Wednesday, July 31, 2013

SOME SHAMELESS SELF-PROMOTION


It is time for some shameless self-promotion!

I am offering a special SCHEDULE C COMBO for self-employed readers.  Separately my report THE SCHEDULE C NOTEBOOK, with advice, information and resources for Schedule C filers, goes for $6.95 and my compilation of SCHEDULES, FORMS AND WORKSHEETS FOR THE SELF EMPLOYED is $3.00, for a combined total of $9.95.  You can get both for $7.45!  Both will be sent as an email attachment – the Notebook in pdf format and the forms compilation in word format (so you can customize the forms to your business).

I am also reviving my half price offer for MY BEST TAX ADVICE.  It can be yours for $2.49, sent as a pdf email attachment, if your order is postmarked in August.

FYI, I am available to write articles and columns, obviously for a fee, for websites, portals, and print or email newsletters on a regular or occasional basis. I can write on general tax topics, answer specific questions submitted by your readers in an “Ask the Tax Pro” format, or pen articles and columns that are specific for your individual industry or audience.    

I can also provide a guest post or posts on tax topics for your blog.  As with articles I can tailor my guest post to your specific audience.  I do not charge a fee for occasional guest posts.

You can find samples of my writings here.

Upon request I will send fellow bloggers complimentary review copies of any of my reports or forms compilations, with the hope that they will post a positive mention or review (not a requirement – I want your honest opinion) on their blog.

And finally - why not "follow" me on Twitter @rdftaxpro.

Send your order, with check or money order payable to TAXES AND ACCOUNTING, INC and your email address, to –

SHAMELESS SELF-PROMOTION
TAXES AND ACCOUNTING INC
POST OFFICE BOX A
HAWLEY PA 18428

And email inquiries about my writing, and requests for review copies of my offerings, to rdftaxpro@yahoo.com.  Put “Shameless Self Promotion” or “The Wandering Tax Pro” in the “subject line”. 

TTFN

Tuesday, July 30, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION

There is no distinctly American criminal class – except Congress.”– Mark Twain

* Bernie Becker tells us that it is business as usual in Congress in “Tax Reform in Senate? Not So Fast, Says Reid” at ON THE MONEY, The Hill’s Finance and Economy Blog.

The biggest obstacle to tax reform, or the passage of any important legislation, is the fact that the members of Congress are contentious, self-absorbed idiots who do not care about the proper administration of the country.  As long as the first priority of Congresscritters is partisanship nothing will ever get done.

And, of course, BO is not on board, reading from the Democratic Party script rather than demonstrating needed leadership.  

* BB also reports that “Senators' 'Blank Slate' Submissions Trickle Out”. 
 
And Kay Bell alliterately posts on the same topic in “Some Senators Shun Secrecy, Share Tax Reform Suggestions” at DON’T MESS WITH TAXES.
 
I certainly hope that the committee does not take seriously the suggestion of Jay Rockefeller to “improve and expand the Earned Income Tax Credit (EITC), refundable Child Tax Credit, American Opportunity education tax credit and the Retirement Saver's Credit”. 

The Retirement Saver’s Credit maybe, but the other credits – while the benefits may be appropriate and worth providing elsewhere more effectively - do not belong in the Tax Code. 

* Check out TAXGIRL Kelly Phillips Erb’s first Podcast.

* Jersey senior homeowners screwed again.  “New Jersey's 'Senior Freeze' Tax Relief Program Leaves Some Out in the Cold” explains Christina Izzo of the Times of Trenton at NJ.COM.

The PTR applications indicate that $82,880 ($80,000 indexed) is the income limit, but each year (since 2008) when balancing the budget the legislature lowers the number to $70,000.  We are told (highlight is mine) “the law also allows the limit to rise as high $82,880 when the state budget allows.” 

Even though senior applicants who have income within the $82,880 limit, but over $70,000, do not get the reimbursement check this year, they should still complete and submit the PTR-1 or PTR-2 application to establish or maintain their “base year” – in case their income decreases in a future year, or if the cafones in Trenton allows the higher income limit to stand.

FYI - I have confirmed with a friend that the first wave of PTR checks have been sent out.

