HAPPY LABOR DAY

In honor or Labor Day I thought I would post a reprint of my Labor Day 2007 post discussing job-related deductions (I have used updated 2015 info when applicable).

You may also want to get my “Business Expense Guide” for $2.00 from my Tax Deduction Guides page.

I will, as I usually do, be spending Labor Day laboring on tax “stuff”. 

An employee business expenses is an “ordinary” and “necessary” expense of your job. An “ordinary” expense is one that is common and accepted in your trade or profession and a “necessary” expense is one that is helpful and appropriate. An expense does not have to be required by your employer or law to be necessary.

Deductible expenses include:

* Job related use of your car – but not commuting back and forth to work. You can deduct either a proportionate share of the actual costs of maintaining your car or a “standard mileage allowance”, which for 2015 is 57½ cents per mile.  {54 cents per mile for 2016 - rdf}

* The cost of looking for a job in your present line of work. This includes fees paid to employment agencies and consulting firms for securing a job, preparing a resume or career counseling, the cost of typing, printing and mailing resumes, telephone calls to set up interviews, newspapers and periodicals purchased for employment ads, and round-trip travel or transportation to job interviews, plus lodging and meals (at 50%) if away from home overnight. If you drive you can deduct 57½ cents per mile for 2015. Expenses to look for work in a new trade or field are not deductible; neither are the costs of finding your first job after graduating from school. You do not have to actually get a new job to be able to deduct the expenses.

* The cost of job-related education.  If you use your car to travel to the education you can deduct 57½ cents per mile for 2015 in lieu of actual expenses, plus parking and tolls. You can also deduct registration and travel expenses that relate to attending a job-related annual convention or conference, such as the NJ teacher’s convention usually held each year in Atlantic City or, in my case, the NATP National Conference or the NSTP Annual Convention.

* The cost and cleaning of uniforms and work clothes. To be deductible they must be required as a condition of employment and not adaptable to everyday wear. Items that qualify are uniforms of police officers, firefighters, nurses, transportation workers (air, rail, bus), and professional athletes, special jackets, shirts, ties, etc that feature a company logo (i.e. the gold Century 21 jacket), and special protective clothing such as safety boots, hard hats and work gloves.

* Job-related use of your telephone. This includes the cost of actual local (if identified on the phone bill) and long-distance business phone calls, extra features such as call waiting and call forwarding, and a second phone line in your home used for business. The cost of basic phone service for the primary phone line in your home is not deductible. You can also deduct the cost of a pager and cell phone used for business.  

* Union dues, initiation fees and assessments and dues to professional organizations. You can deduct assessments for benefit payments to unemployed union members but you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits or contributions to a pension fund. You cannot deduct amounts you pay to a union or professional organization that are related to certain lobbying and political activities. The organization will generally report the percentage of dues that are, or are not, deductible.

* Job-related travel and entertainment (see my Business Expense Guide).  

* Small tools and supplies used at work.

Unfortunately job-related expenses, a “miscellaneous” deduction on Schedule A, are deductible only to the extent that your total miscellaneous deductions exceed 2% of your Adjusted Gross Income (AGI). Plus such miscellaneous expenses from Schedule A are not deductible in calculating the dreaded Alternative Minimum Tax (AMT). Excess job-related expenses may actually trigger AMT.

You may want to review IRS Publication 529 (Miscellaneous Deductions).

TTFN

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

I have been at the National Association of Tax Professionals Tax Forum and Expo in Philadelphia – so I have not had much time for web wandering.  I will post on what was discussed at the Tax Forum early next week.

* Kelly Phillips Erb, FORBES.COM’s TaxGirl, gives us a detailed “Small Business Startup and Survival Guide”.

* Taxes do matter.  Kerry Picket at the DAILY CALLER tells us that according to the “IRS: New York Lost Most Tax Paying Residents In 2013”.  Florida is the biggest recipient of the 2013 migration.

