Monday, December 31, 2012

HAPPY NEW YEAR!



HAPPY NEW YEAR!
 
 
 
As has been my custom for many years, I have been typing W-2s today.
 
2013 certainly promises to be an "interesting" year - tax wise.  I hope you will continue to vist THE WANDERING TAX PRO in 2013 for the continuing saga of "As The Congress Turns".
 
"Talk" to you next year!
 
TTF2012


Friday, December 28, 2012

2012 – THE YEAR IN TAXES


It is time for my annual tax year in review post.
The tax filing season went relatively smoothly.  Due to the idiots in Congress’ inability to think or act there was nothing new in actual tax law – what is taxable and what is deductible – and no unnecessary processing delays for 2011 returns (except for early returns filed electronically – which did not affect me).  The expiring Bush Tax cuts, the usual extenders, and BO’s American Opportunity Credit had all been extended through at least the end of 2011 in a relatively timely manner.  

I had been concerned before the season officially began (for me February 1st) that the major tax forms (1040, 1040A, Schedules A + B) were no longer available at local Post Offices – but soon discovered that the forms were now available (although in a bit less “bulk) at local libraries.  As a pleasant surprise I found that, while the libraries did not have NJ-1040 forms, they did have New York IT-201s and IT-203s!

The major issue of this tax season involved the new requirements for cost basis reporting, and the resulting new Form 8949 and the revised Schedule D.  For tax year 2011 brokers were required to report to client taxpayers, and to the IRS, the cost basis of most stocks, including foreign stocks, acquired on or after January 1, 2011 (“covered” securities) on Form 1099-B.

The Form 8949 was used to report the individual short-term and long-term transactions in three separate categories – sales where the cost basis was reported to the IRS on Form 1099-B, sales where the cost basis was not reported to the IRS on Form 1099-B, and sales that were not reported on a Form 1099-B.  A separate Form 8949 was required for each of the three categories.  The Schedule D served as a summary of the 8949s.

The various brokerage and mutual fund houses all responded to the new reporting requirements differently, some excellently and a few poorly.  This new system required some additional time, but only a few cases generated additional agita. 

The also new requirement of credit and debit card merchants and third-party payers like PayPal to report transactions to the IRS, and to the recipient, turned out, despite initial concerns, to be a non-issue, as taxpayers did not have to separately report this income on 2011 Schedules C, E, F and entity returns.

The only other major reporting change was in the format of Page 1 of the Schedule E (rental and royalty income and deductions).  This was a PITA at first (I really saw no need for the revisions), but I soon got used to it.

There were no major problems within my own practice during the season.  My new, faster, laptop, its cable access, and my copy machine ran smoothly throughout the 2½ months.  The printer, while deciding it would only print colored pages in pink, and the black printing being less than perfect, did not slow down operations.  There were no issues with my car or any personal concerns to distract and take time away from the job at hand.  And there were no individual client issues.

The Internal Revenue Service lost two of the major architects of the current tax return preparer regime in 2012 via resignation.  David R. Williams, first head of the Return Preparer Office, resigned at the end of August, replaced by Carol A. Campbell.  And Commissioner Doug Shulman stepped down on November 9th.  IRS Deputy Commissioner for Services and Enforcement Steven Miller, a 25-year veteran of the agency, took over as Acting Commissioner

David will certainly be missed.  While he and I disagreed on some of the details of the regulation regime, specifically exempting CPAs, attorneys, and “supervised employees” from the same requirements as other PTIN-holders and a grandfathering exemption from the test for experienced preparers, he did a good job as the face of tax pro regulation.

2012 was the first year that non-exempt PTIN-holders were required to take at least 15 hours of CPE in federal taxation, including 3 hours of updates and 2 hours of ethics.  As David predicted, many new CPE providers jumped on the bandwagon.  A number of tax preparer “quasi-membership” organizations sprang up during the year, most of them solely for the purpose of promoting for-profit companies’ CPE classes.  My email in-box has been chock-a-block with CPE offerings for the past few months.  I had considered becoming a CPE provider, but decided against it for now.

I have always taken more than the required 15 credits each year, most, if not all, being classes offered by the National Association of Tax Professionals.  2012 was no different – I ended the year with 24 credits of federal CPE (and 8 more of state tax CPE).

