Wednesday, September 30, 2009


* Some good news! Mary O’Keefe quotes Harry Buckley, CEO of Jackson-Hewitt, speaking to investors and prospective investors in his firm in a call earlier this month in her post “Jackson Hewitt CEO Talks About the Tax Prep Market” at BED BUFFALOES IN YOUR TAX CODE.

Here is what Buckley had to say (I have highlighted the good news) -

In looking at the entire industry, if we look at the number of returns that were filed last year, and certainly we were down over 500,000 and Block was down over 600,000, and yet the total returns filed electronically were only down 27,000. I think it's indicative from that that there is a growing market out there for independents.”

So between them Block and Hewitt screwed over 1 Million less taxpayers than they did the year before! Let’s hope the number of filers who use these two firms, and let’s not forget Liberty as well, continues to drop.

And, on yeah, when reading Mary’s post be sure to notice Buckley’s comment about “when we have control of the client in our office”.

* Stacie Clifford Kitts continues to bring us news “From The Stupid Preparer Files” at STACIE’S MORE TAX TIPS. This time she tells us of “A Man Pretending To Be a Former IRS Employee Claims To Have A Special Relationship With The IRS”.

This guy really had balls. Stacie points out that after completing a fraudulent return for a client he told the client “he [Mr. Mirabella] had worked extra hard on the client's return and that in addition to his normal $3,000 fee, he would like to receive a "tip" for his services”!

Gee, if I could get $3,000 per 1040 I could really cut down my workload!

* Whatever you, or I, may think about the competence of the IRS in dealing with taxpayers, one must admit that the IRS website – – provides excellent information on tax topics.

The Service recently finished an excellent series of “2009 Summertime Tax Tips” on various tax deductions and issues. Click here to check out the series.

* I have said it many times here at TWTP, and other bloggers have said the same thing in their venues. But it is something that needs to be said over and over. IRS HITMAN Richard Close says it again in his post “Avoid IRS Debt: Freelance Workers, Hire Professional for your Taxes”.

Any company that says they can settle your debt for ‘Pennies on the Dollar’ is only interested in your money. They'll tell that you qualify for an Offer in Compromise, even if you can't. Remember, only 2% of the people who apply for an Offer in Compromise actually get approved. And even fewer people literally settle their debt for Pennies on the Dollar.”

* Just more documentation on how New Jersey’s politicians have totally FU-ed the state with their addiction to pork – the Tax Foundation has issued a “Fiscal Fact” with more data from “New Census Data on Property Taxes on Homeowners”.

The FF shows the Top 20 counties, with population of 20,000 or more, in median real estate taxes paid from 2005-2007. New Jersey has 13 counties on the list, including Hudson County (where I live) at #14. New York State, whose Westchester County tops the list, has 5 and Connecticut and Illinois have 1 each.

* Speaking of the Tax Foundation and New Jersey, check out the post "Fighting New Jersey's Tax Crush".

* Joe Kristan tells us that the “Google Defense” is just as effective as the “Turbo Tax Defense” when it comes to tax return FUs.

Joe’s post “'Google' Is Not the Tax Law” at the ROTH AND COMPANY TAX UPDATE BLOG tells of a Tax Court case in which the taxpayer claimed he failed to include in taxable income a $150,000 IRA distribution, for which he received a Form 1099-R, based on advice he found on the internet using Google.

The bottom line, as Joe puts it – “Google is wonderful, but it's no tax pro”.

FYI, you will find a detailed review of the case here at THE TAX LAW REPORT blog.

* Happy Birthday to TAX GIRL Kelly Phillips Erb!

If you want to read ten things that you may not know about Kelly check out her post “They Say It’s Your Birthday…".

This sounds like a good idea for a birthday post. I have a month and a half or so to come up with ten things you may not know about me.


Monday, September 28, 2009


A list of “Latest Good Reads” at Roni Deutch’s TAX LADY BLOG (which, I am honored to say, begins with my post “A Tax Deduction Is Only Worth What It Is Worth”) led me to “401(k) vs. IRA - Which is Better For Your Extra Money?” at BUDGETS ARE $EXY – A personal finance blog of a 20-something soon-to-be millionaire, written by “j. money”.

