TAX REFORM – DOING AWAY WITH DEDUCTIONS AND LOOPHOLES

One of the skimpy details of idiot Trump’s tax “plan” is to offset lower rates with the removal of tax deductions and “loopholes”.

 

This is a very sound concept that should be embraced in whatever the eventual tax reform package will actually look like.

 

I have always strongly felt, and continue to do so, that the tax return should not be used to distribute government social welfare and other program benefits.  So I believe that items like the Earned Income Credit, the Additional Child Tax Credit, the Advance Premium Credit, the various education tax benefits, and other similar “tax expenditures”, while the idea behind them may be appropriate and acceptable, should be removed from the Tax Code.  These benefits should be distributed in other ways.

 

Here are some of the deductions whose removal from the tax return I would support.

 

ü  Real estate tax deduction for all personal real estate other than the primary principal residence.

 

ü  Personal property tax deduction.

 

ü  State and local sales tax deduction.

 

ü  Acquisition debt mortgage interest deduction for a second personal residence.

 

ü  Home-equity debt mortgage interest deduction – the deduction for interest on home equity borrowing not used to buy, build, or substantially improve a taxpayer’s principal primary residence.

 

ü  Deduction of mortgage insurance premiums as mortgage interest (already gone).

 

ü  Depreciation deduction for real estate and capital improvements thereto.

 

ü  Depreciation deduction for business use of a personal automobile.

 

ü  Auto loan interest deduction for business use of a personal automobile.

 

ü  Auto lease payment deduction for business use of a personal automobile.

 

ü  The adjustment to income for Educator Expenses (why should teachers only be given this benefit and not other public service employees like police, fire, EMTs, stc?).

 

I discuss the reasoning for my choices in detail in A TAX PROFESSIONAL FOR TAX REFORM.

 

What deductions would you keep and what deductions would you remove?

 

TTFN

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

* Most of the recent BUZZ about taxes revolved around the skimpy details of the tax “plan” proposed by the idiot in the White House, and announced by Treasury Secretary Munchkin (apologies to Mnuchin; I realize this is juvenile, but whenever I see his name in print that is all I think of).

I provided my initial reaction to what information was released in the post “My More Than 2 Cents Worth”.

As I said at the end of my post –

“ . . . do you find it a coincidence that the largest tax breaks in the skimpy details released would benefit idiot Trump and his family ‘bigly’?”

I do like what Tony Nitti had to say about the “plan” in “Devoid Of Details, Trump's Latest Tax Plan Nothing But Empty Promises” at FORBES.COM, calling it -

“ . . . a rushed, half-hearted gesture meant merely to meet his minimum obligations.”

NY Times columnist Paul Krugman gets to the heart of the matter and explains the real story behind the release of the tax “plan” in “Living in the Trump zone” -

“No, what we’re looking at here isn’t policy; it’s pieces of paper whose goal is to soothe the big man’s temper tantrums.”

I certainly welcome and encourage substantive tax reform (click here).  But I do not take anything idiot Trump says seriously, and I will wait until an actual bill, with actual specific details, including how cuts will be offset, is presented by the real Republicans before engaging in any further discussion of the issue. 

Before we leave this topic – check out my comment on the post “6 things to learn from the Trump tax plan proposal” at BANKRATE.COM.

* Fellow tax blogger Russ Fox of TAXABLE TALK has borrowed my title to present his own version of “That Was the Tax Season that Was”.

It seems we both had less GDEs this year than in the past. 

I agree with Russ on the following statements from his post (highlight is mine)–

·   “The new law mandating interviews with taxpayers claiming the Earned Income Credit, the Child Tax Credit, and the American Opportunity Credit is annoying for tax professionals and will only stop the lowest of low hanging fruit of tax cheats. Most tax professionals know their clients, and simply aren’t committing tax fraud.”

·   “Tax software is great in automating the mundane but not so great in thinking for you.” (although I cannot confirm that tax software is great at doing anything – and would use the word horrible at doing your thinking for you).

·   “We need tax reform, and soon. The Tax Code is far, far too complex.”

