Tuesday, November 11, 2014


It seems I have a lot to say in this “meaty” BUZZ installment – the “meatiest” in a while.

* Tax pros, I am still waiting to “hear” your comments on the issues discussed in the November, and previous, “issues” of THE TAX PROFESSIONAL. 

Is anybody there?  Does anybody care?  Does anybody see what I see? 

Email your comments to rdftaxpro@gmail.com.   

* ATP, EA, CPA, PTIN, RTRP, AFSP.  WTF do all these initials mean?  Click here to find out.

* Jeff Stimpson starts out his ACCOUNTING TODAY article “Knock on Would: Preparers share whatthey’d do differently” by quoting me!

The things I would do differently would be to attempt to avoid actual and potential agita, aggravation and headaches.

* Professor Jim Maule explains “If You Don’t Own the House, You Don’t Get the Interest Deduction” at MAULED AGAIN -

A recent case, Puentes v. Comr., T.C. Memo 2014-224, illustrates the principle that a taxpayer who is neither legal nor equitable owner of a residence is not permitted to deduct interest paid on the mortgage loan secured by the property. Instead, for tax purposes, the taxpayer who makes those payments is making a gift to the owner, who is deemed to pay the interest.”

I go into detail on deducting mortgage interest in my “Mortgage Interest Guide” available from my Dollar Store.

* Speaking of deducting mortgage interest, tax attorney Charles Rubin discusses “Interest Deductions When Interest Added to Principal Balance” at RUBIN ON TAX.

The situation in the court case Mr. Rubin talks about is similar to that of “points”.  Qualifying points are treated as mortgage interest.  Points are often amortized over the term of the mortgage on Schedule A.  Like in the court decision, if you refinance a mortgage loan on which you have been amortizing points with the same lender you must continue to amortize the points from the loan that you are refinancing over the term or the new mortgage.  If you refinance with a new lender you can deduct the “unamortized points” from the old mortgage in full in the year you refinance.

While the post does not specifically say so, I expect that the taxpayers in the case would similarly amortize the past due interest, included in the principal of the refinance mortgage, over the term of the new mortgage.

Again I refer you to my “Mortgage Interest Guide”.

* In a post at WALLETNERD Daniel Johnson deals with a “Charitable Giving Strategy That Helps Retirees Up for Renewal in Congress”.

This is one of two “extenders” that I think should be made permanent (the other is the option to deduct state and local sales tax instead of state and local income tax).  I list 5 benefits to this strategy, in addition to the current savings from a reduced AGI, in my December 2011 post “Another Year-End Tax Tip”.

BTW – my Dollar Store also includes a “Charitable Contributions Guide”.

* Kay Bell brings us the latest news on the ACA in “Supreme Court to Determine Obamacare Tax Credit Availability” at DON’T MESS WITH TAXES.

I am totally confused.  Who cares whether a person eligible for an advance tax credit for health insurance premiums applies for and is awarded the credit via a state marketplace or a federal marketplace?  My concern is that a person, whose level of income would entitled him or her to a credit to help pay for health insurance, must get the insurance from a government marketplace in order to get the credit. 

If you qualify for a credit based on income and you get the insurance through a government marketplace you get the credit.  If you purchase the exact same insurance directly from the provider – or if you thought you would not qualify due to anticipated income, but your actual income ends up much less, you do not get the credit.  What’s wrong with this picture?

The whole idea behind Obamacare is to help Americans who cannot afford sufficient health care coverage to get insurance, isn’t it?

* I recently came across a post from July by Blake Treu, currently employed with the tax practice of Ernst & Young in Denver, Colorado, at the FULLER TAX BLOG (from Fuller Professional Education, LLC, which provides training, continuing education, exam preparation programs, and general information to tax professionals and other individuals in the areas of taxation and law) titled “Reasons the AICPA Lawsuit Against the IRS is Nonsense” – something the Tax Court has recently agreed with.