Check out who is number 2 on the list of “biggest losers” (highlight is mine) –

“New York lost most of its population in 2013 to Florida — 20,465  residents ($1.35 billion loss), New Jersey — 16,223 residents ($1.1 billion loss), Texas — 10,784 residents ($354 million loss), North Carolina — 9,070 residents ($294 million loss), California — 7,849 residents ($200 million loss).”

New York and New Jersey are consistently among the highest taxes states in the nation.

I left New Jersey for Pennsylvania.  Florida is one of the last places I would ever move to.

* Jason Dinesen continues his series on “Choosing a Business Entity: with “What is Basis?”  

* The TAX FOUNDATION has come up with an interactive tool for “Comparing the 2016 Presidential Tax Reform Proposals”.  See if you can figure out how to use it.

THE LAST WORD –

The issue of the female county clerk who refuses to hand out marriage license applications to same sex couples because she is opposed to same sex marriage on religious grounds is NOT an issue about religious freedom.

The clerk has the right to her opinion – and if her religious beliefs tell her that same-sex marriage is wrong then she should not marry another female.  Just as if her religious beliefs tell her that homosexuality is wrong then she should not engage in homosexual acts.  And if her religious beliefs tell her that abortion is wrong then she should not have an abortion.

She has the right to express her opinion on same-sex marriage – but under the separation of church and state she does NOT have the right to refuse to hand out marriage license applications to same sex couples if that is part of her job description and same-sex marriage is legal in the state. 

If she does not want to facilitate the process of same-sex marriage then she should resign!  If she is fired it will not be because of her religious beliefs – it will not be religious discrimination.  The reason for termination will be because she refused to perform the legal duties of her job.

Under religious freedom she cannot be forced to believe that same-sex marriage is appropriate – but it also means that she cannot force her beliefs and practices on a “non-believer” if those practices are permitted under the law.

Religious beliefs are personal.  Individuals have the right to choose their religious beliefs and the beliefs should be respected.  But one person’s, or group’s, religious beliefs should not, and cannot, be forced on another person.

Individual religious beliefs should not be legislated.  The concept of separation of church and state means that one has the freedom of choice of religion, and no law can stop a person from worshiping as he/she pleases.  But it also means that any one religion cannot force its beliefs on other individuals.  

TTFN

AICPA CONTINUES TO PROMOTE THE URBAN TAX MYTH

Fellow tax blogger Jason Dinesen, of DINESEN TAX TIMES, whose posts I reference often in the BUZZ, brought my attention to “AICPA Lays the Smackdown on Dear Abby” by Greg Kyte at GOING CONCERN.

The piece concerns a letter submitted to and published by “Dear Abby” as “Couple Deep in Tax Hole Need Helpin Climbing Out”.

Here is the text of the letter –

“DEAR ABBY: I have just learned that my sister's husband of 35 years (I'll call him George) hasn't filed their personal income taxes going back a number of years. This has caused a lot of stress and anxiety for my sister, who recently underwent breast cancer treatment. Apparently, he hasn't filed because of his inability to organize. (His family has denial issues.)

Their professional tax preparer has met with both of them and tried to work out a step-by-step program, but George consistently fails to meet the deadlines. I love my sister and want to be as supportive as possible, but I'm unsure what I can do. I have advised her to seek therapy. She has copies of business-related documents relating to the unfiled tax periods, but not enough information to file on her own.

On top of everything else, she has several relationship issues with her children that are causing her grief. What else can I do? -- HELPLESS BIG BROTHER”

And here is “Abby’s” response –

“DEAR BROTHER: Failure to file one's taxes is a federal crime that could land your brother-in-law and sister in the slammer. That's why you should urge your sister to do something she should have done years ago -- take over the family finances.

She and her husband may need more help than their CPA has been able to give them. A group that I have mentioned in my column before is the National Association of Enrolled Agents (NAEA). These are tax specialists -- some of whom are attorneys and CPAs -- who are specifically licensed by the Department of the Treasury. Tell your sister to contact an enrolled agent by visiting www.naea.org TODAY.”

My initial reaction -

(1)  The letter from Big Brother mentions a “professional tax preparer”, but I do not see any indication that this person is a CPA.  So Abby’s reference to “their CPA” in her response is odd. 

