Thursday, October 31, 2013

HAPPY HALLOWEEN - SOME TREATS FROM THE SOCIAL SECURITY ADMINISTRATION


The Social Security Administration announced yesterday that –

Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 63 million Americans will increase 1.5 percent in 2014, the Social Security Administration announced today.

The 1.5 percent cost-of-living adjustment (COLA) will begin with benefits that more than 57 million Social Security beneficiaries receive in January 2014.  Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2013.”

SSA also announced that “the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $117,000 from $113,700”.

For those who decide to collect at or after age 62 but before the full retirement age, $1 in benefits will be withheld for every $2 in earnings above $15,480 per year, or $1,290 per month.  

In the year an individual reaches full retirement age, $1 in benefits will be withheld for every $3 in earnings above $41,400 per year, or $3,450 per month.  This applies only to earnings for months prior to attaining full retirement age.  There is no limit on earnings beginning the month an individual attains full retirement age.
 
Click here for a Fact Sheet.

According to Medicare -

Premiums for Medicare Part B will stay at $104.90 a month for 2014, the same as in 2013, according to the Center for Medicare Services. Premiums have either decreased or stayed the same for the past three years. The deductible will also remain at $147.”

Taxpayers with higher incomes, which could include otherwise tax-exempt interest, will continue to pay higher Medicare Part B premiums.  See the below chart -
 
If your yearly income in 2012 was -
Your 2014 Medicare Premium is -  
File individual tax return
File joint tax return
File married & separate tax return
$85,000 or less
$170,000 or less
$85,000 or less
$104.90
above $85,000 up to $107,000
above $170,000 up to $214,000
Not applicable
$146.90
above $107,000 up to $160,000
above $214,000 up to $320,000
Not applicable
$209.80
above $160,000 up to $214,000
above $320,000 up to $428,000
above $85,000 and up to $129,000
$272.70
above $214,000
above $428,000
above $129,000
$335.70
 
TTFN
 

Wednesday, October 30, 2013

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


A day late – but certainly not a dollar short!

* My year-end tax planning series at MAINSTREET.COM ends with “Year-End Tax Advice: Essential 2013 Knowledge” and “What's New for Federal Income Taxes for 2013?

* Speaking of year-end tax planning PARKER PUBLISHING gives us sample Year-End Client Letters for Individuals and Businesses.   

* Oops!  Did I forget to mention that I am quoted in Jeff Stimpson’s TAXPRO TODAY piece “Late Filers a Major Challenge”?

* I am also quoted in TAXPRO TODAY’s weekly “In the Blogs” installment “Quiet, Please”.

* TAXGIRL Kelly Phillips Erb has released Podcast 1.06 – “This Week In Tax News + Same Sex Marriages”.

* And, proving once again that bloggers love lists, Kelly offers “10 Things You Need To Know About Getting Married& Taxes at her “normal” FORBES.COM location.

* TIGTA (Treasury Inspector General for Tax Administration) continues to find fault with the IRS.  Kay Bell tells us about the latest TIGTA study of IRS practices in “Almost 700 IRS Contractors Owe $5.4 Million in Back Taxes” at DON’T MESS WITH TAXES.  

* Good advice from the JOURNAL OF ACCOUNTANCY – “Write It Down: The Importance of Documenting Oral Advice”.

Based on the source of the item, it is obviously written for the accountant providing the advice -

When oral advice becomes client-specific, it is best to record the discussion in a written correspondence with the client.”  

However it also applies to the client receiving the advice.  Get your accountant to put your question and answer in writing – even if it is in an email.

I discourage clients from calling me with questions.  I want them to email the question to me – so I can better understand the question - and I provide a written, documented response via return email. 

When a client cannot reach me by phone and send me an email saying, “I have a question.  Please call me” I respond by email telling them to email me the specific question(s).  I answer the question via email, so we both have a hard copy of what was asked and how I answered.  I tell the client that I will call if they want clarification – but I would still prefer to carry on the “conversation” via email.

* A blast from the past from Jim Blankenship at GETTING YOUR FINANCIAL DUCKS IN A ROW reminds us that “Medicare is Not Automatic” –

If you’re nearing age 65, there’s something you need to know:  unless you’re currently receiving Social Security benefits (having filed early), you need to take action to make sure you receive your Medicare benefits in a timely fashion.”