·   “If you’re using a tax professional to prepare your returns, he almost certainly has also set a deadline for receiving paperwork prior to the October 16th extension deadline. You should pay attention to that, and get your paperwork in to your professional timely.”  (my deadline was March 18^th this season – and all returns received, with all the needed information, by March 18^th were completed in time for an April 18^th filing).

* I feel Jason Dinesen’s pain expressed in his tax season in review post titled “My Tax Season Recap: Business is Booming, But I’m Starting to Hate this Crap” at DINESEN TAX TIMES.

Jason is correct that “Being a Perfectionist is Not an Asset in this Field”.  I, too, have sleep interruption issues during the season – but not worrying about what I may have done wrong.  My mind is often so involved with what has to be done on certain returns that are or will soon be “on the table” that I cannot fall back to sleep, and sometime find myself getting up to work after only 4 or 5 hours of actual sleep.  And I find that beginning at the end of February I am doing tax returns in my sleep!

Fortunately my practice is different from Jason’s, and that of most other tax preparers.  I have not accepted new clients for several years, so I have history of varying lengths with all my clients.  Many have been with me, and my mentor before me, for decades, and I now do several generations of a family.  A substantial % of my 1040 clients are, or have become, actual personal friends.

I work alone out of my home 50-100 miles from my clients.  Only a handful of true long-timers are permitted to actually make the trip up to NE PA to see me – and then I never do the return while they wait.  I receive, and return, most of the returns I do via the mail.  On many days I forget to turn the phone on (it is always off on Wednesdays) – and when it is on the answering machine often is not, and I only answer the phone when it suits me (I have caller id so I know who is calling – and never answer “cold” if it is an unknown or unidentified caller).

I don’t “hate” the business yet – although I will admit I do not cherish it as much as I did when I worked with my mentor.

Jason ends the post by telling us his wife has recommended that he “disappear for a while” after April 18^th.  I have been doing that at season-end – going to the Jersey shore for several days to recover – since almost the very beginning (there was a time, when my uncle was alive, that I boarded a cruise ship and crossed the Atlantic after the season was over to recover).

* Staying with Jason, we learn that he agrees with me that Quickbooks is the best bookkeeping software (although, to be fair, I have not tried any other software) in “Bookkeeping Software is Deceptively Simple”.

However, Jason tells us -

“Here’s the problem with Quickbooks, or any other software solution for bookkeeping: it’s deceptively simple.”

Why is that a problem?

“The problem is, the simplicity is deceptive. It’s easy to enter transactions, but it’s also easy to enter things the wrong way, thus creating trainwrecks that people such as I have to fix.”

In answering the question “Should I Keep My Own Books” Jason explains –

“. . . when you’re keeping the books yourself, know your limitations and when to stop and ask for help.

Because again, Quickbooks will accept whatever you put into it, and it’s not going to tell you if you’re doing something wrong.”

As with any software program – garbage in, garbage out.  This is just as true for bookkeeping software as it is for tax preparation software.  If you don’t understand bookkeeping and accounting and payroll you should not be doing your own books, and if you are not familiar with the intricacies of the mucking fess that is out Tax Code you should not be using DIY software to prepare your tax returns.

I “keep the books” (make all software entries) for my few remaining business clients using Quickbooks, with one exception (the client attended the official Quickbooks training class with me – and he knows to ask me if he is not sure about an entry), just so I do not have to fix any “trainwrecks” after the fact. 

* “Having a Garage Sale or Yard Sale? What to Do First” is explained by Jean Murray at THE BALANCE.

Jean explains –

“Several issues are involved with the "business" of holding a garage sale:

1. Local permits and licenses for garage sales or yard sales

2. Income taxes on the profits from the sale, and

3. Sales taxes on the cost of the items sold.

Before you decide to have that garage sale or yard sale, consider these local, state, and federal laws, taxes, and permits.”

* Have you checked out the May 2017 “issue” of THE LIBERTY TIMES yet?

* Good news from Kay Bell in “Lewis aims to end latest private tax debt collection effort” at DON’T MESS WITH TAXES.

Kay quotes Lewis as correctly saying (highlights are mine) -

"For the record, I want to be crystal clear — in today's world, private debt collection will only make a bad situation much worse.  We have been down this road before. It has been tried and tried again. Each and every single time, private debt collection fails. It creates confusion and wastes taxpayer dollars. Most importantly, the program does not help or serve the American people."