(2)  Abby is right to recommend an Enrolled Agent to any person who has tax troubles.  Enrolled Agents are indeed “tax specialists” who have proven competence and currency in 1040 taxation by passing a difficult test and maintaining annual required CPE (continuing professional education) in taxation.

(3)  The “professional tax preparer” – who may be a CPA, or an EA, or “unenrolled” – has done his/her job – trying to implement a detailed solution.  However no tax professional – EA, CPA or “unenrolled” - can force a client to act properly.

(4)  Abby’s advice to “take over the family finances” is a good one.  But the advice I would provide as a tax professional is that the wife should file separate tax returns for the unfiled years to at least cover her arse.  If the husband insists on being an idiot, and she cannot do anything about it, at least she has complied with the law and cannot be penalized.

The issue in the GOING CONCERN post concerns a letter sent to “Abby” in response to her advice to Helpless Big Brother from AICPA Tax Executive Committee Troy K Lewis –

“DEAR ABBY: As chairman of the American Institute of CPAs' Tax Executive Committee, may I offer some clarification to you and your readers about your answer in your July 13 column titled, "Couple Deep in Tax Hole Need Help in Climbing Out".

 

In fact, THREE groups of tax preparers have unlimited practice rights under Department of the Treasury regulations to represent their clients on any matters before the IRS -- certified public accountants, attorneys and enrolled agents.

None are more qualified than CPAs. CPAs are licensed by state regulators and must meet minimum education requirements to sit for their national licensing exam and then fulfill ongoing continuing education requirements, as well as abide by a code of professional ethics. Attorneys have a generally similar system.

Enrolled agents are often former IRS employees who are licensed by the IRS after passing an exam. Enrolled agents are competent and respected tax professionals, but the fact they are licensed by the IRS does not mean they are better qualified or superior in serving clients than are CPAs or attorneys.

IRS.gov has a page explaining the different types of tax return preparers and their qualifications, which may be helpful to your readers. -- TROY K. LEWIS, CPA”

Lewis is correct when he says “THREE groups of tax preparers have unlimited practice rights under Department of the Treasury regulations to represent their clients on any matters before the IRS -- certified public accountants, attorneys and enrolled agents.”  But that is not the issue here.

His statement “None are more qualified than CPAs” is an out and out lie.  There is absolutely nothing about possessing the initials CPA that in any way, shape, or form guarantees that the possessor knows his or her arse from a hole in the ground when it comes to 1040 preparation.    

It is true that “CPAs are licensed by state regulators and must meet minimum education requirements to sit for their national licensing exam and then fulfill ongoing continuing education requirements, as well as abide by a code of professional ethics.”  But their education requirements, national licensing exam, and ongoing continuing education requirements are in the area of accounting and auditing – and not taxation.  The education may include a basic course in federal taxation, and the national licensing exam may have a couple of questions on 1040 taxation.  But CPAs have absolutely no requirement to take even 1 CPE credit in taxation.

Of the three groups with “unlimited practice rights under Department of the Treasury regulations to represent their clients on any matters before the IRS” only Enrolled Agents have been tested and are required to take minimum annual CPE exclusively in federal taxation.

A specific CPA may indeed be a 1040 tax expert – and many are - but it is only because of the specific education, training, and experience of that individual and not because he/she has been granted the initials CPA.

The AICPA believes that they “own” tax return preparation, and publicly admit this, and continue to fight against more qualified tax professionals that threaten this assumed “ownership”.

And, to further respond to Mr Lewis’s misinformation, as Jason has correctly pointed out to me (highlight is mine) -

“The ‘former IRS employees’ thing is simply false. There are a few EAs who became EAs after working for the IRS, but it’s a small number.

I don’t know what the statistics are or how one would even find the statistics, but I feel confident in saying that the vast majority of EAs are NOT former IRS employees. In fact, of all the EAs I know, I can think of only 1 who became an EA after working for the IRS.

The rest of us are people who have passed the tests.”

