Saturday, November 21, 2009


* OOPS! Sorry I missed Kay Bell’s T3 (Tax Twitter Tuesday) in Wednesday’s BUZZ. Anyway, here it is now – “Tax Twitter Tuesday 11.17.2009”.

* This page on “How to Pay Less Taxes” at EFILE.COM is chock-a-block with good tax planning and preparation tips and advice, many of which I have talked about here and elsewhere for years. It is nice to have all this information in one place.

* An email from the Treasury Inspector General for Tax Administration (TIGTA) announced the release of a new report titled “Improvements Are Needed in the Administration of Education Credits and Reporting Requirements for Educational Institutions”.

It seems that –

TIGTA's review looked at taxpayers who claimed the credit in 2006 and 2007 and found that, in 2006, approximately 203,000 taxpayers erroneously claimed a total of over $300 million in Hope Credits. In 2007, over 169,000 taxpayers erroneously claimed a total of over $232 million in Hope Credits.”

Another reason why such benefits should not be administered via the Tax Code (as I have been saying now for some time)!

I was especially interested to read the following item from the email (highlight is mine) –

TIGTA also performed a computer analysis of all Forms 1098-T, a tuition statement provided by educational institutions to students, from 2005 through 2007. The form includes a box in which the educational institution may show the amount of tuition paid by the student, which is the figure that taxpayers and the IRS use in order to determine the amount of the credit. However, educational institutions are given the option of showing the amount billed for qualified tuition and related expenses rather than the amount paid. TIGTA found that the box in which the amount of tuition paid may be shown was blank on 80 percent of the Forms 1098-T it reviewed. Educational institutions expend approximately 5.1 million hours each year to complete Forms 1098-T and an estimated $3.8 million to mail the forms to students. Although a few government agencies use some of the information on the form, the IRS does not use the form to match or confirm the amount of the claim.”

This just goes to emphasize my comment that the Form 1098-T as currently issued by most colleges is like “tits on a bull”. For the most part the Form 1098-Ts that I get from clients are totally useless. Who cares how much was “billed” - I need to know how much was paid! And if the IRS is not going to match 1098-T information to the tax return what is the purpose of having it at all?

TIGTA made legislative recommendations to “enact legislation to either revise the reporting requirements for Form 1098-T so that the IRS and taxpayers are able to use it to calculate the amount of the claim or else relieve educational institutions of the burden of producing the form”. I hope there is some follow through on this.

* MISSOURI TAX GUY Bruce continues on the subject of the dreaded Alternative Minimum Tax (AMT) with the follow up post “How Do I Know if I Have to Worry About the AMT?

* Chad Bordeaux has a good post on “What is a Qualified Charitable Organization?” over at BEANCOUNTER RAMBLINGS.

Chad tells us that, “Many times, people will think that donations can be deducted when they can not”. He provides a good example –

An example that I usually bring up to explain this is related to a local homeowner’s association in the area. At least once a year, they send out a flyer that promotes a neighborhood get together (aka “party”). In the flyer they specifically state that they need donations for the keg fund and to remember that “these are tax deductible.” I hate to burst their bubble, but they are not tax deductible for a host of reasons. Primarily because the donations are not made to a qualified charity. The homeowner’s association is a tax-exempt organization (aka “non-profit”), but it does not have a charitable purpose.”

Just because an organization is “tax exempt” does not automatically mean that payments made to it are deductible as a charitable contribution.

If I may add a caveat to the subject – if you are putting your donations of old clothes in a “drop-off box” be sure that the box actually belongs to a charity. Here is some advice I gave in a July 2007 edition of the BUZZ (highlight has been added) -

While I have, in the past, found errors in and disagreed with items discussed in Sandra Block’s weekly YOUR MONEY column in USA TODAY, I do recommend last Tuesday’s installment ‘Your Money: Donated Clothes May Not Help Charities’. When donating used clothes and household items to charity you should go with the ‘old reliables’ like Goodwill Industries, the Salvation Army, Vietnam Veterans of America or your local church – this way you are sure to be giving your items to a legitimate charity. In many cases the charity will come to you to pick up your donations. And if you are putting your donations in a “drop-off box” make sure the name of the charity is clearly indicated on the box. While these boxes may be convenient it is “more better” to drop off your donation at a local Goodwill or Salvation Army store or donation center, where you can get a signed receipt.”