TTFN

Monday, October 28, 2013

TIME FOR YEAR-END PLANNING


It’s that time of year again – when I usually talk about year-end tax planning here at TWTP.

This year I shared my year-end strategies and advice at the MainStreet.com “Tax Center”.  Here is what I wrote there -

·   Year-End Tax Planning 2013” covers the basics of year-end tax planning and how to apply them to 2013.

·   Year-End Tax Essentials: News You Need to Use” discusses a special year-end tip you can use to make up under-withholding and avoid a penalty for underpayment of estimated tax.

·   Year-End Tax Advice: Essential 2013 Knowledge” talks about two year-end charitable contribution strategies.

·   What's New for Federal Income Taxes for 2013?” provides tax facts and figures for 2013 that you will need to know when doing year-end tax planning.

Juliette Fairley also deals with year-end issues at MainStreet.com in “Don't Miss These Year End 2013 Tax Deadlines”.

Any questions?

TTFN

Friday, October 25, 2013

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


If you are a fellow "twit" search #toptaxmovies.

* I have written a series on Year End Tax Planning for MAINSTREET.COM.  Check out Part 1 and Part 2.

* More proof that (1) refundable tax credits are bad, and (2) government welfare programs like the Earned Income Credit do not belong in the Tax Code from the WASHINGTON TIMES – “IRS Paid Out $132 Billion in Bogus Tax Credits Over Last Decade”.  

The IRS paid as much as $13.6 billion in bogus claims for the Earned Income Tax Credit last year, according to a report the agency’s internal auditor released Tuesday morning.

The Treasury Inspector General for Tax Administration said it warned the IRS in 2011 that it was making the erroneous payments, but two years later the agency hasn’t fixed the problem.

Over the last decade, the IRS could have paid out as much as $132.6 billion in improper payments.

And further –

According to the audit, the improper payments accounted for between 21 percent and 25 percent of all EITC claims in 2012.

Those figures do show a little progress. In 2010, as much as 29 percent of EITC payments were erroneous, accounting for up to $18.4 billion.”  

TAX PROF Paul Caron reprints a chart from the report.  Click here.

To quote a lyric from a popular folk song of my youth – “When will they ever learn?”.

The article goes on to state –

In its response to the report, the IRS said it’s working with the White House Office of Management and Budget to try to reduce bogus payments.”

I can tell the IRS, OMB, and White House how to reduce bogus payments.  Do away with the Earned Income Credit altogether and distribute federal welfare money through the “normal” channels!

* Jason Dinesen tells it like it is in his post “Incorporate Your Life? Not So Fast” at DINESEN TAX TIMES.

Don’t be fooled by ridiculous claims of idiots trying to sell you a book or DVD or combination thereof.  I echo what Jason says in the post.  Read my lips (highlight is his) –

. . .simply having a business entity DOES NOT make everything in your life tax deductible.”

Jason correctly explains –

Forming a corporation doesn’t magically make your mortgage deductible. Forming a corporation doesn’t make your grocery bill deductible. Forming a corporation doesn’t make the purchase of a big-screen TV for your living room tax deductible.

Legitimate business expenses are tax deductible.

Personal expenses are not tax deductible.”


* WEALTH PILGRIM Neal Frankle, CFP does us a great favor by dealing with a true FAQ with his post “Beneficiary IRA Distributions (RMD) Made Simple”.

Actually the post title is misleading, and really doesn’t answer the most FAQ.  This post explains how to calculate the RMD of a non-spouse beneficiary.

You may also want to check out his posts “IRA Beneficiary Rules to Protect Your Family” and “Inherited IRAs – Please Avoid This Mistake”.

* The IRS is already predicting delays with the beginning of the 2014 tax filing season (for filing 2013 returns) due to the most recent irresponsibility of the idiots in Congress (i.e. the government shutdown).  It has announced “2014 Tax Season to Start Later Following Government Closure; IRS Sees Heavy Demand As Operations” -

The original start date of the 2014 filing season was Jan. 21, and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4.”

No problem for me.  My tax filing season has always begun on February 1st. 

* The Tax Foundation’s TAX POLICY BLOG reports that A Lot Has Changed in the 27 Years Since the Last Major Tax Reform”.  The last major tax reform being the Tax Reform Act of 1986, which recently celebrated an anniversary.

One change of interest –

Since 1986, the U.S. tax code has gone from less than 30,000 pages to over 70,000 pages.”

