* Here it is – the August 2011 issue of LOIS, my free newsletter. As promised, it contains lots of interesting stuff! Feel free to pass it along to friends and family.
* Oops! He did it again! It seems the pompous ass offending/offensive tax blogger has once again proven he is a pompous ass by the tone and content of his latest personal attack, which continues to lie about and misrepresent what I have said in previous posts. I expect that my regular readers, if they come across his rants, know me well enough to know that he is just a jealous arsehole.
My fellow, more respectful and responsible, tax bloggers have advised me that the fool is only after attention, and have told me to ignore his excrement and not give him any attention (which is why I never refer to his name or link to his posts). Good advice. Unless he goes overboard in the future this is the last I will mention of the fool. Let’s hope he just fades away.
If I may be allowed one last time - what an arsehole!
*While I was gone Kay Bell posted her “Tax Carnival 89: Dog Days” – a day late but certainly not a dollar short!
As Kay observes, it’s “Too hot to do much of anything … except hold a Tax Carnival!” So she lets loose the hounds of tax.
Kay ends her carnival with my “Bring Me the Head of the US Tax Code” post, with some good stuff on the way there.
* Kay celebrated the 100th birthday of Lucille Ball with “If the IRS Asks, You Got Some ‘Splaining to Do”.
She offers some words of wisdom for taxpayers -
“Remember, the burden of proof when it comes to an IRS audit is on you.
The IRS examiner starts from the premise that your claims are wrong. Unless you can prove otherwise, then your claims for such things as a dependent and any related tax breaks, business expense write-offs and charitable deductions will be disallowed.
To prevent that, you need clear and convincing proof. That means documentation.
A receipt is your best defense. Make sure it has all the relevant details -- such as type of expense or donation, when, where, who else was involved, for example, attendees at a business meeting -- or add that information yourself directly on the receipt. Without adequate records, the IRS can estimate your income and/or expenses, usually not in your tax favor”
Her final words of advice are also wise (the highlight is mine) –
“Yes, an audit is nerve wracking. But don't make it worse by worrying needlessly. If your claims are legitimate and you have the records to back them up, then you should be OK.
And your audit can serve as a learning experience to help ensure that you never go through the process ever again.”
* And it is a trifecta for the Yellow Rose of Taxes. Check out Kay’s post “Downgrading Capitol Hill” over at BANKRATE.
Kay provides ratings for the various components of the idiots in Congress, and for BO. The Tea Party gets a very appropriate “F” –
“You, however, are like the young Chicken Hawk latching onto Foghorn Leghorn's ankle; you're convinced you're much more important than you are. And your insistence on rigid extremism and willingness -- desire in some cases -- to push the country into default were major factors in shaping the mishmash of a debt deal that resulted.”
* Do you remember the movie FIVE EASY PIECES from the early 1970s? Jack Nicholson and, I think, Karen Black. Kelly Phillips Erb, FORBES’ TAX GIRL, is ”Breaking Down the Debt Ceiling Fix in 10 Easy Pieces”.
Her 10th “easy piece” –
“Nobody really won in this scenario. Not President Obama. Not Senate Majority Leader Harry Reid (D-NV). Not Senate Minority Leader Mitch McConnell (R-KY). Not House Majority Leader Eric Cantor (R-VA). Not House Minority Leader Nancy Pelosi (D-CA). And not Speaker of the House John Boehner (R-OH). And certainly not the American people.”
The American people rarely win when Congress acts – or rather reacts.
At least the idiots got it done by, literally, the deadline.
* And Kelly keeps us up-to-date on the airline ticket tax story in “IRS, Congress Now Say No To Ticket Tax Refunds”.
Kelly points out that as the result of a “quick fix” by the idiots in Congress (“goodness knows, the sitting Congress can’t do anything long term”) -
“. . .passengers who purchased tickets prior to July 23 and traveled between July 23 and the date of enactment of today’s legislation are not entitled to a refund of the airline ticket excise tax.”
* Let’s make it another trifecta. Kelly puts out a “Call for Guest Posts About Taxes and the Economy”.
* I agree with at least the first part of Prof Annette Nellen’s post “Payroll Tax Cut Should Expire as Intended - We Need to Stop the Tax Cut Addiction” at 21st CENTURY TAXATION.
While this method was much better than Dubya’s rebate checks for getting money in the hand of taxpayers, it was a PITA for payroll preparers.
And, surprisingly for something from BO, it put over $4,000 in the hands of some couples earning over $200,000! I thought he wanted them to pay more taxes, not get more rebates.
* Apparently most of America now joins me in thinking that the members of Congress are idiots. The NEW YORK TIMES reports “Disapproval Rate for Congress at Record 82% After Debt Talks”.
“A record 82 percent of Americans now disapprove of the way Congress is handling its job — the most since The Times first began asking the question in 1977, and even more than after another political stalemate led to a shutdown of the federal government in 1995.
* Joe Kristan gave us a daily double on August 4th.
First he discusses the governor of his home state of Iowa’s “Earned Income Credit Veto: Heartless, or Good Policy?”.