The constitutionality of “Obamacare” had been in question since its passage.  In June of this year the Supreme Court upheld the law. The Supreme Court’s decision, combined with President Obama’s re-election, ensured that Obamacare is here to stay, at least for a while, and its tax hikes will kick in next year.

The biggest tax story for 2012, once again (the 3rd year in a row this has been the biggest tax story!), was the continued inability of the idiots in Congress to accomplish anything.  The popular package of “extenders”, including the temporary AMT patch, expired on December 31, 2011, and the various Bush and Obama tax cuts and benefits are scheduled to expire on December 31, 2012.  As of this writing nothing has been done by the idiots in Washington to extend anything.  The result - the start of the upcoming tax filing season, and the processing of refunds, will be delayed, and the country faces what has been called “Taxmagedden” on January 1, 2013, as it tumbles over the “fiscal cliff”.  

Having done nothing all year, the idiots should have just extended everything expired and expiring through 2013 (similar to what they did in 2011) after the election and begin 2013 with serious work on serious tax reform.  At the very least they should have extended the AMT patch through the end of 2012.  But then again – they are idiots!

Over the past years the members of Congress have proven that they are incompetent and ineffective dolts with no concern for the American public, and are incapable of compromise or of independent thought.  The current Congress has one of the lowest approval ratings in history, although despite this fact most incumbents who ran in November were re-elected.  As I said earlier, I guess the thinking was the incompetent idiot you know is better than the incompetent idiot you don’t.   

And, according to the NBC report “Congress to Make History -- But for the Wrong Reason” (highlight is mine) -

By passing just 196 bills into law so far, it is in the running to become the least productive Congress since the 1940s.

In fact, that amount is 710 fewer public laws than was produced by the 80th Congress (from 1947-48), which first earned the moniker ‘Do-Nothing’ Congress.”

Christopher Bergin of THE TAX ANALYSTS BLOG read the minds of the idiots in Congress and quoted their Christmas message to America in his recent post “Tin Ear Tinhorns” –

Merry Christmas from Washington, D.C. Here’s your bag of coal.

It’s chilly here in Washington. We don’t care how it is where you are. We don’t care about your 401k plan. We don’t care about whether you have to pay the Alternative Minimum Tax for this year. We don’t care if you don’t get your tax refund on time or if you have to wait to file your tax return until July. We just don’t care.

In Washington, all we see is ourselves. We drive around in our self-important haze, yapping on our cell phones and cutting people off on I-66 because what we are doing is all that matters and is certainly more important than anything you’re doing.”

The 2011 Tax Offender of the Year Award, presented each year by Russ Fox of TAXABLE TALK, was Congress.  The criteria for the award – “it really needs to be a Bozo-like action or actions”.  Chances are very good that the idiots in Congress will be the recipient of this designation again for 2012.

There is nothing to indicate that the new Congress to be seated in January of 2013 will be any less incompetent or ineffective, or will have any more concern for the American public, than the current, retiring one.

And let us not forget that 2012 was a Presidential election year – which only further motivated the inaction of the idiots in Congress.  While the two-year campaign did highlight the need for tax reform, the result was a blow to the hopes for a substantive rewriting of the Code.  BO’s tax plank called for more complexity and confusion and continued misuse of the Code.  

At the end of my 2011 tax year in review post I predicted –

As 2012 is an election year it is expected that nothing of any consequence will be accomplished in the tax arena (or any other arena).  Next February the idiots in Congress will probably extend the payroll tax cut for the rest of the year, and, as I suggested above, next December they will pass the usual year-end extenders bill and also continue the ‘Bush’ tax cuts for another year or two.”

I was almost 100% on the money, except for the idiots extending everything in December. 

Let us hope that 2013 will see the passage of real tax reform – although I won’t hold my breath!

So, as I ask each year at the end of the post, did I forget anything?

TTFN

Thursday, December 27, 2012

WHAT’S NEW FOR NJ INCOME TAXES FOR 2012


The 2012 NJ state income tax forms and instructions are now available at the NJ Division of Taxation website.

The big change for the 2012 NJ-1040 is the new “Alternative Business Calculation Adjustment”.