* Sophia Coppolla of ACCOUNTING SCHOOL GUIDE sent me an infographic on “Sin Taxes” that you may find of interest.

* Jim Blankenship gives us a lesson in “How Adding to Your Earnings Can Increase Your Social Security Benefits” at GETTING YOUR FINANCIAL DUCKS IN A ROW.

* Good advice from Tax Mama Eva Rosenberg at EQUIFAX.COM - “Tell the IRS and Your State When You Move”.

* The weekly “Tax Talk Tuesday” (aka McTax Hangout) You-Tube show of Bruce McFarland, the MISSOURI TAXGUY, discusses “Charitable Contributions”. 

In the show Bruce uses a special presentation that was taken in a large part from the Contribution section of my “Itemized Deductions: A Complete Guide to Schedule A”.

THE FINAL WORD –

A good quote from fellow tax blogger Russ Fox EA of TAXABLE TALK

This matters because in tax when a statute says ‘x’, it’s ‘x’. A good example of this is some of the ludicrous ways the Alternative Minimum Tax impacts individuals. Judges have stated in their rulings that these make no sense but because it’s written into the statute, there’s no choice on this matter: Until Congress changes the law, they’re stuck.”

Because tax law is written by Congress, and the members of Congress are idiots, tax law can sometimes be idiotic.  The fault lies not with the IRS, who must enforce idiotic tax law, but with the fools who wrote the law.

As I have observed often in the past, most of the idiots in Congress do not actually read in full the laws that they pass.

TTFN

Wednesday, October 23, 2013

HOW TO DEAL WITH THE IRS AND LIVE TO FIGHT ANOTHER DAY


I just finished reading “A Good Guy’s Tax Journey Series Part 1 – Tax Tips on How to Deal With the IRS and Live to Fight Another Day” by fellow tax blogger (THE TAX FACTOR) Jamaal Solomon EA.
 
FYI, I had interviewed Jamaal as part of my TAX BLOGOSPHERE BUDDIES series a while back.  Click here to read the interview.

This book is about dealing with an IRS balance due notice and is written from the unique point of view of the taxpayer receiving the notice – in this case Mr. Will E. Wonk.

Will E. did indeed make a serious, and actually fraudulent, error on his first Form 1040.  Upon receiving a notice from the IRS he does some online research and comes across tax preparer “Tax Guy” (aka Jamaal Solomon), who he retains to help him deal with the IRS.  As the book progresses Will explains, in plain and simple language, just how Tax Guy deals with the IRS and the advice TG gives Will.

Jamaal’s purpose in writing the series is “to empower you, the reader, to learn about the basics of taxes”.   He wants the reader “to learn about your options and rights.  To know the consequences of your action (and inaction).”

Sprinkled throughout the book are appropriate tips and information direct from IRS publications, which Jamaal does to prove how easy it is to research tax issues on the IRS website.

Having a story told by the taxpayer makes what could be a dry and perhaps boring, although important, subject entertaining and easy to follow.  Jamaal does a great job in capturing the “voice” of an average taxpayer.

After the story Jamaal provides an extensive glossary of “Basic Tax Terms That Every Citizen Should Know” and a listing of “Helpful IRS Publications for Individual Tax Issues” available at the IRS website.

Two thumbs up from me!

This book is the first in a trilogy about the tax trials and tribulations of Will E. Wonk and wife Sally.  Part 2 deals with Will’s experience as a CEO of a “shady business”.  I look forward to reading the rest of the trilogy.

The cost of the e-book, in digital version or via Kindle, is $4.99.  Click here to order from Amazon.com. 

BTW, Jamaal is collaborating with me on a book of advice and resources for tax professionals from two points of view – that of the veteran preparer (me) and the relatively new professional (JS).

TTFN

Tuesday, October 22, 2013

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


My “VOID Pledge” campaign has proven a bust.  Oh well.  I have removed the petition link.  However, I still urge you to take, and be true to, the pledge.

* Check out my article “Flexible Spending Accounts: Are They for You? at MAINSTREET.COM.

* An item I missed last week.  Professor Annette Nellen of 21st CENTURY TAXATION deals with the question “Can the IRS Regulate All Return Preparers?” at CPA2BIZ.

In a blog post plugging the article Professor Nellen says -

I'm guessing that the preparers will win again on appeal, but that Congress will enact legislation to make it clear the IRS and Treasury have authority to regulate all paid preparers of federal tax returns.”

