Tuesday, July 18, 2017

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

* Kay Bell, the yellow rose of taxes, tells us “IRS to seek stay in PTIN fee collection court ruling while it ponders its additional legal options” at DON’T MESS WITH TAXES.

While Kay says the IRS and Department of Justice have not officially decided to appeal the decision that shut down the collection of a fee to apply for or renew a tax preparer’s “PTIN” (Preparer Tax Identification Number), IRS Commissioner Koskinen “said his agency is likely to appeal the PTIN ruling”.

Kay continues –

The reason the IRS is so committed to PTINs, noted the commissioner, is that the public, especially among the elderly and in low-income and immigrant communities, can be vulnerable to abuse by tax preparers.”

The Court affirmed the IRS authority to require a PTIN for all individuals who prepare tax returns for a fee and to maintain a PTIN registry.  But there is no need to add an excessive fee, partially going to an outside agency, for the PTIN.

Koshinen continues to want Congress to allow the IRS to regulate paid preparers.  The last thing I want is for Congress to create a tax preparer regulation regime.  The Commissioner said in his recent address "But there are enough [preparers] out there who either don't know a lot about what they’re doing or consciously are trying to take advantage of taxpayers."  I say there are enough Congresspersons out there who either don’t know a lot about what they’re doing or consciously are trying to take advantage of voters.

I see the need for a universally accepted tax return preparer credential to protect the public – but not mandatory and not administered by the IRS or the government.  It should be administered by an independent industry-based organization.

* My THE TAX PROFESSIONAL blog is back!  Check out this week’s post “Another Practice Tip and Some TAXPRO BUZZ”.


* The CCH daily headline newsletter reports “White House Committed to Tax Reform This Year, Mnuchin Says”.

My reaction.  The occupant of the White House should be committed (to a mental institution).

I won’t be holding my breath for Congress to pass substantive tax reform this year.  The Republicans can’t seem to get anything done, thanks mostly to the idiot in the White House.

* My editor at the NJ TAXING TIMES told me, and other NJ tax preparers, about a great resource for tax pros and taxpayers – a “Glossary of Tax Terms” from the NJ Division of Taxation.  It is indeed comprehensive and the individual definitions include links to appropriate pages on the NJDOT website.

THE FINAL WORD

Wise words from former Presidents Clinton and Bush on why arrogant buffoon Donald T Rump will never be a competent or adequate President or leader, reported by CNN in “Bush and Clinton stress value of humility in Oval Office” -

Event moderator, billionaire David Rubenstein, asked the two at the scholastic leadership event in Dallas about what they viewed as the most important quality for someone who wants to be President. Both stressed the virtue of humility.

‘I think it's really important to know what you don't know and listen to people who do know what you don't know,’ Bush said.

Clinton -- who, like Bush, didn't mention President Donald Trump -- agreed that officeholders need to be humble, and warned that those ‘who are real arrogant in office’ have forgotten that history will be their judge.

‘If you want to be President, realize it's about the people, not about you,’ Clinton said. ‘You want to be able to say, 'People were better off when I quit.' ... You don't want to say 'God, look at all the people I beat.'"

Humility is an impossible quality for Trump to understand, let alone express.  And, in Trump’s deluded and unstable mind, everything is always about Trump, and never anyone else.

TTFN
 
 
 
 
 
 
 
 
 
 
 

Thursday, July 13, 2017

A TALE OF THE TAIL

One of the most important pieces of advice I have seen, and have given, over the years is “Don’t let the tax tail wag the investment dog”.

Do not make investment or financial decisions based solely on tax considerations. For years now I have been saying that the first criteria for evaluating any transaction, strategy, or technique you are considering should always be financial.  Taxes are second. 

Obviously you should be aware of, and take into consideration, the tax consequences of any planned transaction, and try to structure the transaction so that it results in the minimum federal and state tax cost.   

But remember - taxes are only pennies on the dollar.   

When discussing this issue I always tell the following story –

Many decades ago, when I was still an "apprentice" tax preparer, one of my mentor’s clients came in and proudly announced that his employer had offered to reimburse him for job-related mileage, but he turned it down because then he would not be able to deduct business travel on his Form 1040 (back then employee business expenses were deductible in full "above-the-line" as an Adjustment to Income). 