Using private collection agencies is wrong for many reasons.  Let us hope that H.R. 2171 - "Protection of Taxpayers from Abusive Tax Collection Practices" – is passed by Congress. 

* I wholeheartedly agree with the advice of Peter J Reilly at FORBES.COM - “You Should Just Hang Up On IRS Collection Calls Legitimate Or Not”.

I have always opposed the erroneous practice of the IRS, and state tax agencies, using private collection agencies for alleged tax debt.  You should refuse to deal with an outside agency – and deal only directly with IRS or state agency.

TTFN

 

NEWSLETTERS – NEW AND ONGOING – ONLINE AND SUBSCRIPTION

Two newsletter issues written by me are available today.

First the new/subscription one – ROBERT D FLACH’S 1040 INSIGHTS.

This new newsletter, published 5 times a year - May, July, September, November, and January - will share in detail my insights on tax deductions, credits, strategies, and issues based on my 45 years in “the business”.

A one-year subscription to ROBERT D FLACH'S 1040 INSIGHTS is only $11.95 delivered as a pdf email attachment.  A print edition sent via postal mail is available for only $17.95.  One tip from an issue could return the cost of a subscription many times over.

This newsletter is not written for the “wealthy” – but for the average middle to upper-middle class taxpayer.

The first issue – May 2017 – discusses in detail everything you need to know about deducting charitable contributions and taking a tax deductible vacation, and explains how long to keep tax records and when to contact your tax professional.

I will send you a sample copy of the May 2017 issue for only $1.00 - $2.00 for the print edition.  If after reading the issue you decide to subscribe we will apply the $1.00 or $2.00 to the cost – so you pay only $10.95 or $15.95.

Send your check or money order payable to TAXES AND ACCOUNTING, INC, and your email or postal address, to –

ROBERT D FLACH’S 1040 INSIGHTS

TAXES AND ACCOUNTING, INC

POST OFFICE BOX A

HAWLEY PA 18428

And now the ongoing/online one – THE LIBERTY TIMES.

The May installment discusses the hot topic of the day – tax reform.

And the Online Digest continues to provide links to more reasons why dangerous, despicable, and deplorable Tronald Dump must be removed from office.

Enjoy!

TTFN

 

 

 

 

 

 

 

 

 

 

 

A BETTER WAY

Perhaps the greatest source of tax fraud, and tax return error, is the result of the erroneous policy of distributing government welfare and other social program benefits via the Form 1040 (or 1040A), especially when this takes the form of a refundable tax credit – the Earned Income Tax Credit, the Additional Child Tax Credit, and the American Opportunity Credit.

 

Obviously the best solution to the problem of tax fraud and error in this situation is to remove the distribution of government benefits, and all refundable credits, from the Tax Code. 

 

But if Congress insists on continuing this erroneous practice I have an alternative to forcing paid tax preparers to act as Social Workers and verify that clients qualify for these government program benefit payments via excessive additional “due diligence”, and forcing many legitimate low-income claimants to pay a tax return preparer to apply for government benefits.

 

First, require that all taxpayers who claim the Earned Income Tax Credit, whether or not refundable, have their tax returns prepared at an IRS VITA (Volunteer Income Tax Assistance) site, where returns are prepared free of charge for lower-income taxpayers.  Tax preparers would not be permitted to prepare, nor taxpayers to “self-prepare”, tax returns claiming the EITC. 

 

The number of VITA centers would need to be expanded and staffing would include paid IRS employees who, along with volunteer preparers, are specifically trained in verifying EITC qualifications.  Taxpayers would be required to provide VITA preparers with all the appropriate documentation that tax preparers are currently told to ask for.

 

Currently VITA preparers are not required to do the same excessive due diligence as paid tax preparers – which is wrong. 

 

Second, educational institutions must be required to report on the Form 1098-T all cash payments made to the institution during the calendar year for qualifying tuition and fees from all sources (payments from the student or the student’s family, direct student loan or employee benefit payments, and scholarships and grants), net any tuition and fee refunds, without exception (which Congress has already required institutions to do), the Form 1098-T must include a second page that lists the specific details of the charges and payments (as many colleges actually already provide to students), and the Form 1098-T must also be required to be attached to the tax return.