I agree that the preparers will win on appeal, but I do not see Congress enacting any legislation giving more power to the IRS. 

* The IRS is back to work, and Kelly Phillips Erb, the FORBES.COM TaxGirl, keeps us up-to-date on the post-shutdown IRS in “IRS Asks Taxpayers for Patience as They Tackle Shutdown Backlog.

Kelly anticipates my, and I expect your, initial reaction -

I know, I know. You want me to make a snarky comment about how the IRS doesn’t wait for taxpayers. I’m not going to do it, though. There’s lots to be annoyed with IRS about from time to time – but the shutdown isn’t one of them. That’s all on Congress.”

* At THE BUZZ ABOUT TAXES Manasa Nadig talks about “The Science Behind A Home Mortgage Interest Deduction!

I do agree with Manasa that the deductibility of home mortgage interest should not be a significant factor in one’s decision to buy a home. 

I also believe that you should not even consider purchasing a home until you have a full 20% to put down.  Buying a house with 5% down, or allowing someone to buy a house with 5% down, is ridiculous and certainly not fiscally responsible.

And I believe that, especially in states like New Jersey (and New York, etc) where the cost of homes are highly inflated, the mortgage interest deduction (for acquisition debt) is truly a help to new homeowners (the first few years the monthly P+I payment is almost all interest).  And I also believe that the mortgage interest deduction coupled with the deduction for real estate taxes is a way of “geographically equalizing” taxpayers.  See “Defending the Deductions for Taxes and Mortgage Interest”.

* In case you haven’t heard - fellow tax blogger Jamaal Solomon, EA of THE TAX FACTOR has published "A Good Guy's Tax Journey Part 1: Tax Tips on How to Deal With the IRS and Live to Fight Another Day". 

Look for my review coming soon! 

THE FINAL WORD –

In case you are having a rough day, here's a stress management technique recommended in all the latest psychological journals. The funny thing is that it really does work and will make you smile.

1. Picture yourself lying on your belly on a warm rock that hangs out over a crystal clear stream.

2. Picture yourself with both your hands dangling in the cool running water.

3. Birds are sweetly singing in the cool mountain air.

4. No one knows your secret place.

5. You are in total seclusion from that hectic place called the world.

6. The soothing sound of a gentle waterfall fills the air with a cascade of serenity.

7. The water is so clear that you can make out the face of the Congressman you are holding underwater.

See it worked. You're smiling. You feel better already.

TTFN

Friday, October 18, 2013

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


Politicians and diapers have one thing in common…they should both be changed regularly, and for the same reason.”  Unknown

As I was reading a newer Margaret Truman “Capital Crimes” mystery in the waiting room while waiting for the windshield of my car to be replaced I came across an observation in the narrative, that, while nothing new in my lifetime, seemed especially relevant considering the recent mucking fess in Washington –

Those in government who thought that the death of Afran Mutki {a plot point - rdf}  and the suspicion surrounding it could be kept under wraps also believed that politicians made decisions based upon what was good for the country rather than what would help them perpetuate their positions of power.”
 
After the past few weeks nobody believes that.

* Have you taken the “V.O.I.D. Pledge” yet?  Click here.

* I am quoted in Jeff Stimpson’s TAXPRO TODAY article “Their Bad: The Biggest Mistakes Tax Prep Clients Make.”

* Fellow tax blogger Jamaal Solomon of THE TAX FACTOR has published "A Good Guy's Tax Journey Part 1: Tax Tips on How to Deal With the IRS and Live to Fight Another Day".  I just got my copy yesterday and will be reviewing it here at TWTP once I have finished reading it.

BTW- JS and I are working together on a book of advice and resources for tax professionals.
 
* Still another example of fraud and waste involving federal welfare delivered via refundable tax credits from the WASHINGTON POST in "Bungling Bureaucrats Dole Out Billions in Tax Credits to Illegal Immigrants". 

* PARKER PUBLISHING gives us the word that “Annual Per Diem Rate Guidance Changes ‘Incidental Expenses’ Definition”.

Parker tells us that -

. . . the definition of incidental expenses was revised by the Federal Travel Regulations in October of 2012, to provide that incidental expenses include only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.