Beginning with 2012, taxpayers who have losses in the categories of -

·      net profits from business,
·      net gains or net income from rents, royalties, patents, and copyrights,
·      distributive share of partnership income, and
·      net pro rata share of S corporation income
 
-    can use the losses to calculate an adjustment to their taxable income (“Alternative Business Calculation Adjustment”). 

The percentage used to calculate the adjustment is being phased in over five years. The percentage will increase from 10 percent for tax year 2012Taxpayers can carry forward unused losses in those categories for a period of 20 years to calculate future adjustments. 

Taxpayers with income and/or losses in any of these categories must complete two new return schedules: Schedule NJ-BUS-1 (Business Income Summary Schedule), and Schedule NJ-BUS-2 (Alternative Business Calculation Adjustment) to calculate the amount of their adjustment or loss carryforward.

A new Line 34 has been added to Page 2 of the NJ-1040 to enter the Alternative Business Calculation Adjustment.

I look forward to the January 2013 NJ-NATP “Famous State Tax Seminar” to learn how this new adjustment will work.

The only other changes to the NJ-1040 are –

·      A new worksheet has been developed (Worksheet G, Use Tax Calculation) to make it easier for New Jersey residents to determine the amount to report on Line 45, Use Tax Due on Internet, Mail-Order, or Other Out-of-State Purchases.

·      A new oval has been added below the signature line that must be filled in if a copy of a deceased taxpayer’s death certificate is enclosed with the return. This oval should be filled in and a copy of the death certificate enclosed only if there is a refund due and the check needs to be issued to the decedent’s surviving spouse/civil union partner or estate.

·      Three new funds have been added to the list of organizations to which taxpayers can contribute on the New Jersey tax return – the Boys and Girls Clubs in New Jersey Fund, the NJ National Guard State Family Readiness Council Fund, and the American Red Cross-NJ Fund.

Other than that the 2012 NJ-1040 is no different than the NJ-1040 of past years.

FYI - For 2012, the maximum employee unemployment insurance/workforce development partnership fund/supplemental workforce fund contribution (SUI) was $128.78, the maximum employee disability insurance contribution (SDI) was $60.60, and the maximum employee family leave insurance contribution (FLI) was $24.24.

I was pleased to find that it appears there is no longer an income limitation for submitting a NJ-1040 online via the NJWebFile system.  I should be able to submit the 2012 NJ-1040 for taxpayers with NJ Gross Incomes over $150,000 this way.

TTFN

Wednesday, December 26, 2012

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


Welcome to the last BUZZ of 2012!  It’s a meaty one!

* Don’t forget my special offer for MY BEST TAX ADVICE!

* Check out my THE TAX PROFESSIONAL post about a Christmas Eve “Twitter Conversation”.  Tax pros – what do you think?
 
Russ Fox of TAXABLE TALK responded in “Sometimes the Cynics Are Right.

* One of my posts was included in TAXPRO TODAY’s “In the Blogs: The Graying Year”, which gave us “highlights from some of our favorite tax bloggers this week, as 2012 starts to look mighty grey”.

And TAXPRO TODAY had previously “tweeted” about me thusly via @TaxProToday –

A true tax hero! RT @rdftaxpro: I will be typing W-2s on NYE!

Hey, I have been typing W-2s on Christmas and New Years’ Eves for years now.

* Trish McIntire is, I expect, correct in calling the current fiscal cliff shenanigans a “Congressional Con” over at OUR TAXING TIMES.

I wouldn’t put anything past Congress - or even at this point BO, who is really only just the spokesperson for the idiot Democratic Party leaders - except having actual concern for the American public.

* Trish also puts the AMT patch fiasco in perspective for we tax professionals in “AMT, the Gift You Don't Have to Wrap!” (the highlight is mine) –

Stuck in the middle of this mess are the tax pros. We are the ones who will have to deal with clients who can’t file for refunds they need now.  We’ll have to explain why they’re refund is lower or gone due to AMT. And since we won’t be able to file returns, we won’t get paid. Tax Preparation is a seasonal business and for many of us, there is little cash left in January. Waiting until late March, could make for a long cold winter.”

* Christopher Bergin of THE TAX ANALYSTS BLOG hits the nail directly on the head, dead center, with his sarcastic, but totally true, post “Tin Ear Tinhorns” – one of the best ones on the subject.