 

Just a thought. 

 

What do you think?

 

TTFN

 

 

 

 

 

 

 

 

 

 

A GREAT TAX SAVING STRATEGY FOR CHARITABLE TAXPAYERS

A recent discussion with my wealthiest client about 2017 tax planning reminded me of a truly great tax strategy for charitable taxpayers with long-term capital gains.

 

Instead of giving cash to charity at year-end you can donate stock, bonds or mutual fund shares that you have held for more than one year and which have increased in value and save some money in the process.

This method of giving to charity has many tax benefits -

1. You can claim a deduction on Schedule A for the full market price of the investment on the date you make the donation and reduce your net taxable income. 

2. You don’t have to report the increase in value as a capital gain on Schedule D.  So you avoid the 15% or 20% federal capital gain tax.

3. If your AGI is more than $200,000 if single or $250,000 if married you avoid the 3.8% Obamacare Net Investment Income Tax (NIIT) on the gain.

4. You also will probably avoid state income tax on the gain.

5. Because the capital gain is not reported on Schedule D you do not increase your Adjusted Gross Income (AGI) and do not reduce or eliminate a variety of deductions and credits that are affected by increased AGI. 

6. Because the increase in value does not increase your AGI, if you are a victim of the dreaded Alternative Minimum Tax you will not reduce your AMT exemption.

My client, whose AGI will already exceed $250,000 without adding the potential capital gain and who generally is a victim of the dreaded AMT, wanted to donate $100,000 to charity.  Let us assume the stock he is donating has increased in value by $40,000.  By donating stock instead of cash he will save at least –

·      $26,000 or $28,000 in AMT for the deduction value of the gift (charitable contributions are deductible when calculating AMT)

·      $6,000 in capital gains tax

·      $1,520 in NIIT surtax

·      $2,600 or $2,800 in additional AMT because the AMT exemption is not reduced

·      $2,548 in NJ state income tax

Bottom line – by using this strategy the taxpayer gets the full $26,000 or $28,000 tax savings from making the contribution.  If he sold the stock first and donated the cash to the charity his net tax savings would be only $13,332 or $15,132.  The net tax savings for donating cash instead of stock would be even less if the resulting increase in AGI reduces other deductions or credits. 

The numbers would be different – perhaps greater tax savings - if the taxpayer was not subject to the dreaded AMT and in the 33% or higher bracket and/or could claim a deduction for the contribution on his state tax return.

Regardless of the amount of the donation and gain and the taxpayer’s federal tax bracket (unless 15% or 10%) there will be some savings from donating stock instead of cash to charity.  Consider this example –

Art Center has pledged $5,000.00 to his church building fund.  He also has 100 shares of Online Profits, Inc. which he purchased in 1998 for $2,000.00 and is now worth $5,000.00.  He decides to give the stock to the church to satisfy his pledge.  Art can deduct $5,000.00 on his Schedule A.  He does not have to pay tax on the $3,000.00 appreciation in the value of the stock.

If Art were to sell the Online Profits, Inc. stock and give $5,000.00 cash to the church he would have to report the sale of the stock on Schedule D and pay $450.00 in federal tax, as well as state income tax, on the gain.  Plus, the $3,000.00 gain would increase his Adjusted Gross Income (AGI), which could reduce or altogether wipe out a multitude of deductions and credits that are affected by AGI

In order for this strategy to work –

·   Any investment you donate to charity MUST be long-term property - an investment you have held for more than one year.  If you donate stock that you held for one year or less your deduction is limited to the cost basis, which in the above Art Center example would be $2,000.00.

·   Any investment you donate MUST have appreciated in value and would generate a capital gain if sold.  Do not donate an investment that has gone down in value - it is better to sell the stock, claim the loss on Schedule D, and donate the cash to charity.

And to provide the maximum tax savings you must be in the 25% or higher federal tax bracket.  If you are in the 10% or 15% tax bracket the special long-term capital gain tax is 0%.

FYI – I discuss the deduction for charitable contributions in detail in the premiere issue of my newsletter ROBERT D FLACH’S 1040 INSIGHTS – which could be yours for as little as $1.00.