* In light of the recent royal birth Trish McIntire discusses “Saving for Education” at OUR TAXING TIMES -

No matter which university Prince George chooses to attend he won’t have to worry about paying for it. But so many American parents have the high costs of college to look forward to unless they plan ahead. It’s never too early to plan and save for future college expenses and the U.S. tax code gives parents some options.”

As usual, Trish has an excellent “bottom line” -

You don’t have to be royalty or rich to pay for college but it takes the will to save ahead. The earlier you begin to contribute to the plans, the larger the earnings and tax advantage.”

* The TAX FOUNDATION is issuing a series of case studies on “tax expenditures” which will “examine the growth effects if the deduction were repealed”.   First up is the “Mortgage Interest Deduction for Owner-Occupied Housing”.
 
TTFN

Monday, July 29, 2013

A LETTER TO THE EDITOR

FYI, I submitted the following “letter to the editor” response to a recent USA TODAY editorial on tax reform.
 
I provided my email address with the submission, but have not heard anything.  I do not get USA TODAY in paper form and do not know if it has been printed.  If it has, please let me know. 
 
"I am a tax professional who has been preparing 1040s since 1972. 
 
I join USA Today in supporting Max Baucus and David Camp’s 'clean slate' approach to tax reform ('Simplify tax code with blank slate: Our view' July 22, 2013).  I agree that the process should start by “erasing” all “tax expenditures”, adding back only those deductions and credits that are absolutely necessary or appropriate.
 
My concern is that the various social welfare benefits that are currently, and erroneously, distributed via the Tax Code do not make it back to the 1040 in this process. 
 
The purpose of the federal tax system is to raise the money necessary to run the government.  Period.  It should not to be used to “redistribute income” – the Tax Code is not Robin Hood - nor to deliver social welfare and other government benefits.
 
Providing assistance to students, welfare for the working poor, and encouragements to purchase energy-efficient products are all good programs that deserve support and continuation.  But they do not belong on the 1040.  They should be delivered and distributed separately out of the budget of the appropriate cabinet department
 
For example, the benefits provided by the Earned Income Tax Credit and the refundable Child Tax Credit should be distributed via existing federal welfare programs for Aid to Families with Dependent Children. The benefits provided by the education tax credits and deduction for tuition and fees should be distributed via existing federal programs for providing direct student financial aid. The benefits provided by the energy credit and other such personal and business credits should be distributed via Cash-For-Clunkers-like direct discount or rebate programs funded by the budget of the appropriate Cabinet department.
 
Distributing the benefits in this manner is much better than the current method for many reasons:
 
1. It would be easier for the government to verify that the recipient of the subsidy, discount or rebate actually qualified for the money, greatly reducing fraud. And tax preparers, and the IRS, would no longer need to take on the added responsibility of having to verify that a person qualifies for government benefits.
 
2. The qualifying individuals would get the money at the “point of purchase,” when it is really needed, and not have to go “out of pocket” up front and wait to be reimbursed when they file their tax return.
 
3. We would be able to calculate the true income tax burden of individuals. Many of the current “47 percent” would still be receiving government benefits, but it would not be done through the income tax system, so they would actually be paying federal income tax.
 
4. We could measure the true cost of education, housing, health, energy and welfare programs in the federal budget because benefit payments would be properly allocated to the appropriate departments.
 
Item #2 is especially important in many situations.  Let’s look at the deductions and credits for tuition and fees.  In order to claim these tax benefits the student, or more likely his/her parents, must spend the money for tuition and fees and then wait until they file their tax return to get the “student financial aid” from the government.  But these students, and parents, need the money when the tuition and fees are due.  
 
There is currently in place a process for providing student financial aid at the “point of purchase”.  And this aid is based on student and family income, using information from tax returns.  The assistance currently provided on the 1040 should be added to the benefits provided by the existing student financial aid system.
 
Refundable tax credits, like the Earned Income Credit and the Child Tax Credit, are a magnet for tax fraud.  It has been estimated that close to 25% of all EIC claims are erroneous.  This money should be delivered through the existing welfare channels, with its built-in system of checks and balances.  And tax preparers should not be forced to take on the added responsibility of being a Social Worker."
 
What do you think?
 
TTFN 

Friday, July 26, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’


When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.” –P.J. O’Rourke


No comment.


* This past Tuesday’s McTax Hangout tv show topic = “Enrolled Agent (EA) What is it?