The post introduces a question regarding 401(k)s and IRAs, provides j money’s answer, and asks the readers, “What would you guys advise?”.

Here is the question –

"I'm like you, turned 30 this last year, and getting my finances in line (I'm in the black, which is a good thing, but I can do better). Got a question for you regarding 401k's and IRA's. I currently participate in my company’s 401k program, but I am only contributing the amount that the company matches (i.e. 60% on my first 6%). However, my 6% doesn't even get me close to my annual maximum ($16,500 or so... whatever it is ).

Would you suggest hitting the $16,500 in my 401k before setting up a separate IRA account? Or would you just contribute to the 401k up to the employer match amount, and then max out an IRA each year?

You can read the post to find out j. money’s response. Here is mine –

Let us look at the 401(k) and IRA in two separate ways – the tax considerations and the non-tax (financial/economic) considerations.

Tax Considerations:

Employee contributions to a “traditional” 401(k) plan (there is also a ROTH 401(k) option), up to the annual maximum, are considered “pre-tax” for federal, and generally state, income tax purposes. This means that the money you contribute to a traditional 401(k) reduces your taxable income. If your gross wages for the year are $100,000 and you contribute $15,000 to your employer’s 401(k) plan the federal, and probably state, wages reported on your Form W-2 for the year will be $85,000.

This means that in addition to any employer match, the IRS, and probably your state tax agency, will also “match” anywhere from 15% to 45% of your total contributions, depending on your level of income and state of residence. I expect that the average government “match” is between 30% and 35% of the money you put into the plan. If you contribute an additional $10,000 to a 401(k) plan, and your combined marginal tax rate is 30%, your federal and state income tax liability is reduced by $3,000. That is $3,000 more in your pocket! This $3,000 tax savings can be contributed to an IRA.

There are no income thresholds to “phase-out” allowable 401(k) contributions. The maximum employee contribution is allowed regardless of the extent of your Adjusted Gross Income (AGI). The only possible restriction on employee contributions concerns “highly compensated” employees in a plan where the lower-level employees do not adequately participate.

If your employer offers a ROTH 401(k) option your contributions and distributions are treated pretty much the same as a ROTH IRA. Contributions are considered “after tax” and do not reduce taxable income. If the employee in the above example contributed the $15,000 to a ROTH 401(k) plan the taxable wages on his W-2 would be $100,000. But qualified distributions are totally tax free!

If your employer has both options you can split your contributions between the two plans in any way you choose, or as allowed by the individual plan, as long as your combined employee contributions to the two components do not exceed the annual maximum. You can contribute $10,000 to a traditional 401(k) and $6,500 to the ROTH component, or vice versa

The maximum amount you can contribute to an IRA for 2009 is $5,000 ($6,000 if age 50 or older at the end of 2009). If you also have a 401(k) plan at work your contributions may be partially or totally “non-deductible” depending on your level of income.

The phase-out ranges for an IRA deduction by an active participant in an employer plan for 2009 are:

• Modified AGI of $55,000 to $65,000 for Single or Head of Household
• Modified AGI of $89,000 to $109,000 for Married Filing Joint
• Modified AGI of $0 to $10,000 for Married Filing Separate

If only one spouse is an active participant in an employer plan the other spouse (whether a working or non-working spouse) the deduction for the non-active spouse is phased out for 2009 when AGI is between $166,000 and $176,000.

You can contribute the annual maximum amounts to both a 401(k) and an IRA, but the deductibility of your IRA contribution may be limited. So the person asking the question can contribute a total of $21,500 to retirement plans for 2009. The 401(k) contribution must be made during the calendar year, but you have until April 15, 2010 to make an IRA contribution for 2009.

The amount that can be contributed to a ROTH IRA is limited based on your AGI. The phase-out ranges for contributions to a ROTH Individual Retirement Account (IRA) are:

• Modified AGI of $105,000 to $120,000 for Single and Head of Household
• Modified AGI of $166,000 to $176,000 for Married Filing Joint and Qualifying Widow(er)
• Modified AGI of $0 to $10,000 for Married Filing Separate

A single taxpayer with AGI of $120,001 or more cannot contribute to a ROTH IRA for 2009. Neither can a married couple filing a joint return with an AGI of $176,001 or more.