He has read the minds of the idiots in Washington, and quotes their thoughts –

Merry Christmas from Washington, D.C. Here’s your bag of coal.

It’s chilly here in Washington. We don’t care how it is where you are. We don’t care about your 401k plan. We don’t care about whether you have to pay the alternative minimum tax for this year. We don’t care if you don’t get your tax refund on time or if you have to wait to file your tax return until July. We just don’t care.

In Washington, all we see is ourselves. We drive around in our self-important haze, yapping on our cell phones and cutting people off on I-66 because what we are doing is all that matters and is certainly more important than anything you’re doing.”

Chris is spot on in identifying what is broken in Washington –

Our politicians don’t realize that there is a whole world beyond here. What’s amazing to me is that our politicians, who think they are so important, never take into account that their actions – or more precisely, their inaction – affect things like the stock market, business, the global economy, the citizens of this country for whom they work.

The fiscal cliff is nothing new. Other than it is the newest reindeer game that the politicians found to help them squabble over their egos.”

There is no doubt in my mind that, as Chris states, the current Congressional leaders “have literally demonstrated that they don’t have a clue about the nation’s fiscal problems and have equally demonstrated that they are willing to take us all over the fiscal cliff over their egos”.

Right on, Brother Christopher!

* Howard Gleckman presented “TaxVox’s 2012 Lump of Coal Awards”.

I agree with three of the “awards” -

1. And the winner (of course) is the fiscal cliff. Congress and Obama created an artificial crisis for themselves, spent 18 months arguing and, so far at least, have accomplished nothing at all. Increasingly, policymakers are like that aunt and uncle who regularly ruin holiday dinners with their bickering. At first, we wanted to reach out and help them. Now we just wish they’d go away.

4. President Obama for a campaign almost entirely devoid of serious tax proposals. When it came to fiscal policy, Obama’s re-election could have been orchestrated by Jerry Seinfeld. It was about nothing.

7. The Tea Party. What do you call a political movement that flames out after one election cycle? Not only did many of their high-profile candidates lose in November, the loosely affiliated tea party groups have been remarkably silent on what should be their signature issue–the fiscal cliff and long-term deficit reduction. The tea party remains a force in some state legislatures, but its influence in Washington is rapidly fading.”

But take special exception to one -

2. Lawmakers of both parties who continue to insist they can pay for rate cuts and deficit reduction by “closing loopholes.”  This is the tax equivalent of saying you can balance the budget by reducing waste, fraud, and abuse.  The deductions for mortgage interest, charitable giving, and state and local taxes are intentional subsidies. They are not accidental loopholes.”

I do agree that lawmakers of both parties deserve lumps of coal – but for a different reason (because they are idiots!).  I very sincerely believe that we can make a big dent in the deficit by reducing waste, fraud, and abuse – since there is so much of it in the budget at each level of government.  And while I do support maintaining the deductions for mortgage interest (specifically acquisition debt on a primary residence), charitable giving, and state and local taxes, there are tons of other “loopholes” and “tax expenditures” that can and should be closed.

* Jason Dinesen of DINESEN TAX TIMES puts in his more than 2 cents worth on the new expanded Form 8867 in “New Preparer Requirements on Earned Income Credit = Higher Fees for Clients”.

Jason agrees with me that the new “requirements on tax preparers who prepare tax returns that claim the Earned Income Credit” are “basically making tax preparers become social workers”.

While he will not turn away EIC filers, as I will, he does say (highlight is mine) –

My fee for returns claiming the EIC will increase more than $30 over what I have charged for EIC in the past. There’s simply too much work involved, and too much risk on my end of me being hammered by the IRS if I don’t check the right boxes on the Form 8867.”

* The IRS issued the following statement regarding payroll withholding tables -

We are aware that employers have questions with respect to 2013 withholding. Since Congress is still considering changes to the tax law, we continue to closely monitor the situation. We intend to issue guidance by the end of the year on appropriate withholding for 2013.”

Let’s hope they get it right.

* Kay Bell put a lump of coal in our stocking on Christmas Eve by explaining “Average Tax Bill Increase if We Fall Off the Fiscal Cliff? $3,446” at DON’T MESS WITH TAXES.

The post has a good chart that shows the possible tax bill increase at various levels of income so you can see what the inaction of the idiots in Washington could cost you.

