Saturday, October 22, 2011
WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENIN’
Tons of BUZZ today!
BTW – I do apologize for the inconsistency of the type in recent posts here at TWTP. For some reason Blogger.com seems to be a bit FU-ed – and I have trouble when I “cut and paste” blog posts from Word to Blogger. Can anyone provide any guidance for how to fix, or avoid, the FUs?
+ Trish McIntire gives a detailed answer to the question “Can You Give Away an Exemption?” at OUR TAXING TIMES.
+ KIPLINGER.COM has a tool to help you determine “How Your Income Stacks Up”.
“Are you in the top 25% of all earners? The top 10%? Plus, find out what portion of the tax burden you bear according to your income status.”
The accompanying article “Where Do You Rank as a Taxpayer?” has a breakdown of income and taxes paid by category which indicates that for 2009 the top 1% paid 37% of federal income taxes collected, the top 50% paid 98%, and the bottom 50% paid 2%.
+ Joe Kristan talks about a recent Court case in “Rental Home Deduction Disaster” at the ROTH AND COMPANY TAX UPDATE BLOG.
His bottom line offers good advice for just about all tax situations –
“The moral? Keep good records, and watch out for high water.”
+ The Chicago Tribune tells us what the Treasury Secretary said about tax reform in “U.S. Cannot Overhaul Tax Code in 2 Months: Geithner”.
Constipation, Mr Holmes! So why did you not start earlier in the year? And when are you going to start seriously working on the overhaul? I am tired of hearing every politician say we must reform the Tax Code. Do something about it!
+ Over at SMARTMONEY.COM Bill Bischoff has some good advice for employees in “3 Tax-Savings Deals At Your Job”.
+ The Phoenix Business Journal reports that “First Class Stamp Will Rise to 45 Cents in 2012”. Oi vey!
“The Postal Service will also raise the cost of a post card 3 cents to 32 cents.
The new prices go into effect Jan. 22, 2012.”
+ “Dr Don” deals with an oft-asked question in “Mortgage Refinance Taxing with 401(k)” at BANKRATE.COM (highlight is mine).
“A 401(k) account held with your employer isn't a piggy bank you can crack open and raid. While some plans offer in-service withdrawals, it's not common. The 401(k) plan may have loan provisions allowing you to borrow against the plan, but it isn't required to have a plan loan option.”
While some plans offer a loan option, this can result in tax problems if you terminate your employment before paying off the loan.
Your 401(k) account is “retirement savings”. You should use it to save for retirement. It should be the absolute last place you turn to for money, and only if you do have a true emergency or hardship.
As a related aside - depending on your emergency you may be able to avoid the premature penalty on some of the withdrawal if you first transfer the money to an IRA.
The person posing the question says that he will use the money from reduced mortgage payments to “rebuild” the 401K9K account. In response Dr Don makes a good point –
“I'm not a huge fan of people raiding their retirement accounts with the promise they'll rebuild them with future savings. Yes, you can make the math work, but you have to have the financial discipline to actually replenish the savings. Do you truly have that discipline?”
+ A comment to the last BUZZ installment by “Knobby” took me to “AICPA Pushed for Disclaimer in Tax Preparer Ads” at ACCOUNTING TODAY.
“The American Institute of CPAs convinced the Internal Revenue Service to require registered tax return preparers under the new IRS’s regulatory program to add a special disclaimer to any of their advertising to avoid the appearance of an IRS endorsement.”
I am glad the AICPA is worried that the new RTRP initials will help dispel the urban tax myth that a CPA = tax expert.
The item did not quote the actual disclaimer.
+ I am constantly referencing lists here at the BUZZ that verify the high taxes NJ residents are subject to. However there is one list where NJ is at the bottom.
“Boost Would Put Maryland In Top 10 States For Gas Tax” from JOHN HANCOCK’S BLOG at the Baltimore Sun indicates that NJ is #48 on the list with a total of 14.5 cents per gallon in gasoline tax.