So to answer the question - the best case scenario, based solely on tax considerations only, would be to contribute the maximum $16.500 to your employer’s 401(k), splitting the contributions between traditional and ROTH components if available such that you get the maximum employer match, and contribute the maximum $5,000 to an IRA, with as much as allowed going into a ROTH account.

Non-Tax Considerations:

There are many financial or economic considerations to review before deciding how much to put aside for retirement and where to put the money. I will touch on just two.

It is very important to state upfront that the first, and most important, criteria for evaluating a transaction, strategy or technique should always be financial. Taxes are second. Remember that taxes are only pennies on the dollar.

I also feel it important to point out that I do not have any training, experience or expertise as an investment advisor. I do, however, feel strongly that the secret to investment success is simply the application of basic common sense.

1. How much can I afford to put aside?

This is perhaps the most important question. You want to put as much as possible aside for retirement, but you need a certain amount of cash flow to properly cover all your fixed and variable expenses and to have money available for contingencies and emergencies. Money you put into a 401(k) or IRA account cannot be touched until you are at least age 59½ (well you can touch it, but you should not; and there are different rules for withdrawals from a ROTH IRA).

You should have a separate liquid “emergency” fund. You should not use an IRA as your emergency fund.

You may also want to set aside money each paycheck into a “contingency fund” invested in a liquid money market or similar fund. If by year end you have not had to use this money for “contingencies” you can contribute the balance, up to the $5,000 or $6,000 maximum, to an IRA.

2. Where should I invest my retirement money?

In his response to the question j. money says –

Most 401(k)s from smaller companies usually suck as the funds to choose from aren't as good as if you had the open-sea of EVERYTHING out there like you do with IRAs. My company has a great match at that 100%, but the funds are pretty shitty from what people tell me.”

While I have not done any research or have any first hand knowledge of or experience with employer 401(k) plans, I would guess j. money is not wrong in his comments. I expect that most employer 401(k) plans have very limited and fairly generic choices when it comes to specific investment options.

Regardless of how much money you put away in a retirement plan, or how much tax you save upfront, it will do you no good if there is no significant growth, or if the investments tank.

You want to be, for the most part, conservative with your 401(k) investment choices and be sure to diversify. Don’t put all your eggs in one basket, especially if that basket is your employer’s stock.

And j.m. is correct that you have a much wider and more diversified selection of investment choices with it comes to your IRA investments. As I said you will want to be more conservative with your 401(k) money. But you can be a bit more “adventurous” with your IRA account, since it is much easier to change your investments and you have almost unlimited options.

The answer to the question, based solely on non-tax considerations, would depend on how much you can afford to put away, how good the investment options available in your 401(k) plan are, and the amount of flexibility the plan provides for changing your investment mix.

So how would you answer the question?


Saturday, September 26, 2009


* A tip of the hat to TAX GURU Kerry M. Kerstetter for bringing my attention to the above picture.

* Before we leave “Chuck” behind – check out “Mr. Tax Law Writing Tax Evader” over at Russ Fox’s blog TAXABLE TALK.

* Mary O’Keefe of BED BUFFALOES IN YOUR TAX CODE has “turned me on” to a section of the IRS website that has published all of the various public comments, including mine, that were submitted in response to IRS Notice 2009-60 regarding the regulation, registration and licensing of paid tax preparers. Click here.

Once I have finished all the 2008 GDEs (hopefully by September 30) I will take some time to read through these comments and will write a TWTP post about my reading. In the meantime you are welcome to check out the comments yourself.

* I seem to recall seeing business cards of several tax consultants years ago that included the phrase “former IRS employee” on them. This was thought of as a selling point – using a “former IRS employee” to prepare your taxes would assure proper filing and help to avoid an audit or other problems with the IRS because of the consultants’ familiarity with IRS practices, procedures and personnel.

Well, folks, it ain’t necessarily so! Just ask the clients of Debra Windham of Chicago a former secretary with the IRS Criminal Investigative Division.

Check out Stacie Clifford Kitts’ post “From The Stupid Preparer Files - Rerun of Former IRS Secretary Files Fraudulent Returns for Taxpayers” at STACIE’S MORE TAX TIPS.