* MISSOURI TAXGUY, and McTax Hangout host, Bruce McFarland asks, and answers, a question that I had asked about two years ago (and Bruce was one of the tax pros I consulted at the time) – “Can an LLC be Taxed as an S Corp?”.

The answer - “Yes, it can. An LLC can be taxed as an S Corp, assuming it qualifies for S Corp taxation status.”

THE LAST WORD –

What are the chances the idiots in Washington will perform a miracle tomorrow or Friday?

The 2013 tax filing season is certainly going to be an interesting one!

TTFN

Tuesday, December 25, 2012

 
 
HAVE YOURSELF A MERRY LITTLE CHRISTMAS!
 
 
 


Friday, December 21, 2012

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ - SPECIAL FRIDAY EDITION!


Another special Friday edition of the BUZZ!

* There is still time for you to order my stocking stuffers!  Click here and here and here and here.  Hey, it is ok to buy them for yourself (and they are tax deductible)!

* And don’t forget my special pre-publication offer for MY BEST TAX ADVICE.

* I never thought I would ever reference something written by an idiot from Congress in a positive light here.  But here goes.  An editorial by Sen. Jeff Bingaman, a Democrat at that, actually gets it right!  He tells the other idiots in Washington, “Don’t Tie Tax Extenders Bill to Fiscal Cliff”.

He correctly says (highlight is mine) –

Lost among the fiscal cliff debates on marginal tax rates and the sequester is a bipartisan package of important tax cuts that the House and the Senate should take up and pass immediately, regardless of whether Democrats and Republicans can reach a larger compromise.”

And –

While I hope the negotiations to avert the fiscal cliff are successful, we should not wait for a “grand bargain” to materialize before we finish our work on tax extenders. Tax extenders are different from the other fiscal cliff issues.”

Who knew an idiot from Congress could actually say something smart!  As I write this I am looking out my window for airborne pigs.

* Along these lines, ACCOUNTING TODAY reports that “IRS Warns Congress Tax Season Might Be Delayed until March or Later without AMT Patch”.

* The WALL STREET JOURNAL knows “A Bad Budget Deal” when they see one, and feel, “Higher taxes now for notional reform later is worse than nothing”.

They also tell us (highlight is mine) –

It's clear by now that the budget talks are drifting in a drearily familiar Washington direction: Tax and spending increases now, in return for the promise of spending cuts and tax and entitlement reform later. This is a bad deal for everyone except the politicians who want more money to spend.”

* Trish McIntire explains the IRS “Identity Theft PIN” at OUR TAXING TIMES.

* Jamaal Solomon, himself an EA, lists the latest in a series of “Reasons Why You Should Love EAs: John Sheeley, EA” at TAX FACTOR.

While I have never met John, he has been an online friend and supporter for several years.

BTW, Jamaal is correct when he says, “EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS.”  RTRPs may be federally licensed tax practitioners who specialize in taxation, but their rights to represent taxpayers before the IRS is limited.  And CPAs may have unlimited rights to represent taxpayers before the IRS, but they are in no way, shape or form federally licensed tax practitioners who specialize in taxation.

* I came across some good non-tax news via CNN MONEY (by way of the AccountantsWorld.com daily headlines) – “Refunds from Credit Card Issuers on the Way”.

I just wish we didn’t have to wait till March to get the credit.

* The TAX ADVISOR’s Tax Clinic reminds us of the importance of “Contemporaneous Documentation of Charitable Contributions”.

This item elaborates on what I included in my MAINSTREET.COM article “How to Give at the Holidays With Tax Day in Mind”. 

* Kay Bell has been running a series titled “Reindeer Year-end Tax Games”, with year-end tips provided each day by Santa’s sleigh-pullers.  For example, #7 was “Donder Says Harvest Investment Losses”.     

* Paul Neiffer explains the annual gift tax exclusion in “Annual Exclusion Update” at FARM CPA TODAY.  

* Kelly Phillips Erb, the internet’s TaxGirl, has a thoughtful post worth reading at FORBES.COM – “Lawmakers, Guns and Money: Where Do We Go After Sandy Hook?”.

* And Kelly continues her “12 Days of Charitable Giving 2012” by highlighting “Doctors Without Borders”.

THE LAST WORD

I hope you have a “successful” Christmas holiday!