* Kay Bell goes into detail on the tax provisions of the Senate health care “reform” bill in her post “2,074 pages + $849 billion = Senate Health Care Bill” at DON’T MESS WITH TAXES.

Joe Kristan also deals with one of the tax provisions in “Harry Reid's Funky New Medicare Surtax” at the ROTH AND COMPANY TAX UPDATE BLOG.

I found this nice listing of “the 17 tax increases in the Senate health care bill, which are estimated to raise $370.2 billion in revenues over ten years” as published by the Joint Committee on Taxation in the post “The Number 17 May Mean Something This Year” at the SACRAMENTO TAX BLOG, which is written by Owen S. Arnoff, EA.

I don’t quite know what “Conform definition of medical expenses” means in this context. And I, at this point, would certainly oppose “Raise 7.5% AGI floor on medical expenses deduction to 10%”.

* An article by Ryan J. Donmoyer at BLOOMBERG.COM reports that “Rangel Says House Democrats Will Seek to Renew US Tax Breaks”.

According to the article –

New York Representative Charles Rangel said House Democrats will move next month to renew dozens of tax breaks before they expire at year’s end” and “the panel will send a measure containing most of the extensions directly to the House floor for consideration, bypassing a committee debate.”

Apparently there are 73 tax laws that are schedule to expire on December 31, 2009, as per a report by the Joint Committee on Taxation.

The expiring items include the normal tax deductions and the AMT “fix” that have come to be identified as the “extenders” because the idiots in Congress can’t make up their mind whether or not the deductions should be part of the permanent Tax Code or that the dreaded AMT should be fixed or, more better, destroyed and end up passing a 1 or 2 year extension. In the past the fools in Washington have often sat on their hands for most of the year and waited till the last minute to pass the extenders. At least now, when the bill passes, we will begin 2010 knowing that these deductions and the AMT fix is in place for the year.

* Along the lines of extending tax breaks, Joe Kristan has a post on this topic – “Theory, Meet Practice” – at the ROTH AND COMPANY TAX UPDATE BLOG.

Joe tells us that -

George Yin, former Chief of Staff of the Congressional Joint Committee on Taxation, thinks temporary legislation -- such as the perpetually-expiring AMT patch and research credit -- is a good thing.”

Ridiculous - the constant extending of expiring tax breaks is a bad thing!

* Back to Kay Bell at DON’T MESS WITH TAXES. She gives us “A Look at Who's Paying How Much Taxes” with references to several recent studies on the topic by differing organizations.

Kay ends the post with some questions for her readers –

What do you think? Are you being overtaxed? Are the rich disproportionately bearing the U.S. tax burden? Or are middle-class and poorer taxpayers really paying more relatively speaking than the wealthy? Should Congress let the income tax rates go back up in 2011?

Regardless of which position you take, how would change the tax system?

I look forward to reading the comments.

* TAX GIRL Kelly Phillips Erb apparently also writes for “The Legal Intelligencer”. Over there she gives some advice on “Holiday Parties: Keeping Expenses Low and Deductibility High”.

* It will soon be time for sending out Christmas cards. I usually get my first one just after Thanksgiving, although I do not mail my own out till mid-December.

FYI, I order my cards from American Humane.

Here is a suggestion for inclusion on your Christmas Card list – passed along to me via a tweet from, once again, taxtweet Kay Bell – Holiday Mail for Heroes.

And finally another option passed along by a tweet – click here.


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