* Jason Dinesen explains “When Do Dependents Have to File a Tax Return?”, with a couple of scenarios.

* POLITICO PRO tells us “Senators Unsure of Steps for Tax Reform”.

I apologize, but what I found interesting in this post was the fact that there is a Senator named Crapo.

Again, no comment.  

* SAN DIEGO BUSINESS ADVISORS lists “Eight Tips to Help You Determine if Your Gift Is Taxable”.

#3 deals with a question I am often asked (highlight is mine) –

Generally, the person who receives your gift will not have to pay any federal gift tax. Also, that person will not have to pay income tax on the value of the gift received.”  

* Over at the ROTH AND COMPANY TAX UPDATE BLOG Joe Kristan brings us the word that “Man Who Supported Someone Elses Kid Gets Attaboy, but No Tax Credit”.
 
* Things that make you go “huh?” – “Baucus, Hatch Promise Lawmakers 50 Years Secrecy for Tax Comments” – from CCH.

Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Orrin G. Hatch, R-Utah, have promised lawmakers 50 years of secrecy if they submit their preferences and justifications for which tax expenditures to save as the committee considers tax reform legislation, a Finance Committee aide has confirmed.”

Huh?
 

* Kelly Phillps Erb, FORBES.COM’s TaxGirl, lets us know that “Louisiana To Offer 'Fresh Start' Tax Amnesty Program” –

This year, taxpayers in Louisiana will have the opportunity to participate in the state’s ‘Fresh Start’ program. The state is offering tax amnesty for two months beginning September 23 and ending on November 22. The program is an opportunity for delinquent taxpayers to resolve their outstanding liabilities and with fewer penalties.”

Like me, Kelly is “a big believer in the idea of tax amnesty and I have been for years. It’s an opportunity for a fresh start. And it works, as I said in my first article to appear on Forbes.com ‘not because of the fear of getting caught but because of the opportunity to get it right’.”


The post is written to “nannys”, but for the most part applies to anyone in the same situation.

Being paid “off the books” or “under the table” “can have serious consequences for both the employer and the nanny because working off the books is illegal”.

* How much would you bet that this tax break remains in the rewritten Tax Code – “Lawmakers Benefit More From Second-Home Tax Break”?

FINANCIAL ADVISOR blogs –

Members of the congressional tax-writing committees are eight times more likely than the average American to own a second home with a mortgage, casting doubt on their eagerness to curb the tax break, according to data compiled by Bloomberg.”

This deduction would not make the cut in my new Tax Code.  I would limit the deduction to one’s primary principal residence.

TTFN

Thursday, July 25, 2013

DEDUCTING CAPITAL LOSSES


Tom Herman of the ASK DOW JONES blog of the Wall Street Journal recently dealt with the issue of the $3,000 maximum annual capital loss deduction in “There's No Dollar Limit on Capital-Loss Carry-Overs”.

Capital losses can be used to reduce, or wipe out, capital gains.  If you have more losses than gains you can claim a current deduction of up to $3,000 in net losses.  Losses in excess of $3,000 can be carried forward indefinitely until used up.  

Tom quotes an IRS example:

“Suppose a married couple lost $7,000 on the sale of securities last year and had no other transactions. Their taxable income was $26,000. ‘On their joint 2012 return, they can deduct $3,000,’ the IRS said. ‘The unused part of the loss, $4,000 ($7,000−$3,000), can be carried over to 2013.’"

If the couple had no capital gains in 2013 they would deduct $3,000 on their 2013 Form 1040 and carry $1,000 forward to 2014.

When I first started preparing 1040s in 1972 the annual net capital losses deduction was $1,000.  The Tax Reform Act of 1976 increased the maximum annual deduction to $2,000 for 1977 and $3,000 for tax years starting after 1977.  The $3,000 maximum has been in place for 35 years.

For a detailed history of the treatment of capital gains and losses, see “Congressional Research Service, Individual Capital Gains Income: Legislative History”, last updated in May 2006.

What are the chances that the $3,000 limit will be increased as part of the, hopefully, rewrite of the Tax Code this year?  Tom quotes former House Ways and Means tax staffer Tim Hanford, a consultant in Bethesda, MD -

“{The idea of increasing the $3,000 limit} has gotten little attention in Congress" during the past few years.  It is possible that it could be considered as part of the fundamental tax reform the Senate Finance Committee and House Ways and Means Committee are working on.  However, one factor Congress would have to take into account is the cost to the federal government of increasing the loss limit."