I will be continuing with my annual tradition of typing W-2s on Christmas Eve (and New Years’ Eve), and driving to New Jersey for a homemade Christmas Day dinner with my sister.  As such, this year I am NOT dreaming of a white Christmas.

Don't forget animals in your holiday charitable giving. Support your local non-profit animal shelters & rescue groups. Check out www.petfinder.org.

“Talk” to you again next Wednesday!

HO! HO! HO!

TTFN

Thursday, December 20, 2012

MY BEST TAX ADVICE

 
I am finishing up a new report on MY BEST TAX ADVICE. iT will be ready in early January.

This report will be “chock-a-block” with the best tax planning and advice I have accumulated from 40 years as a professional 1040 preparer, geared toward the average middle-class taxpayer.

While, as I said above, it will not be available until January, I am making a special “pre-publication” offer –

For all orders postmarked by December 31, 2012 the price for this report, delivered as an email “pdf” attachment, is only $3.95! And I will include as a special gift my compilation of Schedule A Forms, Schedules, and Worksheets (current price for this compilation = $3.00)!

The cost for this report will be at least $4.95 in 2013, and this price will NOT include the Schedule A forms package.

Mail your check or money order for $3.95 (payable to Taxes and Accounting, Inc) and your email address to -

MY BEST TAX ADVICE
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428
TTFN

Wednesday, December 19, 2012

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


* Still looking for stocking stuffers?  Click here and here and here and here.  Hey, it is ok to buy them for yourself (and they are tax deductible)!
 
* Check out my article "How to Give at the Holidays With Tax Day in Mind" at MAINSTREET.COM!

* A must read.  Jason Dinesen posts “An Example of What Could Happen if an AMT Patch Isn’t Passed” by the idiots in Washington at DINESEN TAX TIMES (the highlight is Jason’s) -

So the short version is: John and Mary — a solidly middle class family {with combined income of only $77,000 – rdf} that doesn’t even itemize deductions — would owe $1,135 more in taxes if Congress doesn’t pass an AMT patch.”   

* See my post “RTRP Statistics Update” at THE TAX PROFESSIONAL.

Again I ask – “is the IRS really going to force 100,000 to 200,000 tax preparers out of business?”.

* Peter J Reilly of FORBES.COM is right when he says “Some People Can't Resist the Siren Call Of Tax Season”. 

It is true that I have always loved the “tax season” (February 1 through April 14 for me), more so when I worked with my mentor Jim Gill.  I have even parodied the Christmas carol “It’s the Most Wonderful Time of the Year” to reflect the filing season (look for it here at TWTP late next January).

And it is true that I hate the “second tax season” of GD extensions.  I still wish the season would truly end on April 15th, as it did for me in my earlier years in the biz.

* Jim Blankenship identified some misconceptions about IRA contributions this past summer in “Once You Reach Age 70½ – No More IRA Contributions”.

* The IRS National Taxpayer Advocate Nina Olson recently talked about some of the consequences for taxpayers if President Obama and Congress cannot agree on a compromise to avoid the “fiscal cliff”, among other things, on CSPAN.  Click here for the video “Tax Season and the Fiscal Cliff”.  

* Trish McIntire goes into more detail on the proposed “Hurricane Sandy Relief Act” at OUR TAXING TIMES.

* And Trish provides tax preparers with a copy of her excellent “EIC Interview Sheet” (to help us become better Social Workers).

Although I will not need this interview sheet, as I am not be accepting any Form 1040s that include an EIC claim (thanks to the ridiculous new IRS “due diligence” requirements), it is a great tool for the rest of you tax pros.  Thanks to Trish for providing this tool!

* At THE EXAMINER.COM Craig Smalley warns about “Fiscal Cliff - Scare Tactics Used”.

Basically don’t let a salesman (banker, broker, etc) use the fiscal cliff uncertainty to scare you into doing something without properly thinking it out.  Craig’s bottom line is universal, and is not limited to the fiscal cliff (highlight is mine) -

The moral to this story is two-fold; first don’t get emotional about money. It is only money. Secondly, understand that people are using this situation to scare you into doing something that you wouldn’t normally do. Before you make any decision call your tax advisor. If he or she is good, they will be able to guide you through what you are being told. Remember that you tax advisor is on your side. He or she is not trying to sell you anything.”