If you think this tax strategy would work for you consult your tax professional.

TTFN

 

 

 

 

 

 

 

 

 

 

 

 

 

MY MORE THAN 2 CENTS WORTH

Here are my initial thoughts on what has been released of the White House tax reform proposal –

 

I support the end of the Estate Tax (as long as it does not do away with the step-up in basis for inherited assets).

 

I support the end of the dreaded Alternative Minimum Tax – which began as the lazy reaction of Congress to a report that 155 individuals with Adjusted Gross Income of more than $200,000 (over $1 Million in today’s dollars) paid “0” tax on their 1967 tax returns.  Instead of closing the loopholes and fixing the Tax Code the reaction of Congress was to provide a “quick fix” in the form of originally a “Minimum Tax”, which has morphed into the dreaded AMT.

 

I support reducing the number of tax brackets.

 

I support doubling the Standard Deduction.

 

I support repealing the 3.8% NIIT surtax, created by the Affordable Care Act.

 

I like closing “loopholes” – but not doing away with all itemized deductions except charitable contributions and mortgage interest.  I like keeping the deduction for acquisition debt on a taxpayer’s principal personal residence only (not home equity), but also the deduction for real estate taxes on a taxpayer’s principal personal residence only as well as the deduction for state and local income or sales taxes.  I feel that the mortgage, property tax, and state tax deductions help to “geographically equalize” taxpayers.  I can explain more about this concept in a subsequent post.  And I believe that certain “employee business expenses” should be allowed under certain circumstances.

 

To be honest I do not know enough about the concept of a “border adjustment tax” to form an educated opinion.

 

I support reducing the tax on corporations – but feel this can be done by creating a “dividend paid” deduction for corporations, which would allow corporations to claim a tax deduction for dividends paid to stockholders (combined with eliminating corporate special loopholes – and taxing net book profit less dividends paid).  Allowing a dividends paid deduction would finally do away with the double-taxation of corporate dividends.  As part of this new treatment I would have individuals pay tax on all dividends at the appropriate ordinary income rates – no more special treatment for “qualified” dividends.

 

What is wrong is capping the tax on “pass-through” self-employment income from partnerships to general partners, and the self-employment income of Schedule C filers, at 15%.  This is unfair to wage-earners.  Net earnings from self-employment should be taxed the same as wages.

 

I would support a cap equal to the top corporate rate on sub-S pass-through income, providing that the current rules and guidelines regarding reasonable salaries for sub-S shareholders are maintained. 

 

I would, however, think about considering taxing some of the excess net earnings from self-employment for partners and Schedule C filers along similar guidelines as those applied to salaries of sub-S shareholders.

 

I look forward to the actual details of the real tax reform plan that the Republicans will introduce in Congress – hopefully soon.

 

As an aside - do you find it a coincidence that the largest tax breaks in the skimpy details released would benefit idiot Trump and his family "bigly"?

 

TTFN

 

 

 

 

 

 

 

 

 

 

 

 

 

JUST BECAUSE IT IS “DEDUCTIBLE” DOESN’T MEAN YOU CAN DEDUCT IT

This past tax season I got the following email from a client –

“I was just informed that I am able to write off my union dues which were $370 for the year.” 

The client was correct.  Union dues are deductible on Schedule A as a “Miscellaneous Expense”.  But the client did not actually get a tax deduction for union dues on her 2016 tax return.

Just because a legitimate expense you incurred during the year is “deductible” does not mean that you can actually deduct the item and receive a tax benefit.

Let’s look at this particular “deductible” item – my client’s union dues. 

First you must itemize – have more “itemizeable” deductions than the Standard Deduction you are allowed based on your filing status. 

There are situations where you either must itemize or it is beneficial to itemize, even if your total allowable deductions are not more than the Standard Deduction – but these are truly rare.  And there are certain items that can be deducted either directly against a category of income reported on Page 1 of the 1040 – expenses related to self-employment income on Schedule C or EZ, expenses related to rental income on Schedule E, and direct expenses related to the sale of investments on Schedule D – or “above the line” as an “Adjustment to Income”.  But in this case union dues are an itemized deduction claimed on Schedule A.

