Tuesday, May 18, 2021

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

BUZZ.  BUZZ.  THE BUZZ IS BACK!

* Michael Cohn reports “IRS starts refunds for tax returns claiming unemployment benefits” at ACCOUNTING TODAY.

The Internal Revenue Service is starting to provide tax refunds to taxpayers who paid taxes on their 2020 unemployment benefits that recent legislation later excluded from taxable income. . . .

 

The IRS said Friday it has identified more than 10 million taxpayers who filed their tax returns prior to enactment of the American Rescue Plan and has been reviewing those returns to determine the correct taxable amount of unemployment compensation and tax. That could result in a refund, a reduced balance due or no change to tax (no refund due nor amount owed).”

 

* Also from ACCOUNTING TODAY – "N.J. residents paythe most in lifetime taxes, W. Virginians the least” -

 

Those living in New Jersey will pay on average a grand total of $931,698, well above the $827,185 for Massachusetts residents and $805,213 for Connecticut. Nationwide, Americans will pay $525,037 over their lives, which includes taxes on income, property, cars and retail spending, according to the study from financial technology company Self.”

 

Thankfully I now live in Pennsylvania.

 

* Kay Bell, the yellow rose of taxes, tells us “TN disaster relief means May 17 isn't {wasn’t – rdf}Tax Day in 6 states" at DON’T MESS WITH TAXES.

 

* Check out the annual top 10 “Bozo Tax Tips” from Russ Fox at TAXABLE TALK.

 

Click here for #2 – 10 and here for #1.


- - - - - - -

 

I am off to the Jersey shore to recover from my 50th tax filing season later today!  "Talk" to you when I get back.

 

TTFN






















Monday, May 17, 2021

THANK GOD IT'S OVER!

 


TAX SEASON'S OVER (my 50th!)!

MY FACE IT HAS A BIG SMILE.

AND SO, IT'S OFF TO THE SHORE,

1040s NO MORE!

AT LEAST FOR A WHILE.
















Thursday, April 29, 2021

JUST SAY NO!


Suggesting an end to the step-up in basis for inherited investments, which has been suggested often over the years, is clear proof that those who write the tax laws have absolutely no clue about the actual practical application of what they write.

Ending the step-up would be a nightmare for taxpayers and tax preparers. 

Most of my clients have no idea of the cost of investments they purchased, let alone the cost of investments they inherit.  Or how the deceased acquired the investments that are inherited (purchase, gift, inheritance, employee stock ownership program, etc.).  And there is the issue of dividend reinvestment to consider.  

Per T.C. Memo 2003-259, if a taxpayer cannot provide proof of the cost basis of a stock or other investment sold it will be considered to have a "0" cost basis.  So, if the taxpayer cannot properly identify the cost basis the entire gross proceeds will be fully taxable.   

It could be OK if the deceased acquired all investments by purchase only and used the same brokerage for all investment purchases because the deceased’s broker could have all the cost basis information.  Or if the deceased actually kept meticulous records of all investment acquisitions.  But these situations would be the exceptions and not the rule.

And if there is no step-up in basis then the estate tax should be based on the original cost of investments and not the market value at date of death.

It seems I may be retiring at just the right time.  

TTFN











Wednesday, April 28, 2021

GOOD ADVICE!

Some good advice from Kay Bell, the yellow rose of taxes, in “Don't fall for these 6 tax refund myths” at DON’T MESS WITH TAXES -

Myth 1: Calling my tax professional or the Internal Revenue Service will get me my refund sooner.

There are lots of good reasons to use a tax professional rather than doing your taxes yourself. It is a myth, however, that bugging your tax preparer, or the IRS itself, will get your refund to you more quickly.

In fact, being a pest could backfire.

Your tax preparer has done his/her best job for you. If you continue to bother him/her after your return is in the IRS' hands, you're likely to get on the tax pro's troublesome client list. That doesn't mean the tax preparer will provide less than professional service. But it does mean your tax pro isn't likely to go beyond that to help. If you're a persistent post-filing pest, you might even find yourself being fired.

The IRS can't do anything for taxpayers who are simply waiting for refunds either. Once your Form 1040 is in the agency's system, it's just got to work its way through. 

The IRS says the best way to check the status of a refund is to use its online Where’s My Refund? tracking tool. If you're away from your laptop or PC, then use your digital device to check on your refund via the IRS2Go mobile app.

But don't go crazy with the checking. The IRS updates the status of refunds once a day, usually overnight. Checking either status option more than once a day will not produce new information.

And no, trying to connect with a real person at the IRS won't get you any additional info. Plus, you'll be on hold for a while until a representative answers. So, leave the IRS phone help line staff alone. Call only if the refund status tool or app instructs you to do so.

To repeat what I have said here before - THERE IS ABSOLUTELY NOTHING YOUR TAX PREPARER CAN DO TO EXPEDITE THE RECEIPT OF A REFUND.

TTFN












Monday, April 26, 2021

ATTENTION TAXPAYERS

If your 2020 federal tax return included a “Recovery Rebate Credit” – claiming the portion of the first two economic stimulus payments that you were entitled to but did not receive

OR

If you (or your tax preparer) used your 2019 Earned Income in calculating your 2020 Earned Income Credit or Additional Child Tax Credit

AND

You are requesting a refund on your return -

Be advised that the IRS will take longer to process the return and your refund will be delayed.

So, don’t call or email your tax pro and complain that you haven’t received your refund.  

THERE IS ABSOLUTELY NOTHING YOUR TAX PREPARER CAN DO TO EXPEDITE THE RECEIPT OF A REFUND.

TTFN


















Monday, April 19, 2021

JUST A REMINDER

Make a note of the amount of the third stimulus payment you received (the maximum $1,400 per taxpayer and dependent), or if you received no payment, and keep any IRS notice you get that identifies the payment.  Do the same for any subsequent payments that may be enacted.  Give this information to your tax preparer with your 2021 tax “stuff” next year.

These payments are NOT taxable income.  But they will need to be “reconciled” when preparing your 2021 tax return.  If you didn’t get the full amount to which you were entitled you can claim the shortage as a refundable credit on the 2021 return.

TTFN















Tuesday, April 13, 2021

ESTIMATED TAXES

The filing and paying deadline for the 2020 Form 1040 (and 1040-SR) has been extended to May 17th, but as of this writing the 1st Quarter 2021 federal estimated tax payment is still due April 15th.

But, according to the IRS (see here) -

To the extent an overpayment of the 2020 tax exists as of April 15, 2021 (because payments made on or before April 15, 2021, exceed the 2020 tax liability), and the taxpayer makes a valid election to apply the overpayment to 2021 estimated tax, the overpayment would be applied as of April 15, 2021, whether the 2020 return is filed on April 15, May 17, or October 15, 2021.

So any amount of your overpayment you apply to 2021 estimated tax on your 2020 tax return, regardless of when the return is filed, is treated as having been received by the IRS by April 15, 2021 – assuming that all the tax payments reported on the tax return were made before April 15, 2021. 

So, if you file an extension with a payment of anticipated tax due and when you finally prepare your return you are entitled to a refund this may not apply.  But if all the tax payments reported on your return were made via withholding and/or timely paid estimated taxes you are OK.

TTFN