My mentor avoided the temptation to tell the client that he was a complete idiot, and attempted to explain, with great patience and tact, that it is much "more better" for someone to give you $1.00 tax free than it is to be able to save 30 cents by claiming a tax deduction. 

Similarly, there is no benefit in spending $1.00 needlessly to save 30 cents in taxes.  You have not saved 30 cents – you have actually lost 70 cents!  It doesn’t make sense to incur an expense solely because it is deductible.

TTFN
 
 
 
 
 
 
 
 
 
 

Tuesday, July 11, 2017

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

* My THE TAX PROFESSIONAL blog is back!  Check out this week’s post “The Good, the Bad, and the Ugly”.

* A good lesson to those looking for a tax pro in “Truth In Advertising Isn’t Always a Good Idea” from Russ Fox at TAXABLE TALK.

When shopping for a tax pro totally disregard advertising claims about refunds like ““The Largest Refund…Guaranteed!!!”.  Concentrate on the experience, quality and competence of the preparer.  An experienced and competent, and honest, tax preparer will work to make sure you pay the absolute least amount of federal and state tax possible – but will do it legally.

Start your search for a tax pro at FIND A TAX PROFESSIONAL.

* I prove reality is truly stranger than fiction and tell you about the proposed SWAMP Act in the July “issue” of THE LIBERTY TIMES.  Check it out.

* Jean Murray provides a detailed lesson in “How to Pay Yourself from Your Business” at THE BALANCE.

* Kay Bell celebrated the 4th of July by reminding us of the “Cohan Rule” in “America's Yankee Doodle Boy gives us a tax deduction rule” at DON’T MESS WITH TAXES.

Kay quotes from an archival post I had written about George M in her piece.


I do not oppose this move.  While I do not support the current Republican healthcare legislation, the mandate – i.e. the “shared responsibility penalty” - is one of the “bad” things about Obamacare (see my THE TAX PROFESSIONAL post referenced above).

What needs to be done is not Republican “repeal and replace” but Republicans and Democrats working together to fix what is wrong with Obamacare while keeping what is right.  But the words “working together” and “Congress” have not gone together for decades now.

Perhaps what we need to “repeal and replace” are the idiots in Congress.

* Elle Martinez deals with a timely topic with “Volunteering This Summer? Find Out if Your Work is Tax Deductible” at the TURBO TAX BLOG.

* The TAX FOUNDATION takes a look at “State and Local Sales Tax Rates, Midyear 2017”.

FYI –

Five states do not have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of these, Alaska and Montana allow localities to charge local sales taxes.

The five states with the highest average combined state and local sales tax rates are Louisiana (10.02 percent), Tennessee (9.45 percent), Arkansas (9.34 percent), Washington (9.20 percent), and Alabama (9.03 percent).

The five states with the lowest average combined rates are Alaska (1.76 percent), Hawaii (4.35 percent), Wyoming (5.26 percent), Wisconsin (5.42 percent), and Maine (5.5 percent).”

New Jersey is #26 and Pennsylvania is #33.  New York is #9 and California is #10.

* The CHECKPOINT NEWSTAND week-day daily email newsletter from July 10th discussed the National Taxpayer Advocate’s legitimate concerns about the IRS use of private collection agencies –

Finally, the NTA said that she believes IRS is misinterpreting Code Sec. 6306 by not requiring PCAs to solicit financial information from taxpayers, as they are supposed to do under Code Sec. 6306(b)(1)(C). That means PCAs will not collect financial information that could be shared with IRS to determine whether a taxpayer can pay the debt and still pay for basic living expenses. The NTA described the calling scripts for one of the PCAs as instructing the employee to give the taxpayer suggestions on how to come up with funds to pay their debt, such as borrowing from a retirement plan or taking out a second mortgage on a home. While IRS might make similar suggestions, IRS employees first gather financial information which reveals when a taxpayer is in economic hardship, and unlike PCAs, IRS has no financial incentive to ignore indications of financial hardship. PCAs do not gather this information, and their incentive structure doesn't encourage them to look for economic hardship.”