 Unfortunately “Abby” gave in and replied –

“It was not my intention to imply that CPAs are less qualified than enrolled agents – and if I created that impression, I sincerely apologize.”

But “Abby”, and Mr Lewis, Enrolled Agents are indeed more qualified than CPAs when it comes to 1040 preparation and representation issues!

TTFN

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

I am off to the National Association of Tax Professional’s Tax Forum and Expo in Philadelphia. 

The Forum is being held at the Marriott, but I am saving $20+ per night by staying across the street at the Loews (a hotel of equal quality).  Moral of the story – the conference or group rate is not always the best rate (even at the same hotel – another registrant found that the AAA rate at the Marriott was cheaper than the group rate).  Check out other options – do not automatically book at the conference hotel using the conference rate.

I will post anything of value discussed at the Forum education sessions here at TWTP.

* The Tax Foundation’s TAX POLICY BLOG tells us “Here’s How Much Taxes on the Rich Rose in 2013”

“For American taxpayers making under $500,000, income tax rates stayed almost exactly the same between 2012 and 2013. For instance, in both 2012 and 2013, the typical household making between $50,000 and $100,000 paid 8.7 percent of its total earnings in income taxes.

But for households making over $500,000, taxes rose dramatically in 2013. Americans making between $1 million and $2 million saw their effective income tax rates rise from 24.2 percent to 28.6 percent between 2013 and 2014; on average, these taxpayers paid $53,050 more in taxes.

For the highest-income taxpayers, rates spiked by even greater amounts. Taxpayers with over $10 million of income saw their average rates rise from 19.8 percent to 26.1 percent, equivalent to an average tax hike of $1.52 million.”

The Foundation suggests two reasons why the increase in tax on the wealthy – both of which boil down to the front and back door increases in the tax rates of those considered to be wealthy.

“The fiscal cliff tax deal created a new 39.6 percent income tax bracket, raised the top rate on capital gains to 20 percent, and imposed a limitation on itemized deductions for high income Americans.” 

In other words – the Tax Code further punished Americans for entrepreneurship, ambition, and investment.

* Jason Dinesen makes a good point in “Due Date of Iowa Partnership and Corporate Tax Returns Unchanged” at DINESEN TAX TIMES.

While the federal deadline for filing certain business tax returns has been changed (for the better), this does not automatically mean that the state filing deadlines for these forms has also changed.

As Jason points out –

“The due dates for partnership and corporate federal tax returns is changing starting with 2016 filings (so for tax season 2017), but the due dates for the corresponding Iowa tax returns will not change.”

Federal and state filing deadlines are not always the same.

* TAX BUZZ tells us “IRS Ramps Up Action on Classification of Employees as ‘Independent Contractor’ or Employee” –

“According to the IRS, an estimated 80% of workers are classified as ‘independent contractors’ when they are in fact employees. While I am sure many accountants, lawyers and small business owners would argue with this estimate, the IRS and Department of Labor are building up their enforcement by adding new auditors focused specifically on targeting these misclassifications.”

The item includes the “20-factor control test the IRS uses when questioning a job classification”.

While IRS audits in general have, and will continue to, drop due to budget cuts, it appears that job classification audits will be on the increase.  It is important to be sure you are properly classifying workers in your business.

* There has been much talk in the tax “blogoshphere” lately about “Cadillac Tax” – a component of Obamacare that charges a 40% excise tax on high cost employer-sponsored health coverage.  At FORBES.COM Robert Book takes on the daunting task of “Decrypting The ‘Cadillac Tax' (Part 1)”.   

Robert’s bottom line is “This is quite odd”.

Like much of Obamacare (aka The Affordable Care Act), as it was hastily and poorly written, this does not make sense.  Luckily the “Cadillac Tax” does not take effect until 2018, and I expect it will probably be done away with before then.

* Actually, Kay Bell tells us “Cadillac Tax Repeal on Senate's Post-Recess To-Do List” at DON’T MESS WITH TAXES.

Kay tells us – “Everyone hates the tax”.

THE LAST WORD –

BUSINESS INSIDER tells us “Voters Described Presidential Candidates with One Word — and the Results were Brutal”.