FYI, California is #1 with 47.7 cents per gallon and Alaska is #50 with 8 cents.
+ On Thursday I discussed Mitt Romney’ tax plan. Now comes word from CBS NEWS that “Perry Calls for Flat Tax to Replace Income Tax”.
According to the item –
“He said he would unveil a proposal next week calling for creation of a flat tax, which would replace the present system of graduated tax rates based on income with a single rate for all taxpayers regardless of income.
Perry told an audience of about 150 Republicans that his plan would also include a ban on congressional earmarks, passage of a balanced budget amendment to the Constitution, spending cuts and entitlement reform. He plans to unveil details in a speech Tuesday in South Carolina.”
Perry would shred "the current 3 million words of the American tax code" and replace it with "something simple: a flat tax."
"I want to make the tax code so simple that even (Treasury Secretary) Timothy Geithner can file his taxes on time."
I am not against a flat tax, and look forward to hearing more details next week (which I will report to you here).
+ According to the “Executive Summary” of Ron Paul’s “Plan to Restore America", his tax plan is –
“Lowers the corporate tax rate to 15%, making America competitive in the global market. Allows American companies to repatriate capital without additional taxation, spurring trillions in new investment. Extends all Bush tax cuts. Abolishes the Death Tax. Ends taxes on personal savings, allowing families to build a nest egg.”
+ One would hope that most voters agree that Michele Bachman is too crazy to be taken seriously. But if you don’t, here is what she has said about her tax plan –
“And under my tax plan I want to adopt the Reagan tax plan. It brought the economic miracle of the 1980s. Why not go with what works? I want to reinstitute the Reagan tax model from the 1980s.”
+ More proof that social program benefits should not be distributed via the Tax Code. Ed O’Keefe’s FEDERAL EYE blog at the Washington Post website reports that “Education Tax Credit Mistakenly Claimed by Millions, Report Says”.
According to a report by the Treasury Inspector General for Tax Administration released on Thursday (highlight is mine) –
“As many as 2.1 million taxpayers may have erroneously claimed a total of $3.2 billion by taking advantage of the American Opportunity Tax Credit, which provides up to $2,500 in relief for college students paying tuition and related expenses. The tax credit, once known as the Hope Scholarship Credit, was expanded as part of the 2009 economic stimulus program.”
+ Over at the MISSOURI TAX GUY Bruce has a great guest post with great advice from Erin Stamm titled “Tax Record Keeping Advice For Small-Business-Owning Technophobes”.
“Are you afraid of Quicken? Do you hate working on your computer? Is record keeping one of your least favorite things to do? If you feel this way but still want to get every tax deduction you possibly can qualify for, you’re not alone.”
Erin provides “tips for getting the most out of your small business tax returns without stressing yourself over software programs and techie stuff”.
+ A “tweet” from NATP took me to an item at the JOURNAL OF ACCOUNTANCY that tells us “Trade Bills Pass Congress With Tax Provisions”.
“Section 501 of the U.S.-Korea Free Trade Agreement Implementation Act, HR 3080, increases the EITC due diligence penalty from $100 to $500. The Sec. 6695(g) penalty applies to each failure of a tax return preparer to exercise due diligence in determining taxpayer eligibility for, or the amount of, an EITC.”
“Section 502 of the Korea trade act adds (as new Sec. 6116) a requirement that the Federal Bureau of Prisons and state prison administrative agencies annually send the IRS a list of all inmates incarcerated in the prison system at any time during the previous two calendar years and the first eight months of the current year.”
There would be no need for assessing an EITC due diligence penalty if the EITC was taken out of the Tax Code and the benefit was provided as a direct payment by the appropriate federal or state social service agencies!
+ While I could not renew my PTIN online (as I discussed in my post “PTIN Update”) EA Russ Fox was finally able to after much trouble and agita, as he explains in “PTIN Follies, Year 2” at TAXABLE TALK.
+ Submit a comment and help support breast cancer research in TAX GIRL Kelly Phillips Erbs’ annual “Comment for the Cure” at FORBES.