* Kay Bell keeps us up to date on the health care reform issue in “Senate Health Care, Take Two” at DON’T MESS WITH TAXES.

Kay tells us about Senate Finance Committee Chairperson Max Baucus’ revisions to his previous submitted bill, which was discussed in the last BUZZ.

* It is that time of the year when the Tax Foundation tells us which states are best for business by presenting the “2010 State Business Tax Climate Index”, its annual report on the "Business-Friendliness” of state tax systems.

The report tells us that “South Dakota has the most ‘business-friendly’ tax system, and New Jersey has the least”. As a long-time resident of the Garden State NJ’s placement on the list is certainly no surprise to me. New Jersey was dead last on last year’s list as well.

The top 10 states in the 2010 Index, from 1st to 10th, are South Dakota, Wyoming, Alaska, Nevada, Florida, Montana, New Hampshire, Delaware, Washington and Utah. The bottom 10 states, from 41st to 50th, are Vermont, Wisconsin, Minnesota, Rhode Island, Maryland, Iowa, Ohio, California, New York and New Jersey.”

Let’s hope that NJ voters take head and “throw the bastards out”, including Governor Corzine, in the upcoming election.

* This past week my fellow tax bloggers were all talking about the plea deal for “Girls Gone Wild” founder, and basic all-round arsehole, Joe Francis.
Joe Kristan tells us – “It looks like a good deal for him, as he gets no additional prison time” in his post “'Girls Gone Wild' Figure Goes For Plea Deal” at the ROTH AND COMPANY TAX UPDATE BLOG. Too bad – he could have started a new line of videos under the banner “Prisoners Gone Wild”.

Kay Bell tells us that – “According to published reports, Francis will plead guilty this afternoon in a California court to filing false tax returns (and one count of bribing Nevada jailers for food; really), receive credit for time (301 days) already served in connection with the tax charges and pay $250,000 in restitution” in “Tax Plea for 'Girls Gone Wild' Founder” at DON’T MESS WITH TAXES.

In the similarly titled post “‘Girls Gone Wild’ Founder Takes Plea” at TAX GIRL Kelly Phillips Erb reports that – “Francis’ attorney, Brad D. Brian, has said – and I’m not making this up – that prosecutors ‘didn’t understand Francis’ business model’ and the expense related to the ‘Girls Gone Wild’ brand”. Are “rufies” deductible?

I am disappointed that Francis is basically “off the hook”. Some “shower play time” with fellow inmates would have done him some good.

* Trish McIntire talks about “Putting Back RMD” over at OUR TAXING TIMES. She tells us that -

Thanks to a law changes last year, taxpayers over 70 and 1/2 are not required to take a required minimum distribution (RMD) from their IRA or pension plan in 2009. But what happens if you did and have changed your mind (or your plan executive didn't tell you about this year's special rules)? You can put it back.”

The IRS has recently issued “guidelines” for “putting it back”, which Trish explains –

So if you took a distribution in 2009, you can put back up to the amount of your RMD and not pay taxes on the returned money if you can get it back in 60 days or Nov. 30th which ever is later. Rollovers are limited to one a year from each account and this hasn't been changed. And it only applies to taxpayers required to take RMDs. If you have questions about this, check with your tax professional.”

* And speaking of OUR TAXING TIMES, Trish continues her ongoing series with “Buyer Education IV”, which discusses “What do you want a tax professional to do for you?

I laughed with I read her comment (that applies to me as well, and I expect most tax professionals) – “I don't know how many times I have been told that, ‘It's a simple return’ when it had rentals or a business

And I especially like her final point -

Don't get mad at us when we won't do what you want. I don't work for you, I work for me and provide you a service in the form of an accurate tax return. I don't care what your other preparer did. And remember, just because you haven't gotten caught, yet, doesn't make your cheating right. There are plenty of people out there who will be glad to get you the refund you think you deserve.”

* A “retweet” by the TAX GIRL brought me to a good post on “Why You Should Hire a Tax Professional” by Miranda at PERSONAL DIVIDENDS. She also provides some tips for choosing the right tax professional for you.

