Wednesday, October 24, 2012
WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION
* Have you taken advantage of my “October Half Price Sale” yet?
* Tax professionals should check out my posts “There MUST be Grandfathering!” and “A Potential Disaster” at THE TAX PROFESSIONAL.
* I join Kay Bell of DON’T MESS WITH TAXDS in saying a sad farewell to George McGovern.
1972 was the first Presidential election I voted in (having actively campaigned locally for reducing the voting age to 18 when I was in high school) – and my vote was for McGovern.
The same is true for fellow tax blogger Peter J Reilly, a couple of years my senior, who reminisces in “George McGovern Passes On - Where Were You In 1972?” at FORBES.COM.
Where was I in 1972? In February through April of 1972, a college freshman, I was working my very first season as an apprentice tax preparer for James P Gill and Co just off Journal Square in Jersey City.
* Kay also addresses the same subject as my “A Potential Disaster” post referenced above in “Income Tax Tables and Much, Much More Missing from Annual IRS Inflation Update”.
As her “tweet” promoting the post says –
“Congressional inaction (again) leads to IRS -- and ultimately taxpayer – troubles.”
She joins me in suggesting –
“Remember all this undone tax work as you head out in a couple of weeks to vote for who stays or goes in Washington, D.C.”
* Bruce McFarland hosts a guest post by Alisa Martin titled “Things That You Can Do To Get Ready For Tax Season” at the MISSOURI TAXGUY.
While the post is just a basic plug for using a tax professional, I do like her description of tax preparation -
“Preparing Taxes Is Part Art Part Science.”
My tax returns (prepared for clients) have often been referred to as a “work of art” by the IRS and other tax pros.
* Did you know that Bruce also has a blog for Quickbooks users? Click here.
* CCH reports that “Amended Return Will Not Automatically Trigger Audit, IRS Manager Says” – putting to rest an “urban tax myth”.
Many taxpayers are afraid to file an amended return for a legitimate reason because they think it will result in an audit. This fear is unfounded.
In my 40+ years of preparing 1040s I have never seen an audit of a Form 1040X I, or anyone else, has prepared, or an audit of the original 1040 that was amended as a result of filing an amended return.
* A new report by the Treasury Inspector General for Tax Administration tells us “Expanded Controls Over Refundable Credits Could Reduce Lost Dollars”.
“Millions of dollars in refundable credits that were determined to be erroneous after taxpayers received them may never be recovered by the Internal Revenue Service (IRS), according to a new report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
Refundable tax credits, which not only have the potential to reduce a taxpayer’s liability to zero but can provide cash payments to taxpayers, are highly vulnerable to fraud. TIGTA initiated its audit to determine the effectiveness of efforts by the IRS to recover refundable credits disallowed during post-refund examinations and to consider options the IRS could implement to decrease the issuance of erroneous refundable credits. Examples of refundable credits include the Earned Income Tax Credit (EITC), Additional Child Tax Credit (ACTC), First-Time Homebuyer Credit, and American Opportunity Tax Credit.”
I have a much better solution to the problem – NO REFUNDABLE CREDITS!
* No surprise here – “N.J.'s Local Tax Bills Keep Spiraling Upward” from PHILLY.COM.
“The Christie administration, which took office in 2010, blames the increases on ‘unrestrained spending, overgenerous benefits, and the expansion of government at the local and state level’, said spokesman Michael Drewniak.”
* Trish McIntire gets on The Soapbox with some good advice for 1040 clients in her post “Tax Backup” at DON’T MESS WITH TAXES.
“Using a tax pro for your tax returns doesn’t get you out of taking some responsibility for your tax situation. All taxpayers need to keep a copy of their tax return and all supporting documents for at least 3 (I suggest 5) years. You may never need those documents. But if you get audited or even need a copy of your return for a bank loan you’ll be glad you kept them.”
To go a step further – I tell my 1040 clients to make and keep a copy of their W-2s when sending me their “stuff” at tax time. This way they won’t waste my time having to make and send them copies which they end up needing for a variety of reasons.
* A good tax tip “tweet” from Kathy Bylkas (aka @URTaxlady) –
“Don't let penalties for underpaid taxes increase your tax bill next April. Check the total tax you've paid in for 2012 through withholding and/or quarterly estimated payments. If you've underpaid, consider adjusting your withholding for the final pay periods of 2012.
Withheld taxes are considered paid in equal amounts during the year regardless of when the tax is withheld. Therefore, a year-end adjustment to your withholding could help you avoid a penalty.”
* Oops! Did I forget to mention the “IRA Contribution Limits for 2013” in my recent post on inflation adjustments?
Bill Perez tells us –
“Individuals can save up to $5,500 through an individual retirement account (IRA) for 2013, according to new limits announced by the IRS (IR-2012-77). This new $5,500 limit is the first change in IRA contribution limits since 2008. For the years 2008 through 2012, IRA contributions were capped at $5,000.
The $5,500 IRA contribution limit for 2013 applies to traditional IRAs and Roth IRAs collectively. Taxpayers can choose to contribute either to a traditional IRA or to a Roth IRA or to both in any combination, as long as total contributions don't exceed the annual limit.”
While I could not find it in the IRS Information Release, I expect that the IRA “catch-up” for taxpayers age 50 or older at the end of the year remains at $1,000.
So, if I am so inclined, I can contribute $6,500 to a traditional or ROTH IRA for 2013. And, if I wanted the biggest potential bang for my buck, I would make the contribution on January 2, 2013.