* Dr. Jean Murray answers a question she is asked every year (and I am often asked as well) in “End of Year Paychecks - Which Year's Taxes?” at ABOUT.COM.

* BOSTON.COM gives us “A Look at Tax Breaks That Expired This Year” – those tax benefits, which have over the years become known as “the extenders”, that expired on December 31, 2011, and will NOT be included on the 2012 Form 1040 unless the idiots in Congress get off their far arses and do something.

* TAX PROF Paul Caron quotes from a Wall Street Journal op-ed piece by Dave Trabert and Todd Davidson of the Kansas Policy Institute which explains that “States That Spend Less, Tax Less—and Grow More” -

States that allow taxpayers and employers to keep more of their earnings are reaping the benefits. States without an income tax have significantly better growth in private sector GDP (59% versus 42%) over the last 10 years. They increased the number of jobs by 4.9% while jobs in the rest of the states declined by 2.6%. States without an income tax gained population (+5.5%) from domestic migration (U.S. residents moving in and out of states) while all other states as a whole lost 1.3% of population between 2000 and 2009. ... The path to superior economic growth and job creation is clear.”

* Diane Kennedy shares some rules to follow to be sure to lock in a 2012 tax deduction for year-end payments in “Get Your Deductions In Order Before December 31st” at her US TAX AID blog.

* Bruce McFarland, aka the MISSOURI TAXGUY, summarizes “Capital Gains, What You Need to Know”.   

* Let’s end on a seasonal note.  Kelly Phillips Erb, FORBES.COM’s TaxGirl, continues her annual “12 Days of Charitable Giving 2012” with “Covenant House”.

TTFN

Tuesday, December 18, 2012

WHAT'S NEW FOR NEW YORK STATE INCOME TAXES FOR 2012


The 2012 New York State income tax returns are now available online.

The first thing I noticed is that Page 1 of the IT-201 and IT-203 resident and non-resident income tax forms are expanded to include a detailed listing of dependents. 

The forms are still 4 pages, and the space for the dependent listing section is made by eliminating the detail for itemized deductions previously on the bottom half of Page 2.  The itemized deduction schedule has been moved to new Forms IT-201-D and IT-203-D.  

Good news, at least for me.  Forms IT-2, IT-1099-R, and IT-1099-UI have been eliminated!  I no longer have to waste my time filling in these stupid forms.  We now merely attach the state copy of the W-2 and appropriate 1099s with the filing of the return, like with the federal and other state filings, and like what used to be the case with NY state filings.  Thank God for small favors.  

Tax rates have been reduced for taxpayers with taxable incomes of over $40,000. and the tax computation worksheets for taxpayers with New York adjusted gross income of more than $100,000 are now based on filing status.

Taxpayers requesting direct deposit are asked some additional information about the bank account to which refunds are to be deposited, and taxpayers must now enter only whole dollar amounts on income tax forms (nothing major here – I have never used cents on tax returns, except for some dependent returns).

There are a couple of new tax credits for 2012, including a “Beer Production Credit”.  Too bad there is not a “Beer Consumption Credit”.

The 2012 NJ returns are not yet available.  I will let you know when they are.

