks to the Congress, which ultimately is responsible for the incomprehensibility of the federal tax law, and state legislatures, which have increasingly muddled state tax law.”

As a tax professional (emphasis on “professional”) I am not afraid of an educated taxpayer. I much prefer a client who has some basic knowledge and understanding of his taxes to the “great unwashed masses” of the totally clueless. As I have often said, here and elsewhere, the more informed you are about your tax situation the better prepared you will be when you give me, or your tax professional, your “stuff” at tax time. And, therefore, the easier my, and his/her, job.

It ain’t easy. Albert Einstein said, “The hardest thing in the world to understand is the income tax”! You can start by becoming a regular visitor to THE WANDERING TAX PRO and checking out the BUZZ twice a week (Wed and Sat).

* New Jersey finally tops a list (not the list of the most expensive state in which to live – although it probably would if there were such a list). TAX PROF Paul Caron reports that New Jersey is #1 on the list of “Median Family Income”, according to the US Census Bureau.

* My mail.com home page reports that, “Feds To Issue New Medical Marijuana Policy”.

According to the item – “Federal drug agents won't pursue pot-smoking patients or their sanctioned suppliers in states that allow medical marijuana, under new legal guidelines to be issued Monday by the Obama administration”.

Fourteen states currently allow some use of marijuana for medical purposes: Alaska, California, Colorado, Hawaii, Maine, Maryland, Michigan, Montana, Nevada, New Mexico, Oregon, Rhode Island, Vermont and Washington.

However residents of these 14 states should not expect to be able to deduct the cost of their medical marijuana as a medical deduction on their Form 1040. When it comes to such a deduction the IRS still “just says no”.

* Want to find out how much you need to put away each month to be able to retire with $1 Million? Click here.

* Nothing escapes Joe Kristan of the ROTH AND COMPANY TAX UPDATE BLOG. Thanks and a tip o’ the hat for unearthing “Don't Tell Anybody, But...

“. . . ...the Federal Circuit Court of Appeals on October 9 apparently upheld the taxpayer victory in the Fisher demutualization case, without comment.”

What is he talking about? See my post “The Feeling is Demutual”.

* And check out Joe’s post “Passive Losses Go to the Dogs” for its great moral –

The Moral? If you have a business on the side, keep an appointment calendar.”

* Jean Murray’s post “6 Tax Mistakes Small Businesses Make” at JEAN’S BUSINESS LAW / TAXES: U.S. BLOG begins and ends with great examples -

1. Auto/Travel Expenses. Failing to keep good records for travel and auto usage. This includes failure to differentiate business and personal use of your car, especially if you have only one. The IRS scrutinizes auto expenses closely, and if you have only one car and you are claiming lots of travel and auto expenses, they will probably want to see your records.

6. Keep Business and Personal Separate. I just talked about this one, but I wanted to mention it again. If you fail to keep your business and personal financial data separate, you risk having the IRS disqualify your business as a separate entity, and having all your business expenses wiped out as legitimate business deductions. Set up a separate business bank account and keep separate records
.”

* Roni Deutch tells us what she expects to be in the “The NEXT Economic Stimulus Package” at her TAX LADY BLOG.

She smartly points out that –

One of the administration’s biggest priorities is to keep any new legislation from being labeled as another stimulus package. Why? Because it implies that the first package was unsuccessful, and taxpayers are not likely to support a second unsuccessful program.”

* The Wall Street Journal reports that “Home-Buyer Credit Is Focus of Inquiry”.

According to the article –

The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.”

What is 100,000 times $8,000? I have always said it was too easy to request and get this credit – no documentation or even a signature required. Plus I have been warning against refundable credits for years.

So, do you think it is a good idea to extend this refundable credit for another year?

TTFN

1 comment:

john said...

Congress could have made the First Time Home Buyer Credit a tax filing completely separate from federal income tax returns. Simply put, the taxpayer would file the form to claim the credit and attach the appropriate documentation, such as the closing statement and the first page of the title insurance policy. Certainly the IRS could verify the reported income of the taxpayer to determine if they qualified.

Yes, it should be extended and possibly expanded. Fraud aside, much like the Cash for Clunkers program, the First Time HBC is one of the most visible and effective stimulus programs to date. (In my humble opinion, or course).