Tuesday, April 19, 2016


Thank God it’s over!

Before I head off to the Jersey shore to recuperate here is some BUZZ from the last days of the filing season.  Hopefully another BUZZ this Friday.

* Duh!  H&R Block Objects to Report Claiming Tax Prep Chains Target Low-Income Workers”.  So ACCOUNTING TODAY tells us.  Of course Henry and Richard are complaining.  But, in my opinion, the report is truly calling a spade a shovel.

The report, from the Progressive Policy Institute, a liberal think tank, found that workers eligible for the EITC continue to spend fees averaging around $400 at national tax preparation chains such as Block and Liberty Tax Service.”

The item from Michael Cohn goes on to say –

In a recent survey of storefront operations in Baltimore and Washington, D.C., the researchers found that those eligible for the EITC, who are typically low-income workers with children, would spend between 13 and 22 percent of their refund this year at local tax preparation outlets. In Baltimore, where the average EITC refund is $2,335, the cost to file ranged from $309 at H&R Block to $509 at Liberty Tax Service. In Washington, D.C., where the average EITC refund is $2,351, the cost to file ranged from $315 at H&R Block to $485 at Liberty Tax Service.”

Charging such prices for EITC returns is certainly unconscionable.  I have always told you that Henry and Richard ain’t cheap!

Of course first off - the Earned Income Credit, refundable credit and a huge federal welfare program, does not belong in the Tax Code in the first place.

And second – nobody, especially low-income taxpayers, should use Henry and Richard or any others of their ilk to have their tax returns prepared.

The IRS has erroneously turned tax preparers into Social Workers with excessive due diligence requirements for tax pros preparing returns with an EITC claim.  This is not our job!  The IRS should provide free tax clinics throughout the US where taxpayers, or usually tax non-payers, who qualify for the Earned Income Credit can go to have their returns prepared free of charge by especially trained IRS personnel.

* On April 15th I came across recently introduced federal legislation that, for the most part, I could support.  The item that brought it to my attention was “Senator Warren Introduces Bill to Simplify Tax Filing”.

Here is the story (the highlights are mine) –

United States Senator Elizabeth Warren (D-Mass.) today introduced the Tax Filing Simplification Act of 2016 to simplify and decrease the costs of the tax filing process for millions of American taxpayers. 

The legislation introduced today would direct the Internal Revenue Service (IRS) to develop a free, online tax preparation and filing service that taxpayers can use to prepare and file their taxes directly with the federal government, if they choose to do so, and would prohibit the IRS from entering into agreements that restrict its ability to provide free online tax preparation or filing services.

I have been calling for the IRS to allow taxpayers to submit their federal tax returns directly to the IRS for free via the IRS website – similar to the NJWebFile system available to NJ state filers.

Since I do not, and never will, use flawed and expensive tax preparation software to prepare returns I cannot electronically file client returns.  If there were “a free, online tax preparation and filing service that {I} can use to prepare and file . . . taxes directly with the federal government” I would not need flawed and expensive software to be able to electronically file returns.

I am not against electronic filing – I sympathize with the government’s reason for wanting it – I am against being forced to waste money on commercial software to be able to do so.

I do, however, have some issues with the legislation provision that will allow “eligible taxpayers with simple tax situations to choose a new return-free option, which provides a pre-pared tax return with income tax liability or refund amount already calculated”.  I will explain why if anyone asks.

* Jason Dinesen continued to post valuable information during the tax filing season.  In “Taxation of Incentives Received from a Bank” he deals with a topic that I became familiar with very early in my career while still an “apprentice” tax preparer.

* Jason also began a new blog series on “Basics of Taxes” with “Part 1: Who Has to File”.

* We finish the Dinesen trifecta with the answer to the question “Does My Partnership Need a New EIN if it Becomes an LLC?”.

* I agree with Christopher Koopman, who says at THE HILL “Licensing Tax Preparers Won't Help Consumers”.

I do, however, believe that a voluntary independent, industry-based credential for tax preparers, like a “Certified Tax Return Preparer”, would help consumers, as I first suggested back in 2013 (click here for my editorial).

In the piece Christopher identifies the real problem with tax compliance –

The issue is larger, and more systemic, than simply trying to ensure that only the most honest dealers prepare tax returns. It's important to start by asking why so many individuals turn to others to fill out their forms in the first place. That answer is simple: The tax code as it stands today is a mammoth, complex mess. Littered with loopholes, exemptions, credits and other various programs, the increasing complexity in the code only creates confusion over how to comply.”

The best way to reduce tax fraud is to rewrite the Tax Code.

* Prof Paul Caron reported “NYU Hosts 7th Annual Tax Movie Night” at TAX PROF.  I would have liked to have been able to attend. 

In my experience I have rarely seen the IRS or an income tax issue portrayed correctly in television episodes, movies, or plays.

Many, many years ago my mentor and I had said our tax season experiences would make a good workplace sitcom – but felt most people would find the episodes based on our reality unbelievable.   

* Do you frequently complain about the poor job being done by the IRS?  Here is your chance to do something about it.  In “Think You Can Improve IRS Service? Here's Your Chance” at FORBES.COM Kelly Phillips Erb tells us –

The TAP is federal advisory committee that listens to taxpayers, identifies major taxpayer concerns, and makes recommendations for improving IRS services. TAP reports annually to the Secretary of the Treasury, the IRS Commissioner, and the National Taxpayer Advocate.

TAP is looking for volunteers to serve a three-year term starting in December 2016. There are 55 vacancies in total. TAP is specifically looking for volunteers to serve in the following states: Alaska, Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Iowa, Idaho, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Mississippi, Montana, Nebraska, New Hampshire, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, Puerto Rico, South Dakota, Tennessee, Utah, Wisconsin, West Virginia and Wyoming.”

* Were you following Russ Fox’s series on “Bozo Tax Tips” at TAXABLE TALK?  Click here for a recap.


I was apparently very efficient this tax filing season – ending with less than half the number of GD extensions than I had last year!  More on “the tax season that was” in my annual review to be posted next week.


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