Back in 2002 I wrote to Dubya with a tax proposal related to excess capital losses.  I proposed that investors be given the option to "carryback" unused capital losses to be deductible against previous years' net capital gains.

At the time I felt that this option was especially appropriate in the context of the then current economic reality. During the late 1990s and into 2000, when the stock market was flourishing, many taxpayers realized, and were taxed on, large capital gains, including excessive capital gain distributions from mutual funds. In most cases these capital gains were reinvested in the market and in additional mutual fund shares.

In 2001 and 2002 the bear market provided these same investors with substantial capital losses. It seems only fair to me that they be allowed to carry back the losses to apply against the earlier gains of the bull market and get a refund of the taxes paid on these gains.

Back then I had 1040 clients, a married couple, who had $200,000+ in net capital gains, much of it short-term, one year, followed the next calendar year by $200,000+ in losses.  So in reality they did not have any net income.  However the $200,000 was taxed, most at ordinary income rates, when earned, but only $3,000 in losses was deducted per year in subsequent years.  Unless the taxpayers have another huge gain in a subsequent year, it will take forever to fully use up the $200,000+ in net capital losses.  A dozen years later there is still a substantial unused capital loss carryover.

As a point of information - this situation was not uncommon, and is one reason why there was a budget surplus during the Clinton years.

The clients, New Jersey residents, were especially screwed by the State of New Jersey.  NJ does not allow the deduction or carryover of excess capital losses.  So they paid NJ state tax on the $200,000+ in the year earned, and got no tax relief for the $200,000+ in losses the next year.

FYI, I received the following response to my letter to Dubya about 8 months after it was sent –

"Dear Mr. Flach:

On behalf of President Bush, I thank you for your letter. The President appreciates hearing your view and concerns.

President Bust remains confident in the faith and resolve of our Nation, and he is confronting our country's challenges with focus, clarity, and courage. As the President has said, this is a time of great consequence, and he is working for a prosperity that is broadly shared, strengthening domestic programs vital to our country, and answering every danger that threatens the American people.

To accomplish these goals, President Bush welcomes suggestions from all Americans. Thank you again for sharing your ideas.

Sincerely,
Desiree Thompson
Special Assistant to the President and Director of Presidential Correspondence"   

Not as lengthy as the reply I received to a recent 4-page letter to BO on tax reform, and under the signature of a “lackey” and not Dubya himself, but just as non-responsive.

I still believe that my 2002 proposal is a valid one, and should be included in the, again hopefully, upcoming rewrite of the mucking fess that is our Tax Code.  And I believe that the $3,000 maximum deduction should be increased and perhaps indexed for inflation.

What do you think?

TTFN

Wednesday, July 24, 2013

THE BIGGEST LOSER


Dana Anspach talks about a gross unfairness in the tax treatment of gambling winnings and losses – one that I have been pointing out for years – in her post “Gambling Tax Hits SSA Payouts — Even When You Lose” at MARKETWATCH.

Gross gambling winnings are reported as income on Page 1 of the Form 1040.  Gambling losses, to the extent of winnings, are deducted as an itemized deduction on Schedule A.  So if you win $5,000 and you lose $6,000 your losses wipe out your winnings and there is no tax – right?

Wrong!

Dana correctly explains -

Although your gambling winnings are offset by losses, the way winnings are reported they inflate your MAGI {Modified Adjusted Gross Income – rdf} before they are offset by any losses. MAGI is different than taxable income, and MAGI is a major deciding factor in determining how much tax you pay in many other areas.” 

Dana goes on –

For example, your MAGI will affect all the following:

• Your eligibility to make a Roth IRA contribution

• The amount of your Social Security benefits subject to taxation

• The amount of Medicare Part B & D premiums that you pay

• Phaseouts of exemptions and itemized deductions

• Applicability of the 3.8% Medicare surtax on investment income

• Your eligibility for a tax credit/subsidy for the purpose of purchasing health insurance (starting in 2014)

What Dana does not say is that excessive gambling winnings could also cause a taxpayer to become victim of the dreaded Alternative Minimum Tax (AMT).

Her bottom line, correctly stated –

Gambling winnings, even if offset by the same amount of losses, can cause you to pay thousands more in taxes.”   