Blake comes up with the correct conclusion upon reviewing the AICPA action - 

“. . . the AICPA lawsuit is little more than a nonsense lawsuit intended to serve the interests of the AICPA and its members, not the interest of the general public.”

He observes -

With the implementation of the AFSP program, undoubtedly the number one concern for CPAs is that their competitive advantage of being credentialed through examinations and continuing education regimens is diluted by otherwise unenrolled tax preparers becoming credentialed through the AFSP program. Essentially, the king-of-the-hill status that CPAs enjoy in the tax world is threatened by the implementation of the AFSP program.

Therefore, the AICPA, as the premier organization representing CPAs in the United States, is certainly acting within their own self-interest by doing all they can to prevent the IRS from moving forward with the implementing the AFSP program.”

The AICPA would, and will, be against any program, government or private, voluntary or mandatory, that would identify individuals who are truly competent and current in the preparation of 1040s, which, as I have said time and again, the CPA designation does not, and the taxpayer public be damned.

While I do not believe the voluntary AFSP has any real value, and is the wrong way for the IRS to proceed in response to Loving v IRS (see “There Are So Many Things Wrong with the Annual Filing Season Program”), I am thankful that, as mentioned above, the Tax Court agreed with Blake that the AICPA action was indeed a “frivolous” law suit with no merit.

* Jason continues his blog series with “A Little Bit About Sole Proprietorships, Part 2” at DINESEN TAX TIMES.

I agree with Jason when he says “I don’t mind sole proprietorships”.  Years ago I had an online battle with an arrogant lawyer/CPA blogger (he has since apparently disappeared from the blogosphere) who was advising, incorrectly, that every single sole proprietorship should incorporate, regardless of the specifics of the situation.  This is truly bad advice.  I do, however, advise all sole proprietorships to organize as an LLC for liability purposes but still file via Schedule C. 

In listing the disadvantages of the sole-proprietorship Jason correctly states –

 The tax treatment of health insurance is also much less ‘tax friendly’ when you are a sole proprietor.”

I found this to be especially true in NJ, where health insurance costs are humongous.  The deduction for self-employed health insurance does not reduce self-employment tax for a Schedule C filer, but it does reduce the salary of a one-owner corporation.  The idiots in Congress allowed a deduction for this expense against self-employment tax for one year only back in 2010, but this temporary tax benefit was never extended.

Jason promises “a full discussion of health insurance” for the sole proprietor in another post, which I look forward to reading.  

* Jean Murray lists “10 Facts You Should Know about Your Home Based Business and Taxes” at ABOUT.COM for those who work at home like I do.

I discuss the home office deduction in my “The New Schedule C Notebook”.

* Russ Fox asks a good question at TAXABLE TALK – “Since the Dead Vote, Why Can’t They Get Tax Exemptions?

* Let me end with some good advice from Professor Jim Maule at MAULED AGAIN – “Letter from the Tax Advisor? Read It”.

When tax professionals put advice and information in writing, it is because they have determined that advice and information to be important. They usually don’t waste time and resources writing letters or memoranda about unimportant matters. The taxpayer to whom the letter has been sent almost always has paid for the advice and information contained in it. That, too, should be an incentive to read the letter.

True, we are so bombarded with so many types of information that it is difficult to separate the music from the noise. Yet when the letter is from someone to whom payment has been made, is expected, and refers to something as important as tax matters, it should be much easier to pull it out of the pile and examine it.”

Jim’s post discusses a recent court case where not reading a letter from a tax professional that accompanying a Form K-1 cost a couple more than $12.000.  As Jim says – “Ouch.”    


I continue to worry that the anticipated bi-partisan “cooperation” on tax reform in 2015 will be limited to corporate tax reform - with only some minor token, if any, 1040 tax reform instituted - and not the total rewriting of the entire US Tax Code that is needed.

Obviously there is a need for corporate tax reform – but not any more than the need for 1040 reform.

I truly expect that I will be dealing with the mucking fess that is the current 1040 until my retirement.  I will, however, keep on calling for true substantive 1040, along with business, tax reform.   


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