Before the change in the definition of incidental expenses, incidental expenses included transportation between places of lodging or business and places where meals are eaten and the mailing cost associated with filing travel vouchers and paying employer-sponsored charge card billings.”

* Some TaxPro BUZZ from Diane Gilabert, aka THE MAVEN (as my THE TAX PROFESSIONAL blog has been discontinued).  Diane tells tax pros “How To Advise Clients on Multi-state Income Tax Compliance”.  

Her bottom line –

Multi-state income tax compliance is challenging. Be proactive. Discuss what causes nexus, estimate the additional state tax liabilities, and be up front about your fees.”

* The CCH annual “2013 Year-End Tax Planning” briefing is now available.  Click here to download.

* I came across the PLANTING MONEY SEEDS post “Can You Hold Real Estate in Your IRA?” by Miranda Marquit a while back.  I made a note of the link to send it to a friend and client who was considering such a move.  It is a good discussion of the issue.

Miranda reports-

Many investors like to add a little real estate to their portfolios in times like these. Prices and rates are low, so you can get a good deal. Plus, rents are on the rise, so the potential gains are also quite reasonable. And, you don’t even have to be much of a landlord, since you aren’t allowed to manage the properties you hold in an IRA.”

But cautions –

Carefully consider your options before you decide to add real estate to your IRA. While you can hold real estate in your IRA, there are a number of restrictions, and if you aren’t careful, you could run into trouble with the IRS.”

* Speaking of IRAs, Joe Taxpayer discusses an alternative form or RMD in “The 'In Kind' Distribution” at ROTH MANIA.

* FORBES.COM’s TaxGirl Kelly Phillips Erb warns us that the “Shutdown Gives Tax Scammers New Opportunities to Steal”.

Kelly talks about a recent telephone scam.

* Jason Dinesen, an Enrolled Agent, asks “If EAs are Liechtenstein and CPAs are the U.S., What are the Unenrolled?” at DINESEN TAX TIMES.

* Jason reiterates the unfortunate fact that, however erroneous, “The name “CPA” means ‘tax expert’ to most people”.

In addressing the massive group of tax professionals who are “unenrolled”, like me, Jason correctly states –

“ . . . some unenrolled preparers are excellent — every bit as good as (and maybe even better than) any CPA or EA.”

There needs to be a voluntary designation program for tax professionals who do not want to represent taxpayers before the IRS.  If the IRS does not continue its RTRP program on a voluntary basis then the industry needs to create a universally accepted credential.  See my ACCOUNTING TODAY article “It’s Time for Independent Certification for Tax Preparers”.

* And we end with one more item of TaxPro BUZZ, this time from ACCOUNTING TODAY – “IRS Delays PTIN Renewals for 2014”.

I would think the renewal process would be delayed until the decision in the appeal of Loving v IRS is announced.  If there is no more mandatory RTRP program the IRS should not be charging a fee to renew PTINs!

THE FINAL WORD –

Obviously it is good fiscal policy to reduce the debt.  But the time to discuss/debate the issue is the day after the debt ceiling has been increased, not the day before a vote is required.  The day after raising the debt ceiling the last time it was done the idiots in Washington should have begun to address the problem.

If the idiots we have elected to run the country cannot act responsibly, and cannot put their responsibility to the American people ahead of themselves or their party, then they must be replaced!

At election time we must throw all of the bums out.  Vote Out Incumbent Dysfunction!

TTFN

Wednesday, October 16, 2013

THE APPLICATIONS ARE IN THE MAIL (REALLY)!

The NJ Division of Taxation has announced the delivery schedule for the 2012 NJ Homestead Benefit applications -
 
Camden, Hudson, Hunterdon, Salem, Somerset counties = Thursday, October 10
 
Bergen, Burlington, Cumberland, Warren counties = Saturday, October 12
 
Morris, Ocean counties = Tuesday, October 15
 
Atlantic, Essex, Monmouth, Sussex counties = Friday, October 18
 
Cape May, Union counties = Saturday, October 19
 
Gloucester, Mercer, Middlesex, Passaic counties = Tuesday, October 22
 
If you did not receive your application, wait at least one week after the expected delivery date for your county before you contact the Division. Call the Homestead Benefit Hotline (1-888-238-1233) or click here to e-mail NJDOT for assistance.
 
The deadline for filing these applications is November 22, 2013.
 
Click here for more information on the NJ Homestead Benefit program and here to apply online.
 
TTFN