How many times do we need to say this – using private collection agencies is truly a stupid and inappropriate idea.  Just further proof that the members of Congress are idiots.  This program must be stopped!

* Jason Dinesen answers the question “How Does Business Bad Debt Work?” at DINESEN TAX TIMES.

The bad debt deduction is highly misunderstood, and JD sets us straight.

THE FINAL WORD


This Washington Post opinion piece by David Rothkopf tells it like it is (highlights are mine) 0

That is where we are now. The president’s tweeting hysterically at the media is just an element of this. So too is his malignant and ever-visible narcissism. The president has demonstrated himself to have zero impulse control and a tendency to damage vital international relationships with ill-considered outbursts, to trust very few of the people in his own government, and to reportedly rant and shout at staff and even at the television sets he obsessively watches.

Whether he is actually clinically ill is a matter for psychiatric professionals to consider. But when you take the above behaviors and combine them with his resistance to doing the work needed to be president, to sitting down for briefings, to reading background materials, to familiarizing himself with details enough to manage his staff, there is clearly a problem. Compound it with his deliberate reluctance to fill key positions in government and his wild flip-flopping on critical issues from relations with China to trade, and you come to a conclusion that it may be that Trump’s fitness to serve as president is our nation’s core national security issue.

Not only does the president diminish the office with his pettiness; he also shows disregard for constitutional principles including free speech, freedom of religion and separation of powers, and he operates as though he were above ethics laws. Daily he shows he lacks the character, discipline, intellect, judgment or respect for the office to be president of the United States.”

TTFN
 
 
 
 
 
 
 
 
 
 

Wednesday, July 5, 2017

EXPERIENCE THE JOY OF AVOIDING NJ TAXES!

My book THE JOY OF AVOIDING NEW JERSEY TAXES has gone to press!
 
You are paying too much New Jersey state income tax – and it’s nobody’s fault but your own!  
 
Most NJ taxpayers concentrate on their federal tax return and spend minimal time on their NJ return, simply taking numbers from the 1040 and putting them on the NJ-1040.  As a result they are paying more NJ state tax than necessary, often paying tax on income that is not even taxed by NJ.  By becoming informed on NJ state tax law and using proper tax planning you can make sure that you pay the absolute least amount of NJ Gross Income Tax possible for your particular situation.
 
Whether or not you use a professional tax preparer, the more you know about NJ taxes the more you will be able to properly structure your financial transactions during the year to minimize taxes and the better prepared you will be when giving your “stuff” to your preparer at tax time.
 
I have been preparing NJ-1040s for as long as there has been a NJ-1040, and federal income tax returns for even longer.  I share my knowledge and experience from over 40 years as a professional tax preparer in my new book THE JOY OF AVOIDING NEW JERSEY TAXES to help you to learn how to pay the absolute least amount of NJ Gross Income Tax possible.
 
In THE JOY OF AVOIDING NEW JERSEY TAXES I discuss -
 
• INTRODUCING THE NEW JERSEY GROSS INCOME TAX
• AVOIDING THE NJ MARRIAGE PENALTY BY FILING SEPARATE RETURNS
• CLAIMING DEPENDENT COLLEGE STUDENTS ON THE NJ RETURN
• RECONCILING FEDERAL AND STATE WAGES
• REPORTING INTEREST AND DIVIDEND INCOME
• REPORTING NET PROFITS FROM A SCHEDULE C BUSINESS
• NJ STATE TAX PLANNING FOR CAPITAL GAINS
• TAKING ADVANTAGE OF THE 3-YEAR RULE FOR PENSION DISTRIBUTIONS
• CALCULATING TAXABLE IRA DISTRIBUTIONS
• REPORTING INCOME FROM PARTNERSHIPS AND SUB-S CORPORATIONS
• LIMITED PARTNERSHIPS AND THE OTHER RETIREMENT INCOME EXCLUSION
• MAXIMIZING THE DEDUCTION FOR MEDICAL EXPENSES
• CALCULATING THE NJ PROPERTY TAX DEDUCTION
• CALCULATING TAXABLE NEW YORK NON-RESIDENT INCOME
• AMENDING YOUR RETURN
 
It also contains several valuable worksheets and schedules. 
 