A recent Quinnipiac poll asked respondents to name "the first word that comes to mind" with three of the leading 2016 presidential candidates – Clinton, Bush, and Trump.

What did those polled have to say about tonsorially-challenged idiot Tronald Dump?

“But Trump, the real-estate mogul who was the third candidate tested by Quinnipiac, drew by far the most colorful expressions. The most used word, ‘arrogant’, was deployed just 58 times, followed by "’blowhard’ (38), ‘idiot’ (35), ‘businessman’ (34), and ‘clown’ (34).

Further down on the list were insults including ‘crazy’ (26), ‘a—hole’ (18), ‘joke’ (16), and ‘egomaniac’ (13), among others.”

All good words to describe the fool – except “businessman” is being kind (although it does not tell what kind of businessman).  I think “egomaniac” is the best description.

TTFN

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

It’s about time – a meaty BUZZ!

* The DFBs!  VOX.COM reports “H&R Block Snuck Language Into a Senate Bill to Make Taxes More Confusing for Poor People” -

“At the company's instigation, the Senate Appropriations Committee has passed a funding bill covering the IRS whose accompanying report instructs the agency to at least quadruple the length of the form that taxpayers fill out to get the Earned Income Tax Credit.”

Of course, IMHO the Earned Income Tax Credit does not belong on the 1040. 

 

And, also IMHO, nobody should ever use Henry and Richard to prepare their tax returns.

* TaxGirl Kelly Phillips Erb does a good service when she explains “As Stocks Tumble, Understanding When A Loss Isn't Really A Loss” at FORBES.COM.

Over the years, when the stock market “corrects”, clients and friends have told me things like “I lost $100,000 today!”.  But did they really?  If the value of their portfolio was $500,000 before a correction, and is $400,000 after the correction, but they actually paid $300,000 to purchase the stock in their portfolio, or contributed $300,000 to the pension plan, they have not lost a penny.  They are still ahead $100,000!

* Attention Tax Professionals - here is a great tool for use in your practice.  Click here for more information.    

 

* Tax Guy Bill Bischoff from MARKET WATCH tells us “Inherited a Retirement Account? Don’t Ignore This Tax-Smart Option”.    

* Jason Dinesen asks, and answers, the question “Does a Sole Proprietorship Need a Balance Sheet?” at DINESEN TAX TIMES.

Jason thinks not.  While I agree that it is not required, I do believe it “couldn’t hurt” and is actually a good practice.  See my comment to Jason’s post.

* And Jason lists “Things a Business Owner Needs to Know Before Hiring Employees”.

I certainly agree with Jason when he advises small business owners to “know what you’re getting into before you hire employees”.

* Ellen Chang provides some suggestions on “How to Catch Up on Retirement Savings” at THE STREET.

* Bill Perez answers the question “What to Do if You Contributed Too Much to Your Roth IRA” at ABOUT.COM -

“Sometimes, people contribute too much savings to their Roth IRA. There are four ways to fix this problem that are all pretty straightforward. Just pick the solution that works best for your goals.”

* Bill’s colleague at ABOUT.COM Dr. Jean Murray beings us “The Naked Truth about Being Self-Employed”.

I am self-employed.  I work out of a home office.  And I often work at my desk naked!

* The TURBO TAX blog celebrated Thursday with “Happy National Dog Day! How Finding Your New Best Friend Can Save You Money”.

I discussed in detail the tax deduction for fostering a service dog in my 2009 post “Doggie Deductions”.

FYI, National Cat Day is Thursday, October 29.

* After a bit of a hiatus we welcome Trish McIntire of OUR TAXING TIMES back to posting. 

She brings us “Back to School”, which provides a good list of what records you should keep to document education expenses for the variety of education tax benefits, and tells us about the “Kansas Tax Amnesty 2015”.

Welcome back to Trish!

* The BOTZ, DEAL & COMPANY, P.C. blog has some good advice on how to “Protect Elderly Parents Against Fraud”.

