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?
* ATP, EA, CPA,
PTIN, RTRP, AFSP. WTF do all these
initials mean? Click here to find out.
The things I would
do differently would be to attempt to avoid actual and potential agita,
aggravation and headaches.
“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.
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.
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”.
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.
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.
“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.”
THE FINAL WORD-
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.
TTFN
