Friday, November 1, 2013
WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’
* I provide the new inflation-adjusted numbers for deductions, credits, phase-outs, and rates for 2014 at MAINSTREET.COM later today. Check the Tax Center regularly to see if it has been posted.
* The WALL STREET JOURNAL ONLINE reports that “Consumers Can Roll Over $500 in an FSA” –
“The Obama administration loosened rules governing health-care savings accounts known as flexible-spending arrangements, or FSAs, allowing consumers to roll over as much as $500 in unused funds each year.
The change—likely to be popular with consumers—modifies the use-it-or-lose-it rule that has governed the tax-advantaged accounts for decades.”
According to IRS Notice 2013-71 (highlight is mine) -
“This modification permits § 125 cafeteria plans to be amended to allow up to $500 of unused amounts remaining at the end of a plan year in a health FSA to be paid or reimbursed to plan participants for qualified medical expenses incurred during the following plan year, provided that the plan does not also incorporate the grace period rule.”
The grace period rule gave FSA holders the ability to avoid losing FSA cash by using the cash up to two months and 15 days after the end of the plan year.
* Another good blog list from last year from Jim Blankenship of GETTING YOUR FINANCIAL DUCKS IN A ROW – “8 Things to Consider Before Rolling Over Your 401(k)”.
* TAX PROF Paul Caron reports on more IRS troubles found by TIGTA (Treasury Inspector General for Tax Administration) – “TIGTA: 51% Error Rate in Correspondence Audits of Taxpayers” –
“TIGTA evaluated a statistical sample of 127 of 2,913 correspondence audits that had been reviewed by the NQRS during an 18‑month period and found errors with penalty determinations in 65 of the audits (51 percent) that had not been detected and reported by NQRS quality reviewers.”
I heard of this story from a tweet from fellow twit @dbltall, who tweeted –
“I’m surprised it’s that low. 75-80% in my experience.”
I think we are talking apples and oranges. I agree with @dbitall that at least 75% of all IRS “correspondence audits” (CP-2000 notice, for example) are incorrect. But we (@dbitall and I) are talking about the tax calculation on these notices – in regard to the missing or misreported taxable income or tax deductions or credits identified on the notice and not the actual calculation via tax rates – while TIGTA appears to be talking about the assessment and calculation of penalties.
Anywho, what this means to taxpayers is this - never automatically pay a balance due notice from the IRS. If you receive any correspondence from the IRS, or a state tax agency, send it to your tax professional IMMEDIATELY!
* Some interesting statistics from Andrew Lundeen and Scott A. Hodge of the Tax Foundation appear on the Foundation’s TAX POLICY BLOG in “The Income Tax Burden Is Very Progressive” –
“About half of the nation’s income is reported by taxpayers who make less than $100,000, and half is reported by taxpayers who make more. However, taxpayers who make less than $100,000 collectively pay just 18 percent of all income taxes while those who make more pay over 80 percent of all income taxes. The share of income taxes paid by upper-income Americans, those who earn $200,000 or more, is twice their share of the nation’s income and accounts for more than half of all income taxes paid in 2011. Those making less than $30,000 receive more back from the IRS than they pay in income taxes due to such preferences as the Earned Income Tax Credit and the Child Credit.”
Is this fair? I say of course not!
* And the TAX POLICY BLOG also has some good ideas among the “12 Steps for Economic Growth”.
Such as –
· Reduce Shareholder Taxes
· Eliminate the Alternative Minimum Tax
· Eliminate PEP and Pease
· Eliminate Refundable Tax Credits
* Attention tax pros – the IRS announces that “Preparer tax identification number (PTIN) applications and renewals for 2014 are now being processed.” Click here.
I was surprised to see that the IRS is still charging $63.00 to renew a PTIN. This fee was originally established as a means of partially funding the required RTRP program. Does the IRS still think, unlike everyone else in the world, that the Court will uphold their appeal of the decision in Loving v IRS?
Without a required RTRP program there is no need to charge tax pros $63.00 to renew their PTIN!
* Another blog list – this time from Diane Gilabert (aka TAX MAVEN) - “10 Section 1031 Exchange Facts You Need to Know”.