As far as I am aware, this is the only book in existence that deals exclusively with tax planning for and preparation of NJ state income taxes.
 
The cost of this valuable resource for NJ taxpayers will be only $9.95 delivered as a pdf email attachment.  A print version sent via postal mail is available for only $15.45.  If you take away just one tax saving idea from this book it will pay for itself many times over.
 
To order send your check or money order payable to TAXES AND ACCOUNTING, INC, and your email or postal address, to –
 
THE JOY OF AVOIDING NJ TAXES
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428

BTW - I have also just "gone to press" with the July issue of ROBERT D FLACH'S 1040 INSIGHTS.  In it I discuss in detail medical deductions and talk about keeping track of investment cost basis, forming an LLC and some tax-related "nevers".    Click here to learn more about this newsletter.
 
TTFN
 
 
 
 
 
 
 
 
 
 

Tuesday, July 4, 2017




HAPPY 4TH OF JULY!
 
Despite the fact that the most ignorant and mentally unstable President in our history is currently in the White House - let us remember on this day of celebration that America is still the greatest county in the world. 
 
We must celebrate what is good about America – not what is bad.  And remember and honor the heroes of America – putting out of our minds for a moment its greatest villain.
 
Tomorrow we must join together and work
to remove this dangerous and despicable idiot from the White House so American can remain the greatest country in the world.
 
 
 
 
 
 
 
 
 
 
 
 

Monday, July 3, 2017

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

Since Tuesday is the holiday the BUZZ comes to you a day early this week.
 
* My THE TAX PROFESSIONAL blog is back!  Check out the first weekly post “A Practice Development Idea”.
 
* Did you know that there were several “State Tax Changes Taking Effect July 1, 2017”?  Well, thanks to the TAX FOUNDATION you do now!
 
* You Can’t Make This Stuff Up.  I show you that reality is truly stranger than fiction in the July “issue” of THE LIBERTY TIMES.
 
 
The Service tells us (highlight is mine) -
 
In her preface to the report, Ms. Olson praises the IRS for running a generally successful filing season, including reducing the incidence of identity theft, implementing new accelerated Form W2 reporting requirements, and matching Forms W2 against tax returns claiming refunds.  But Ms. Olson says taxpayers who require assistance from the IRS are continuing to face significant challenges obtaining it.  She attributes part of the problem to resource constraints, saying that IRS funding has been reduced by nearly 20 percent since fiscal year (FY) 2010, after adjusting for inflation.”
 
The idiots in Congress continue to force unnecessary unrelated social welfare benefit responsibilities on the IRS while at the same time reducing the budget allocation.  And you wonder why I always refer to the members of Congress as idiots.
 
* Speaking of the NTA report, over at DON’T MESS WITH TAXES Kay Bell tells us “Private bill collectors going after lower-earners' tax debts tops National Taxpayer Advocate's list of 13 concerns”.
 
And so it should.  To repeat what I said above, using private collection agencies to collect alleged tax debt is, and has in the past been proven to be, a stupid idea.
 
Kay’s post reports –
 
Olson, during testimony before a House Appropriations Committee subcommittee on May 23, told lawmakers that insufficient analysis of taxpayers' financial situations could result in some owing taxpayers, at the urging of private collection agencies (PCAs), enrolling in installment payment plans they cannot reasonably afford.
 
‘This problem will grow worse when PCAs, driven by the prospect of earning commissions, are allowed not only to place taxpayers into installment agreements (IAs), but also to 'restructure' IAs, all without ever gathering financial information for the IRS to consider,’ said Olson a month ago.
 
She reiterates those concerns in today's report.”
 
With Nina Olsen there is at least one intelligent person in Washington.  Unfortunately she is truly in the minority.
 
* And Kay celebrated the 10th Anniversary of the iphone with “Deducting your cell phone as a business expense.”
 
Her excellent bottom line –
 
Again, as with anything tax, the key to deducting your cell phone as a business expenses is keeping good, complete and accurate records.”
 
* NY State has a new payroll tax to fund “family leave”.  It is employee funded, with a new withholding tax that started July 1.  The State of New York explains everything at “Paid Family Leave: How it Works”.
 