Dana’s example concerns someone with excessive winnings and losses – with truly costly consequences.  But what about the retiree who reports $5,000 in gambling winnings on Page 1 of the Form 1040 and has more than $5,000 in losses.

If this person does not own a home and pay real estate taxes he/she may not be able to receive a full tax benefit for losses because total “itemizeable” deductions, without the gambling losses, are less than the applicable standard deduction.  If filing a joint return, the gambling taxpayer may not be able to get a tax benefit for any losses!  And it is possible that the $5,000 in winnings could increase taxable Social Security benefits by as much as $4,250 and net taxable income by $9,250.

So a taxpayer who has actually lost money gambling for the year could end up paying federal income tax on $9,250 in truly nonexistent income!  For someone in the lower 15% bracket that comes to $1,388. 
 
Even if the taxpayer receives a full tax benefit for gambling losses on Schedule A - he/she has increased net taxable income by $4,250 - at a cost of $638. 

I wonder if Dana’s client, with $550,000 in winnings and $600,000 in losses, kept a gambling log during the year.  Doing so could have saved the client lots of money.

Under relatively recent court decisions a gambler’s aggregate (i.e. “net”) winnings for the day per casino should be included in gross income and not the individual winnings on a slot machine.  You will receive a separate Form 1099-G for each individual slot win in excess of $1,200 – but this is not necessarily the amount that you should report on Page 1 of your 1040.

According to the court –

Respondent nonetheless agrees with petitioner’s theory of recognizing slot machine play on the basis of net wins or losses per visit to the casino. Specifically, respondent states the following:

[T]he better view is that a casual gambler playing a slot machine, such as the petitioner, recognizes a wagering gain or loss at the time she redeems her tokens. The fluctuating wins and losses left in play are not accessions to wealth until the taxpayer redeems her tokens and can definitively calculate the amount above or below basis (the wager) realized.  

For details on the procedure for tracking true reportable gambling winnings see my article “Not Keeping Track Turns Gambling Winners Into Tax Losers” at MAINSTREET.COM.

I sincerely hope that the idiots in Congress consider this gross inequity when, hopefully, rewriting the Tax Code this fall.

TTFN

Tuesday, July 23, 2013

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ - TUESDAY EDITION

 
"There is more selfishness and less principle among members of Congress than I had any conception of, before I became President of the U.S." -James K Polk
 
I guess not much has changed over the years.

* OOPS!  I missed this last Friday. 

Joe Kristan proves that the members of Congress are not the only idiots out there (hey – millions of the “great unwashed” watch reality tv) in his post “Long live the Queen!” at the ROTH AND COMPANY TAX UPDATE BLOG.

* TAXGIRL Kelly Phillips Erb also weighed in on the idiot Queen with “How To Stay Out Of Jail: Lessons Learned From The 'Queen Of IRS Tax Fraud'”.

Basically don’t steal, and if you do don’t talk about it on Facebook.  And -

If you do steal, and you talk about it, and you do it on Facebook, don’t use your real name in order to taunt the IRS. Or the police.”

* Jamaal Solomon begins a series of "Confessions of a Mad Tax Accountant" at TAX FACTOR.  He begins with "#1: Earned Income Credit".

I sympathize with JS.  I have long been vocal in my criticism of the Earned Income Credit, especially the refundable portion.

I am not saying that the working poor should not be encouraged, or provided additional support.  I am saying that federal welfare should not be distributed via the Tax Code, and tax preparers should not be forced to act as Social Worker

* PARKER PUBLISHING reports on a court case that decided “No Home Office Deduction for Employee Working from Home for Her Own Convenience” -

While the taxpayer could deduct home office expenses for the portion of time she was an independent contractor, she could not deduct such expenses once she became an employee because working at home was at her request and for her convenience. Fontayne v. Comm'r, T.C. Summary 2013-54 (7/3/13).”

* Professor Jim Maule reiterates his, and my, belief that “Among the many political decision that I consider foolish, privatization of functions that belong in the public arena is high on the list” and gives us “More Proof of How Privatization Harms Taxpayers” at MAULED AGAIN.

The State of New Jersey “privatized” its collection process years ago – and I refuse to deal with the outside companies that were contracted.  If a NJ client is contacted on a collection issue I demand to deal directly with the NJDOT.  