* I’m glad I got out when I did!  NJ.COM gives us the word that “Jersey City Among Worst Places in America to Retire: Report” –

“Finance website WalletHub's recent survey of the 150 largest cities in the U.S. found Jersey City and Newark to be the two worst cities to retire in America.  The report took into consideration each city's affordability, the availability of senior activities, quality of life (including crime rates and weather) and healthcare.

Coming in at No. 149 overall, Jersey City barely edged out Newark by ranking 141st in affordability, 140th in activities, 108th in quality of life and 149th in healthcare.”

THE LAST WORD –

In an unscientific test of morals, Honest Tea went to the 27 largest cities across the country and set up stands, selling tea for $1. People were supposed to put a dollar in a box and take a bottle of tea, all on an honor system.

Atlanta was the most honest city – with 100% of those taking a bottle paying the $1.00.

Guess which city was the only one where people actually took money from the box.  Washington DC!  No surprise here. 

DC was not, however, the least honest city.  That distinction goes to Providence, Rhode Island.

Honest Tea had done the same experiment in 2013 – and then Washington was the least honest.  One poor soul in DC had his bike stolen while he stopped to take a bottle (and put in a dollar).

Perhaps Washington DC would have done better if the experiment had been conducted when Congress was in recess.

TTFN

WHAT DEDUCTIONS WOULD YOU KEEP?

My fellow tax blogger Kelly Phillips Erb – FORBES.COM’s TaxGirl, has a regular feature called “Fix the Tax Code Friday”.  She poses a tax question that concerns a problem with the current mucking fess that is out Tax Code and calls for comments from her readers.

A recent question was -

“If we scrapped all of the deductions under the Tax Code except one, which one would you want to hold onto?”

My answer -

I would keep many of the current deductions, although none of the current credits (FYI – click here for my series of TWTP posts on how I would rewrite the Tax Code).  Specifically I support keeping the deduction for state and local income taxes, and real estate taxes and “acquisition debt” mortgage interest on a principal personal residence (owner-occupied housing).  But my reason is not to encourage home ownership. 

Here is how I explained my reasoning in a post at THE WANDERING TAX PRO back in 2013 -

The Internal Revenue Code taxes Americans based on income measured in pure dollars. However it is a fact that the “value” of one’s level of income differs, sometimes greatly, based on one’s geographical location. A family living in the northeast or California that has an income of $100,000-200,000 (apparently considered “upper-income taxpayers”) may be just getting by, while a similar family that resides in “middle America” lives like royalty on the same level of income. Many components of the Tax Code are indexed for inflation, but nothing is indexed for geography. To be honest I have no idea how one would even begin to index for geography.

It costs an awful lot to live in, for example, New York, certainly New Jersey, Connecticut, Massachusetts, and California. State and local income and property taxes are the highest in the country. The cost of real estate is also excessively high. As a result one must earn a lot more money to be able to live in these states – and salaries are arbitrarily increased to reflect the increased cost of living. Yet $150,000 in income is taxed by the federal government at the same rate in New York City as it is in Hope, Arkansas.

Real estate and state and local income taxes and the cost of a home, and therefore also the amount of “acquisition debt” mortgage interest paid on a residence, are higher in the Northeast, and California. Since we pay taxes on “net income” after deductions, allowing an itemized deduction for these items would help to somewhat geographically “equalize” the tax burden.

I do believe that the itemized deduction for real estate taxes and mortgage interest on secondary personal residences and the itemized deduction for “home equity” mortgage interest (not used for “substantial” home improvement) should be eliminated.

I have two questions for my readers (especially the tax professionals)  –

First – how would you answer Kelly’s “Fix the Tax Code Friday” question?

And second – what do you think about my suggestion, and the issue of “geographical equalization” in general?

TTFN

TRY TO REMEMBER . . .

The summer is almost over – and year-end tax planning time will soon be here.