THE FINAL WORD
 
While we find ourselves faced with the worst President in our history, a dangerous and despicable mentally unstable idiot, currently occupying the White House, we must remember this July 4th that America is still, so far, the greatest country in the world.
 
Let us pray that, for the sake of the future of America and the world, nut job loser Trump is removed from office soon, so America can truly be great again.
 
TTFN
 
 
 
 

Friday, June 30, 2017

WHY DO I OPPOSE AND DENOUNCE TRUMP?

Another pause from taxes to answer an important question.
 
Why do I oppose and denounce Trump?  While I do disapprove of most of his current politics, the main reason I oppose and denounce the idiot in the White House has absolutely nothing to do with politics.
 
I oppose and denounce nut job loser Donald J Trump because he is mentally unstable.  He is a sociopath and the textbook example of the ultimate narcissist. 
 
Look up the word "narcissist" I the dictionary and you will find a picture of Trump! 
 
His every thought, word, and action is motivated by an unnatural need to feed his undeservedly enormous ego, and his delusional perception of his intelligence, ability and accomplishments.  He is totally incapable of dealing rationally with criticism and challenges.  He constantly takes personal credit for any positive result, regardless of who or what actually accomplished the result, and refuses to acknowledge or accept responsibility for any negative action or result for which he is at fault.  In his deluded mind he never makes a mistake and he is never wrong. 
 
He has absolutely no concern or respect for anyone or anything other than himself.
 
He is ignorant and uninformed on the issues and refuses to educate himself properly on them.  He has no intelligent or coherent plans or proposals for properly dealing with the issues.  He claims to be smarter than “the generals” and have a definite specific plan to defeat ISIS, but has never revealed this plan.  His alleged tax reform plan consisted of scribblings on a cocktail napkin.  His ignorance and refusal to learn puts America, and the world, in danger on a daily basis. 
 
He chooses members of his Administration not based on relevant experience, knowledge or competence, but on their proof of loyalty and their willingness to “kiss his ring” (or appropriate body part). 
 
He lies constantly to support and feed his narcissism.  I do not believe he has made a single completely truthful statement since throwing his hat in the ring.  He consistently makes statements today that contradict what he has said in the past, not because he has genuinely changed his mind on an issue but because it serves his ego and delusions.
 
Because of his ultimate narcissism he can, and has been, played like a fiddle by enemies like Putin.
 
He is a deplorable and despicable human being.  Almost every personal indiscretion or bad act that has ever derailed any political career in the past he has unapologetically done many times over.  Everything he accuses his opponents and critics of doing or being, whether or not his accusations are true, he has done and is many times over.
 
He puts his personal financial gain above any consideration for the nation or the world.  Throughout his business life he consistently, and again unapologetically, screwed his shareholders, investors, contractors, vendors, employees, and customers while lining his pockets, and now adds the American people to this list.
 
I have a question for those who support this nut job loser – with all we know about him, based on past and current history, why do you not oppose and denounce Trump?
 
TTFN
 
 
 
 
 
 
 
 
 
 
 
 

Wednesday, June 28, 2017

WHAT YOU SHOULD LEARN FROM A RECENT TAX COURT CASE

A recent court case - Lewis, TC Memo 2017-117 – brings attention to the importance of keeping good records of your tax deductions.

Willie Lewis was a minister and an author who occasionally performed weddings, attended meetings, and conducted seminars.  He timely filed a federal return that claimed a deduction for unreimbursed employee business expenses.  The IRS audited the return and disallowed the deductions for the business expenses.

The Tax Court found that Lewis was not engaged in a trade or business for profit under Internal Revenue Code Sec. 162.  So the deductions related to his ministry and book writing activities were limited to the gross income he derived from these activities. However, because Mr. Lewis derived no gross income from the activities, he wasn't entitled to any deductions.

But the more important take away from this decision is the fact that the Court concluded that even if Mr. Lewis were found to have engaged in a trade or business for profit, the claimed deductions, which consisted mostly of automobile and travel-related expenses, would not be allowed because the taxpayer failed to properly substantiate them.  Lewis produced no accounting records, bank statements, invoices, or any other records traditionally associated with a business operating for a profit. He only submitted credit card statements and a summary showing certain expenses.  