A classic example of the need to itemize to claim a deduction comes from another of my clients many years ago.  When sending me her tax “stuff” a client expressed great joy in her note because she donated her used car to charity so she would get a big tax deduction – as the charity to whom she gave the car had advertised.  She was truly disappointed when I told her she got no tax benefit for her gift because she could not itemize (she rented an apartment, so had no deductions for property tax and mortgage interest, and had truly minimal other deductions – and the market value of the used car donated did not push her “over the top”).

Second, in the case of most Miscellaneous Expenses – job-related expenses such as union dues, investment expenses, and tax preparation fees - you must first reduce the total by 2% of your Adjusted Gross Income before you get any tax benefit.  If your AGI is $100,000 and your total expenses are $1,500 you get no tax deduction – 2% of $100,000 is $2,000, which is more than $1,500.  If your allowable expenses total $2,125 your tax deduction, for which you will receive an actual tax benefit, is only $125.

And third, if you are a victim of the dreaded Alternative Minimum Tax you get no, or a limited, tax benefit from Miscellaneous Expenses.  Miscellaneous itemized deductions subject to the 2% of AGI limitation are not deductible in calculating AMT.

In the example at hand, the taxpayer could itemize but did not have total allowable Miscellaneous Expenses, including the union dues, in excess of 2% of AGI.  So, while “deductible”, she could not actually deduct, and receive any tax benefit, from her union dues.

In many cases the “deductibility” of an item depends on the specific facts and circumstances of the individual taxpayer.  As I have said many times before, the answer to the question “Can I deduct X, Y, or Z” is almost always “it depends”.

Even deductions that you assume based on “common knowledge” are fully deductible may be limited due to “facts and circumstances”.  Just because you receive a Form 1098 reporting $12,459 in mortgage interest for the year does not mean you can deduct $12,459 on Schedule A.  I believe many taxpayers do not deduct the correct amount of allowable mortgage interest.  Your actual mortgage interest deduction is limited based on the amount of the loan and how the money borrowed was used.  For complete details check out my MORTGAGE INTEREST GUIDE. 

So just because someone tells you, or you hear or read somewhere, that an item is “deductible” does not mean you can actually deduct it on your tax return.  As usual check with your tax professional before doing anything.

 

TTFN

 

 

 

 

 

 

 

 

 

 

 

 

THAT WAS THE TAX SEASON THAT WAS - 2017

Another tax filing season down – 4 more to go till I can say I have prepared 1040s for 50 tax seasons. 

 

Another successful year – I ended the season with only 22 GDEs (the “E” is for “extension” – you can guess what the “GD” is).  This is lower than the 24 from last tax season, which at the time was the least amount of GDEs since I took over my mentor’s practice in 1999. 

 

13 were because the client’s package, or all the needed information, was received well after my deadline for timely filing of March 18^th - many received in April (actually one package arrived in my PO box on April 19^th).  Only  2 were “red-filed” – I needed more information to complete the return.  And 7 were requested by clients who did not send me any 2016 tax info yet.  I expect that there is one more from a client who had not contacted me at all yet – they usually submit their own GDE application and send me their “stuff” in the summer. 

 

Not a single GDE was due to my workload!  Every single return received in my hands by March 18^th was completed and returned to the client, as were several received after that date.   

 

So once again my filing season ran smoothly.  There were no car, equipment, computer, or other issues.  The weather did impact the season on one occasion – for the first time since I moved to NE Pennsylvania the snowfall was much more here than in NJ.  A 30+ inch blizzard in mid-March literally buried my car and I could go nowhere for almost 2 weeks.  I have always said that I welcomed a huge snow storm in March so I could catch-up without interruption – and I got my wish this season.  

 

I had no issues with late-issued corrected Consolidated 1099 Tax Statements from brokerage houses this year.  The returns of several clients who usually had to wait until late March to send me their “stuff” were done earlier than usual.  And more cost basis information was provided, to both taxpayers and the IRS, for long-term transactions.

 

The IRS did much better processing returns this year.  I have not heard of any excessive refund delays or other processing FUs so far.  NJ announced in January that no refund, regardless of how submitted, would be issued until March 1^st, due to additional identity verification - and I advised February filers with refunds of this fact.