Just thought I would provide some 1040-related reminders –

MORTGAGE INTEREST

Basically there are two types of mortgage debt –

1) Acquisition debt - debt acquired after October 13, 1987, that was used to buy, build, or substantially improve a main residence or a qualified second home. A “substantial improvement” is one that adds value to the home, prolongs the home’s useful life, or adapts the home to new uses.  And

2) Home equity debt – debt acquired after October 13, 1987, that is secured by a main residence or a qualified second home that is not used to buy, build, or substantially improve the property.  There is no restriction or limitation on what the money can be used for; you can use it to buy a car, to pay for college, or to pay down credit card balances. 

You can deduct interest on acquisition debt principal of up to $1 Million.  But you can only deduct interest on home equity debt principal of up to $100,000.  When you refinance a mortgage, or consolidate mortgage debts, any closing costs that are added to the principal of the loan are considered to be home equity debt.

It is very important that you keep good records of their separate acquisition debt and home equity debt so that the correct amount of mortgage interest is claimed on Schedule A. 

ALTERNATIVE MINIMUM TAX

Speaking of home equity interest - in calculating the dreaded Alternative Minimum Tax (AMT) only interest on acquisition debt – mortgage loan proceeds used to buy, build, or substantially improve a primary and one secondary residence - is deductible.  Interest on home equity debt is not deductible. 

It is very important that you keep good records of their separate acquisition debt and home equity debt so that the correct amount of mortgage interest is claimed on Form 6251. 

{FYI - my “Mortgage Interest Guide” - available from my DOLLAR STORE - includes worksheets, with complete instructions and detailed examples, for keeping track of acquisition debt and home equity debt.}

ADDITIONAL STATE TAX DEDUCTION

You can deduct mandatory employee contributions to a state unemployment (SUI), disability (SDI), and/or family leave fund (FLI) which are withheld from your paycheck, as is the practice in Alaska, California, New Jersey, New York, Pennsylvania, Rhode Island, and Washington, as state income tax on Schedule A. 

The amount of the withholding is usually reported on your W-2 in Box 14.  If not you can find the amount on your year-end cumulative paystub.

I deduct these withholdings as “other tax” on Line 8 of Schedule A to separately identify them.

If you elect to deduct state and local sales tax instead of state and local income tax you cannot deduct these withholdings.

CHARITABLE CONTRIBUTIONS

If the total amount donated to a church or charity is more than $250.00 you must have a “contemporaneous” written acknowledgement from the organization with its name and address, the date of the contribution, and the amount donated.   

To be able to claim a deduction for the full amount of your contribution the acknowledgement must state “No goods or services were provided in exchange for the donation”.  It is very important that this statement is included on your receipt or acknowledgement.  And the receipt or acknowledgement must be received from the church or charity before the earlier of the date the original tax return is filed or the extended due date of the tax return.

{FYI – my DOLLAR STORE also has a “Charitable Contributions Guide” with worksheets.  Order any 2 guides from the Dollar Store by September 15^th and receive “Surfing USA” free!}

BUSINESS TRAVEL

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 individual 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 tolls for business trips on the monthly statement.

I use a pocket date book as my travel log.  I also enter in my travel log the quarter I put in the parking meter while visiting a client.

{You guessed it – the DOLLAR STORE also has a “Business Expense Guide”.}

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’ – SPECIAL MONDAY EDITION

Since there was no BUZZ installment last Friday I am a day early this week.  Still not much BUZZ to report.

* Tax pros – have you seen the new post at THE TAX PROFESSIONAL yet?  PLEASE do – and tell your colleagues about it.  

* And, tax pros, here is a great tool for use in your practice.  Click here for more information.    

* Have you ever wondered “Why is Self-Employment Tax Based on 92.35% of Self-Employment Income?”  Jason Dinesen explains at DINESEN TAX TIMES.  

* Check out the AFFORDABLE COLLEGES ONLINE online "Guide to College Savings and 529 Plans".

Doug Jones from the site tells us –

“Only about 48 percent of parents are saving to pay for their children's tuition, but we believe that number can (and should) increase significantly. With the help of two leading college savings experts, we created this guide to help parents and students better understand 529 plans and other college savings strategies. Key elements of the guide include:

 - An in-depth look at what 529 plans are and how they work,

 - An extensive comparison of 529 and other savings plans,

 - A list of savings tips and tricks from the experts.”