As per IRC Sec. 6001 taxpayers are required to substantiate their claimed deductions. In addition, per IRC Sec. 274, additional substantiation is required for -

1. Any traveling expense, including meals and lodging away from home.
2. Any item with respect to an activity in the nature of entertainment, amusement, or recreation.
3. Any expense for gifts.
4. The use of "listed property", such as a passenger automobiles.

The taxpayer must substantiate expenses by adequate records or by sufficient evidence corroborating -

1. the amount of the expense,
2. the time and place of the travel, use of the property, etc.,
3. the business purpose of the expense, and
4. the business relationship to the taxpayer.  

The bottom line – it is vitally important to keep proper contemporaneous documentation of all business-related expenses, whether claimed as employee business expenses on Schedule A or trade or business expenses on Schedule C.

Actually it is vitally important to keep proper contemporaneous documentation for ALL items deducted on your tax return.

TTFN
 
 
 
 
 
 
 
 
 
 
 

Tuesday, June 27, 2017

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

* No surprise here.  Kay Bell gives us the word that “Bill collectors accused of using financially dubious tactics to collect unpaid IRS debts” at DON’T MESS WITH TAXES (highlight is mine) -

During a recent U.S. House hearing, Internal Revenue Service watchdogs told Representatives that, less than two months on the job, private tax bill collectors were already breaking collection and consumer protection rules.”

Kay reports (again, highlights are mine) –

“ . . . Pioneer is, according to the letter, ‘pressuring taxpayers to use financial products that could dramatically increase expenses, or cause them to lose their homes or give up their retirement security’.

In addition to making general suggestions about how to pay their overdue taxes, such as getting a bank loan or cashing in investments, the letter says that one of Pioneer's collection scripts also advises its agents to give taxpayers repayment options that are ‘extraordinarily dangerous for taxpayers' financial security."

I told you this would happen!  Outside collection agencies could care less about the individual taxpayer or about ethical behavior – they are only interested in earning fees by collecting as much money as possible, whether or not it is truly owed, any way they can.  

Forcing the IRS to use outside collection agencies is, and has always been, a stupid idea.  It did not work properly in the past, so why did the idiots in Congress think it would work this time?  Oh well, I guess that is why they are idiots!

* At MARKET WATCH Bill Bischoff asks us to “Take a look at this real-life tax horror story”.

It is indeed a horror story – but the horror could have been avoided.

Bill’s bottom line –

. . . pay attention to details, don’t procrastinate when a tax problem is identified, and consult a competent tax pro to help you resolve the situation unless the problem is a really simple one.”   

Every person who is thinking of starting a business should consult a competent tax pro, and, once the business has been started, immediately give all paperwork related to the business, especially from a state agency, to that tax pro!

FYI – if you are thinking about starting a business you may want to check out my AN INTRODUCTION TO SELF-EMPLOYMENT: THEBASICS OF SCHEDULE C.

* I am going to “go to press” with my THE JOY OF AVOIDING NEW JERSEY TAXES at the end of June.  So you don’t have much time left to take advantage of my “pre-publication” offer (click here).  This offer will only apply to orders postmarked before July 1, 2017.

* Jason Dinesen begins a new post series on "Managing Cash Flow and Working Effectively with Banks" at DINESEN TAX TIMES.  Check out “Part 1”.


THE FINAL WORD

A typical example of nut job loser Trump’s delusional narcissism from an interview with Michael J Fox in the AARP magazine –

This was about an episode of SPIN CITY {late 1990s sitcom – rdf}.  Since it was about New York, you had to have all the New Yorkers in it, right?  He {Trump} came in, did his stuff, did it well – he was pure Trump.  Great.  We enjoyed having him on the show.  But every time I’ve seen him since then, the same thing has happened.  If I walked out that door right now and he happened to be right there, it would happen again.  He’d say, ‘When I was on your show it was the highest rating you ever got!’”

And you know he would not be joking - the buffoon sincerely believes it.

He certainly hasn’t changed.  What an arsehole!

TTFN