“The Earned Income Credit is best understood as a welfare program. It applies when taxpayers have some income from wages and self employment income, but it phases out quickly as income rises. If the credit computed exceeds tax liability, the taxpayer gets a check for the difference
The Earned Income Credit, like other refundable credits, is a fraud magnet. The GAO estimates a 25% error rate in claiming the credit for 2010. Assuming that rate applies to Iowa's piggyback credit, that means $7 million of the $28 million would have been issued in error.”
Then he answers the question “When is a Tax Deduction the Same as Spending?”.
“The easiest cases to identify as spending are refundable and transferable tax credits, like the Ethanol credit, the Earned Income Tax Credit, and the late Iowa film credit. These turn the income tax return into a payment claim voucher.”
* Trish McIntire tells us about the helpful government website “Mymoney,gov” over at OUR TAXING TIMES.
* And over at her MOM AND POP’S blog, in a post on the question of “Employee or Not?” she voices the frustrations of many a tax preparer –
“The worse problem with being a tax preparer is that I don’t hear about an issue until the client comes in to get their taxes done. That’s when they tell me about the 401K distribution, starting social security, a new business or hiring an employee. Too often, I’m told that the business paid $XXX in labor costs. No 1099MISC was issued and serious questions if those paid are really employees not contract labor. Then I have to clean up the mess.”
This post goes on to discuss the classification of an employee as an independent contractor.
* CPA Michele Edwards offers up another blog list in “Top 10 Things You Need to do When Starting a Business”, a guest post at Joe Arsenault’s CAFÉ TAX.
I certainly agree with her advice -
“Choosing a business structure is not a task to be taken lightly. It is important that you understand the pros and cons to each structure.”
* And Joe himself tackles a question I have been asked many times over the years – “Pay Down Debt or Save Money?”.
Joe wisely recommends -
“Try using this simple 3 step process to make your choice.
1. Identify the variables
2. Run an analysis on the different scenarios
3. Choose and implement the best scenario for you”
I have always favored paying down debt first for a variety of reasons. Perhaps most important is that paying down debt usually provides a better “return on investment”, especially in today’s market. Credit card debt is often double-digit, and, while mortgage interest rates are relatively low, bank interest rates on savings are abysmal, and the stock market is in turmoil.
If you have no credit card debt, and the interest rate of your mortgage interest is 4%, and you can earn 6% or more in an investment I might consider saving money before paying down the mortgage.
* IRS Information Release IR-2011-83 announces “2010 Form 8939 is Due Nov. 15; Reporting Option Applies to Many Large Estates”.
The release is relatively brief, so I will quote it here in entirety -
“The Internal Revenue Service issued guidance today on the treatment of basis for certain estates of decedents who died in 2010. The guidance assists executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply. Form 8939, the basis allocation form required to be filed by executors opting out of the estate tax, is due Nov. 15, 2011.
Under the guidance issued today, an executor must file Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, to opt out of the estate tax and have the new carryover basis rules apply. The IRS expects to issue Form 8939 and the related instructions early this fall.Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. This recent law allows executors of the estates of decedents who died in 2010 to opt out of the estate tax, and instead elect to be governed by the repealed carry-over basis provisions of the 2001 Act. This choice is to be made by filing Form 8939.”
* A reminder – the Taxpayer Advocate Service agrees with me that “The Time for Tax Reform is Now!".
“To help this dialogue along, the Taxpayer Advocate Service has established a vehicle to receive taxpayers’ suggestions about tax reform.”
Click here to submit your suggestion.
* The Tax Foundation’s TAX POLICY BLOG explains “The Facts Contradict Obama's Calls for Higher Taxes on the Rich and Corporations”.
The post’s bottom line –
“Obama’s repeated statements that the wealthy and corporations are not paying their fair share of taxes are simply false. The facts show that the very taxpayers Obama wants to raise taxes on are already paying more than their fair share of taxes and that the majority of Americans are getting the benefits of government spending while contributing next to nothing to its basic cost. That is a recipe for fiscal and social instability.”
* A “tweet” from fellow tax “twit” taxbrain offered some good advice –
“If you itemize be sure to keep track of your medical expenses throughout the year. It’s surprising how quickly they add up.”
* Michele McDonald compiles some “Outrageous Tax Stories” over at the National Society of Accountants MEMBER CONNECT page.
While I have had my share of “interesting” clients and tax returns over the past 40 seasons, thankfully I have never had clients as “outrageous” as those in Michele’s post. And, also thankfully, as I am no longer accepting new 1040 clients, I never will.
* Let’s end with some good news. MA Attorney General Martha Coakley tells us that “H&R Block Mortgage Company Will Provide $125 Million in Loan Modifications and Restitution - Settlement With AG Coakley’s Office Resolves Allegations of Unfair Lending and Discriminatory Practices Against Thousands of Latino and African-American Borrowers by Major Subprime Lender”.
I have always said that one reason Henry and Richard overcharges and oversells to customers in order to cover their many court judgments and legal settlements.
I am trying to get some work done (including the last of the GDEs) – so there may be no posts until Saturday’s BUZZ installment.