* Darren Mish does a good job of discussing the “Entertainment Expenses Deduction” at the IRS PROBLEM SOLVER BLOG.

* Jim Blankenship, who advises us on GETTING YOUR FINANCIAL DUCKS IN A ROW, reveals “What a Mutual Fund Manager Won’t Tell You”.

His bottom line: when investing in mutual funds –

In the long run your best bet is to simply buy and hold the market through passive management and index funds. Your expenses are less and you’re not paying someone to do something they can’t.”

* The IRS offers some good “Tips for Employers Who Outsource Payroll Duties”.

* Russ Fox explains that “Taxes matter, and individuals absolutely do relocate because of taxes” in his TAXABLE TALK post “The Flow of AGI from One State to Another”.

I moved from NJ, the 4th biggest “loser” on the list Russ references, to PA sooner than I had planned – although health and auto insurance were a bigger factor than taxes for me.  Both expenses were almost cut in half!  My real estate taxes are lower than they would have been on a similar condo in NJ, but I am actually paying more state income tax – due to PA flat tax on gross income (no exemptions/deductions).    

THE FINAL WORD:

A review of GROWN-UPS 2 I came across in the paper while having breakfast yesterday morning began with the following –

Whatever comedic fires and bursts of genuinely inspired humor Adam Sandler once possessed have burned out long ago.”

Huh?  To my knowledge Sandler has never had any “comedic fires” or “bursts of genuinely inspired humor” since I became aware of him.  I guess this occurred before he became nationally known.

The review did get it right when it said –

Over the last 10 years Sandler has headlined more terrible comedies than anyone in Hollywood.”

Only 10 years?

I find it a good rule of thumb to avoid any movie with Sandler in it.  His movies are written for 5th and 6th grade boys, and certainly not for adults with wit and taste.

Actually I find it a good rule of thumb to avoid any movie starring any member of any Saturday Night Live “company” – except for those appearing during the first two years, and Billy Crystal and perhaps Eddie Murphy.

TTFN

Monday, July 22, 2013

KEEPING A CONTEMPORANEOUS MILEAGE LOG


A recent post at the ROTH AND COMPANY TAX UPDATE BLOG written by Joe Kristan, a CPA who just happens to also be a 1040 expert (because of his individual training and experience – and not because he passed the CPA exam), provided some good advice for taxpayers who use their car for business - “If you are going to forge your travel calendar, at least get the year right”.

Joe opened the post by reminding us -

The tax law has strict rules for supporting travel expenses.  You need to be able to document your travel with records showing the date, amounts, and business purpose.  For mileage, the tax law likes a contemporaneous diary.”

Joe’s post discussed a court case related to an IRS audit of the 2008 travel expenses of a Florida real estate agent.  It appears the taxpayer submitted a day planner as a “contemporaneous diary”.

“. . . the day planner included an order form which provided a convenient way for the owner to purchase a new day planner for the coming year. In this case, the order form was for the calendar year 2014, a fact that completely undermined Ms. [real estate agent]‘s testimony that she recorded information in the day planner contemporaneously in 2008.”

It should come as no surprise to anyone that there are taxpayers out there who do not keep a “contemporaneous” written travel log – and “recreate” a log if questioned by the IRS.  Over the years I have become aware of tax preparers who kept an inventory of blank past year diaries and pocket date books on hand for such a purpose.

Joe’s bottom line is wise -

The moral: There are a lot of ways the IRS can trip you up if you try to cook up your mileage diary retroactively.  If you really want the deduction, record your travel as you go, either on an old-fashioned auto log or one of those smartphone mileage apps.”

It is not difficult, or even time-consuming, to actually keep a contemporaneous travel log.  I would not be surprised if taxpayers found that by keeping such a log they end up with more business miles than they would have estimated.

Below is what I advise in the “USING YOUR CAR FOR BUSINESS” section of my special report THE SCHEDULE C NOTEBOOK: 

If you use your car for business you must keep ‘contemporaneous’ records of your business mileage. This means that you should record the information on the day the trip occurs.

Record each business trip separately.  Enter the date, location, business purpose and miles driven for each trip in some kind of diary, account book, or expense log.  If you do not have EZ Pass you should also note any toll expenses.  If you do have EZ Pass, you can identify the appropriate tolls on the monthly statement.  I also enter in my travel log the quarter I put in the parking meter while visiting a client – any expense for which I do not receive an actual paper receipt.