* Here is the word on the Homestead Benefit (formerly the Homestead Rebate) from the New Jersey Division of Taxation -

“The Division of Taxation has begun mailing applications for the 2013 Homestead Benefit.  Applications are being mailed to homeowners over the next three weeks according to the schedule below. The deadline for filing is Friday, Oct. 30, 2015.

The Homestead Benefit application delivery dates by county are:

Gloucester, Mercer, Middlesex, Passaic - Aug. 25

Camden, Hudson, Hunterdon, Salem, Somerset - Aug. 28

Bergen, Burlington, Cumberland, Warren - Aug. 31

Morris, Ocean - Sept. 3

Atlantic, Essex, Monmouth, Sussex - Sept. 5

Cape May, Union - Sept. 9

Most homeowners will receive their 2013 benefit payment as a credit on a future property tax bill. They can expect to receive a property tax bill or advice copy from their tax collector reflecting the amount of the benefit.  Homeowners who indicated when filing that they no longer own the property or those whose principal residence was a unit in a co-op or continuing care retirement community will receive their benefit by check (or direct deposit).”

THE LAST WORD -

The circus that is the Trump Presidential campaign reminds me of a number from the musical CHICAGO – “Give em the Old Razzle Dazzle”.

Billy Flynn tells Roxie Hart –

“It's all a circus, kid. A three ring circus.  These trials- the whole world- all show business.”

In the song that follows Billy goes on to say –

“What if your hinges all are rusting?  What if, in fact, you're just disgusting?  Razzle dazzle 'em and they'll never catch wise!”

And –

“Long as you keep 'em way off balance, how can they spot you've got no talents?  Razzle Dazzle 'em.”

Disgusting.  No talents.  That sounds like Trump to me.

TTFN

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

A day late – but not necessarily a dollar short.   

* There is still time to take my TAX PROFESSIONAL SURVEY at THE TAX PROFESIONAL.  A new post will be up later this morning.

* How would you answer Kelly Phillips Erb’s (aka FORBES.COM’s TaxGirl) “Fix the Tax Code Friday” question from last week -

“If we scrapped all of the deductions under the Tax Code except one, which one would you want to hold onto?”

Actually this question will serve as the basis for my new post at THE TAX PROFESSIONAL.

* Want to know “How High Are Property Taxes in Your State?”  Check out the map from the TAX FOUNDATION.

It is no surprise to anyone who lives, or lived, in the “Garden State” that it is #1 on the list.  “New Jersey has the highest effective rate at 2.38%”.  NJ is “followed closely by Illinois (2.32%), New Hampshire (2.15%), and Connecticut (1.98%)”.   

The item also points out that New Jersey “impose{s} high property taxes alongside high rates in the other major tax categories.”

“Hawaii has the lowest effective rate at 0.28%, and is followed closely by Alabama (0.43%), Louisiana (0.51%), and Delaware (0.55%).”

My new home state of Pennsylvania is #13 on the list.

* Oi vey!  An “Extra 220,000 Hit by IRS ‘Get Transcript Breach’” Daniel Hood from ACCOUNTING TODAY tells us.

* THUMBTACK has released the results of its “2015 Small Business Friendliness Survey” – a report card on such components as –

§  Overall friendliness

§  Ease of starting a business

§  Ease of hiring

§  Regulations

§  Health & safety

§  Employment, labor & hiring

§  Tax code

§  Licensing

§  Environmental

§  Zoning

How did your state do?

* Can you get a “Tax Deduction with No Cash Outlay?”  Barbara Weltman says yes at BARBARA’S BLOG.  She explains –

“But under a special rule called domestic production activities deduction (DPAD), you can deduct 9% of your qualified domestic production activities income (after taking into account certain allocable costs).

This write-off is also called the Sec. 199 deduction and it’s on top of deductions you’ve already taken to generate the income. In effect, you get to double dip in tax breaks.”

* Let me leave you with “10 Facts You Need to Know About Required Minimum Distributions” from Sarah Brenner at THE SLOTT REPORT.

TTFN