THIS AND THAT


Here elaborations on “stuff” that appeared in earlier posts.
+ The “Last Word” of a recent BUZZ installment proposed a federal law.  
Here is the idea, slightly adjusted - 
Let us pass a federal law that says
(1) Tax legislation CANNOT be temporary.  Except for declared natural disasters or an official declaration of war, any legislation that makes a change to the US Tax Code will automatically be permanent, unless revised or repealed by specific subsequent legislation.
And
(2) Except for declared natural disasters or an official declaration of war, any tax legislation passed after September 30th cannot take effect until January 1st of the next year.
Written into the legislation should be a requirement that a 2/3 majority of both houses of Congress would be needed to repeal or revise this law.
Temporary tax law is not good tax policy (except perhaps for dealing with declared natural disasters like KATRINA and SANDY).  In the past the idiots in Congress have consistently extended the temporary tax breaks that become known as the “extenders”, often waiting until literally the very last minute, and as a result causing problems and delays with the IRS printing of forms and instructions and processing of returns, and confusing taxpayers.
The IRS had usually “gone to press” with tax forms, schedules and instructions for the year in October.  Putting a September 30th deadline on making changes to the Tax Code in the current year will allow the IRS to return to this schedule.  It will also make year-end tax planning much easier for individuals and businesses, as they will know what will be in effect for the year during the last quarter and have plenty of time to plan accordingly.
+ Below is a recent comment on my post WHY WE NEED TAX REFORM by new tax blogger David Fazio, EA -
You hit the nail squarely on the head: the Cash for Clunkers program was a success because it kept the IRS out of the process. Taxpayers got their government discount (the equivalent of an IRS tax credit) at the point of sale. They didn't have to wait up to a year to reap the benefit.
We have become a nation of deduction junkies. Congress has tweaked the code so much that we start to feel that every dollar we spend should be deductible. We have special deductions/credits for teachers, adoption, child care, income earned outside the US, education, student loan interest and so on.
Does a teacher with out-of-pocket expenses deserve an above-the-line $250 deduction more than the school cafeteria worker who doesn't itemize and has $15 deducted out of her paycheck every week for her uniform? Does the college graduate deserve a special deduction for his student loan interest when a Hurricane Sandy victim can't deduct interest on the credit card he's incurring while he's rebuilding his home and waiting for the insurance check?
Now no one said he tax code was fair. But too many perks are being handed out via the 1040 that (as you pointed out) are completely unnecessary.
Great minds do think alike! 
I have always been confused by the $250 deduction for “educator expenses”.  The tax savings is $60-$70 for most educators.  Depending on where you live, this barely covers the cost of a dinner out.  And why, as David asks, were educators singled out.  Are they more valuable than policemen, firemen, nurses, EMTs, or even school cafeteria workers, all of whom have “out of pocket” employee expenses?
The recipient of a special tax break, whatever it is, depends on either how much the recipient’s lobby pays the idiots in Congress to vote for it, or which special-interest group the idiots in Congress want to buy the votes of.
David also talks about the student loan interest deduction, which is part of a group of tax benefits related to post-secondary education.  But, as I have said time and again, this group should be replaced by direct “point of purchase” student financial aid.
TTFN

Monday, December 17, 2012

WHAT FOOLS THESE POLITICIANS BE!


An online article at NATIONAL JOURNAL dated Saturday told us, “Week five of the fiscal-cliff negotiations came and went without any resolution”.

Today is December 17th.  The month of December is more than half over.  There are only two weeks left in the year.  And the idiots in Washington have not done a damned thing to avoid the serious problems that will result from the expired and expiring tax laws and the other issues involved with the so-called “fiscal cliff”!

I have nothing but the utmost contempt for the idiots in Congress.  There is no legitimate excuse for their incompetence, inaction, and total disregard for the American public.  These arseholes take our money, in the form of inflated paychecks and extensive entitlements, and bitch and moan and bicker and blame and basically do absolutely nothing but play with their private parts. 

The lyrics from the musical 1776 echo in my ears – “Piddle, twiddle, and resolve.  Not one damned thing do we {they} solve!

Both the Democrats and the Republicans, and their leaders (pictured above), are equally incompetent and equally to blame. 

We had the opportunity to throw many of the bums out this past November, but we (not me; my actions in the election booth, or rather in my case on the election table, reflected the concept of GRIP – Get Rid of Incumbent Politicians) re-elected most of them.  I suppose the thinking was the devil (incompetent idiot) we know is better than the devil (incompetent idiot) we don’t know.

We have all along assumed that these fools would eventually at least temporarily extend most of the already expired “extenders”, most important of which is the AMT patch, and the expiring “Bush” and other tax cuts for at least all but perhaps the “richest” taxpayers.  Well eventually is here!  

What will happen if nothing is done?  The tax filing season will not be able to start for most filers until March of 2013, seriously delaying refunds.  The withholding tables for 2013 will either be too little or too much, resulting in either underwithholding or seriously reduced pay checks.  The federal income tax liability of just about every American taxpayer will increase by potentially thousands of dollars (for the average middle class taxpayer too, and not just the “wealthy”).  And that is only the beginning.  Even if the problem is temporarily fixed retroactively in 2013 there will be delays, possible withholding FUs, and other consequences. 

In short, it will definitely not be a happy New Year!

What more can I say? 

TTFN