You should start off the year by entering the total miles on your car on the morning of January 1st in your log – and end the year by entering the speedometer reading after your last trip on December 31st. If you sell the car during the year, enter the total miles on the date of sale and enter the beginning mileage on your new car on the day you drive it off the lot. In addition to the business miles driven for the year you will also need to know the total miles driven for the year.”

I use a simple pocket date book to record my business trips and parking, tolls, and pay phone expenses.  In addition to tracking business miles you can use the book to track mileage, related parking and tolls, and local transportation costs for medical care.

I discuss an alternative method of tracking business miles – “sampling” – in my 2009 post “Bride of Keeping Track of Business Mileage”. 

TTFN

Friday, July 19, 2013

THIS JUST IN - SOME NJ "BUZZ"


The NJ Department of the Treasury has announced “$154 Million in Property Tax Relief On Way to 130,000 New Jersey Seniors”.

So the Property Tax Reimbursement checks, at least for those who filed the application (PTR-1 or PTR-2) by the original June deadline, are in the mail!

The DOT press release also reminds us that -

To give eligible New Jersey residents the maximum opportunity to take advantage of the state’s property tax relief programs, Governor Christie extended the filing deadline for the Senior Freeze program to Sept. 16.”

This is nothing special.  The deadline is extended every year – usually until October 15 or 31st.  I would not be surprised if the September 16 deadline eventually becomes October 31.

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’


Suppose you were an idiot, and suppose you were a member of Congress; but I repeat myself.” –Mark Twain

You see, great minds do think alike!


* Julie Garber, ABOUT.COM’s “Wills and Estate Planning” blogger, tells us that “Death Tax Repeal Act of 2013 Introduced in House and Senate” –

The House and Senate are at it once again, introducing identical bills that would permanently repeal the federal estate tax and generation-skipping transfer tax.”

Surprisingly, the bill keeps the federal Gift Tax –

What about gift taxes? They wouldn't be repealed, instead the current $5,000,000 lifetime gift tax exemption would remain in place as indexed for inflation beginning in 2011.”

This makes absolutely no sense.  The only reason the Gift Tax exists is so that individuals cannot avoid estate tax by distributing their estate prior to death.  Without a federal Estate Tax there is no need for a federal Gift Tax.

While I am not against the death of the “death tax”, my only concern lies with what happens to the step-up in basis for inherited property if there is no estate tax.  I do not want that to disappear.

* KIPLINGER.COM gives us a “State-by-State Guide to Taxes on Retirees”.

Although I am not retired yet, I am ready.  Last year I moved from New Jersey, on Kiplinger’s list of the 10 least tax-friendly states for retirees, to Pennsylvania, one of the 10 most tax-friendly.


* And the beat goes on.  Jason Dinesen’s tale of woe and frustration is up to “Taxpayer Identity Theft — Part 16” and “Part 17”!

* FYI - TAXGIRL Kelly Phillips Erb announces “IRS To Remain Open For Business As Furlough Day Is Canceled” -

The Internal Revenue Service will remain open for business next Monday, July 22, 2013, despite a previously scheduled furlough day.”

* An IRS tweet reminds us – “Hire a veteran before Jan. 1, 2014, and you may get an #IRS #tax credit worth up to $9,600.”  Click here to read more.

* Bruce McFarland, aka the MISSOURI TAXGUY, goes into detail on the different designations of tax preparers in “Choose Your Tax Pro?” as a follow up to his previous post (referenced in earlier BUZZ) “Really, You Don’t’ Know What an Enrolled Agent (EA) Is?

* Some good advice from Joe Kristan over at the ROTH AND COMPANY TAX UPDATE BLOG – “If You Are Going to Forge Your Travel Calendar, At Least Get the Year Right”.

Joe correctly points out –

The tax law has strict rules for supporting travel expenses.  You need to be able to document your travel with records showing the date, amounts, and business purpose.  For mileage, the tax law likes a contemporaneous diary.”

* If you think the income tax is a convoluted mess, take a look at the state sales tax rules.  For example, Gail Cole posts about “Pennsylvania Sales Tax: Strange But True” at the TAX RATES.COM blog.    


TTFN