 

Despite an advertised slight delay in the date the IRS would begin processing returns (Monday, Jan. 23, 2017) the season officially began for me, as it always has, on February 1^st.  I can could on the fingers of one hand the number of returns I have prepared before February 1^st in the past 45 years.

 

Thanks to the PATH Act (nothing to do with the subway from NJ to NYC) the IRS was required to hold tax refunds until Feb. 15 for taxpayers who claimed the Earned Income Tax Credit or the Additional Child Tax Credit.  This did not affect my clients – as I have a truly minimal number of clients who claim these government welfare benefits.

 

While I continue to oppose the excessive additional “due-diligence” requirements for tax professionals preparing tax returns of clients requesting an Earned Income Credit, and beginning with this season the American Opportunity Credit and the Child Tax Credit, and the existence of IRS Form 8867, I was happy that the form was reduced to 2 pages this season and wasted less of my time to prepare. 

 

I did absolutely nothing new, different, or additional this season regarding EITC, AOTC, and CTC claims than I have done in past years.  The Form 8867 was only a minor time-wasting inconvenience this season.  My biggest issue with this form was having to remember to include it for taxpayers claiming the Child Tax Credit.

 

Most of my clients have been with me for decades, often before the birth of their applicable dependents, so I am well aware of their situation.  And I have always asked clients for college Bursar’s or other financial statements in addition to the Form 1098-T to verify the correct amount of qualified tuition, fees and expenses when claiming tuition tax benefits.  While Congress, doing something right for a change, did require colleges to properly complete the Form 1098-T beginning with tax year 2016 returns, the IRS gave in to whining from the schools and continued to allow the 2016 Form 1098-T to be as useful as tits on a bull.

 

As most of you know I no longer accept ANY new clients.  If I did I would refuse to accept clients who would be requesting an Earned Income Credit.

 

The Obamacare “shared responsibility penalty” was not an issue for me this season.  Nor was the advance premium tax credit reconciliation.  There was only one client who would have been subject to this penalty – but the IRS announced that it would not delay processing of returns that were “silent” on full-year health insurance coverage (did not check the box to verify full-year coverage and did not include Form 8965), so I completed the return without checking the box and without completing Form 8965.  The IRS may ask for this form later in the year – and I will deal with the issue it that occurs.  I continue to believe it is wrong to require a taxpayer to pay someone to assess an IRS penalty.  

 

Forms 1095-A, B, and C arrived earlier this season, though the late receipt of Form 1095-B or C would not hold up my preparation of a return.  Information on W-2s and Social Security statements and client representations are enough for me to indicate full-year health insurance coverage.

 

On the state side – I continued to be extremely pleased with New York’s new “enhanced” online Form IT-201 and IT-203 “fill-in” (but manually filed) forms.  The “enhancement” automatically did the math and actually calculated the tax – saving valuable time.  I used the new enhanced process for all of the New York returns I prepared – and continued to add to my invoice a $5.00 “New York State Tax Preparer Extortion Fee Surcharge” for all clients with NY state returns.

 

I also continued to use NJWebFile to electronically submit NJ-1040s directly to Trenton free of charge whenever possible (unless specifically forbidden by the client’s request).  However there are still too many situations where this option is not available.  When I had to manually prepare the return for the client to mail I used the online “Fill-In” Form 1040, which did some math but did not automatically calculate the tax (I wish NJ would initiate a system similar to the NYS “enhanced” process).   I did not encounter any issues with NJ returns – yet.  But it is still early.

 

The delayed filing deadline – April 18 instead of April 15 again this year – really did not add much work time to my season.  I stopped working on 1040s April 14, and actually completed most of the GDE forms that afternoon.  As you may know, I never work on 1040s (or 1040As) on the actual filing deadline day (click here to see a post from fellow tax-blogger Peter Reilly explaining why).

 

As is my custom I took time off after the 18^th to recover at the Jersey shore.  As you read this I am back at my desk working on GDEs at a more leisurely pace.

 

So another tax filing season is added to the history books.  Let’s hope the next 4 seasons continue to be similarly smooth-running and problem-free.

 

I end with my usual question for fellow tax pros – did I miss anything?

 

TTFN