Her final of three reasons is a very good one –

Finally, a tax professional can save you time. It used to take me about four hours to prepare my own taxes. I had to read instructions, make sure I did everything properly, and fill out the forms. It was tedious, time-consuming work. My tax professional does the same thing in about an hour. I still have to gather my documents, but since I organize them throughout the year, this really isn’t very difficult. The time savings of three hours is quite valuable to me, and worth the $450 I pay for my tax preparation.”

I have often said that a majority of my clients are smart enough to be able to prepare their own tax returns but they just don’t want to be bothered. They would much rather pay my reasonable fee (less than the example) then put up with the aggravation of doing it themselves. Plus by having me do it they are sure that they do not miss anything.

If you are looking for a tax professional a good place to start is Don’t contact me – I am not looking for new 1040 clients.

BTW – I was very pleased to see that the term “CPA” was not used at all in the post.

* TAX GIRL Kelly Phillips Erb also comes to the defense, and rightfully so, of the VITA program in her post “Should the IRS Kill VITA Altogether?

While she supports the IRS cutting off the ACORN VITA program, her response to the question is –“I couldn’t be more vehement that I think that’s a terrible idea”.

If you are unfamiliar with the VITA program this post gives a good description. Kelly also discusses her first hand experience with the program.

Fellow tax blogger Mary O’Keefe, she of BED BUFFALOES IN YOUR TAX CODE (see above) is also a good source of information on VITA.

* TAX PROF Paul Caron, who has been called the “king” of tax bloggers, tells us that “President Obama Wants Your Tax Reform Ideas”.

Paul quotes from the official release -

President Obama has asked the President's Economic Recovery Advisory Board (PERAB) to develop options for tax reform. The members of the tax subcommittee are preparing ideas to be considered by the board and would like to give anyone a chance to have input into the process on this important issue. Anyone wanting to share ideas and opinions for consideration by the subcommittee can do so here. The deadline for submissions is October 15th, 2009.”

You can bet that the first thing I do on October 2nd is sit down at my computer and write out my suggestions.


Thursday, September 24, 2009


I was recently reminded of a former client who seemed truly excited when sending me her tax “stuff” a few years back. It seemed that she had donated her used car to charity and was thrilled when the charity told her that the Kelly Blue Book value of the auto was $3,000+ (this was before the rules for deducting the contribution of an auto changed – see below). I got the impression from her note that she anticipated getting a huge refund.

I was sorry to have to disappoint her. The client was retired with Social Security, a small taxable pension and a W-2 for part-time work as a school crossing guard. She rented (no real estate or mortgage interest deductions) and had only average medical expenses and cash contributions, so even with the car donation she did not have enough total deductions to be able to itemize. Each year she got most of the little over a hundred in federal income tax withholding back – and that year was no different.

The most important lesson to be learned from this situation is that a tax deduction is of no value if you cannot use it. While donating her car to charity was a noble thing which provided a value to the charity it put absolutely nothing in her pocket.

If her deductions were such that she could itemize and claim all or part of the value of the car, the deduction would only help to the extent of her taxable income. If a Schedule A had brought her taxable income to below “0”, which it would have in her case, the “in pocket” benefit from donating the car is a reduced one.

And even if she had been able to itemize, and her income was substantial enough to absorb the full deduction, the most she would gain is pennies on the dollar. A $3,000 deduction which is fully utilized would result in putting $300, $450, $600 or $840 in a taxpayer’s pocket – much less than if the car had been sold or traded in.

The moral of the story – if someone tells you, or you read somewhere, that doing something will result in a tax deduction check with your tax professional to be sure that you can actually use the deduction before taking any action.

And now a review of the rules for deducting the contribution of a car to charity:

In order to claim a deduction of more than $500 for donating a motor vehicle (car, motorcycle, boat, or airplane) to charity, you must attach Copy B of the IRS Form 1098-C, which has been provided by the charity, to the Form 8283 that is included in your 1040.

The Form 1098-C will include the name and Taxpayer Identification Number of the charity to whom the car has been donated, the vehicle identification number of the auto, and the date of contribution. Form 1098-C must be issued within 30 days of either the date of the contribution or the date of the disposition of the vehicle by the charity.

If you donate a car to charity that is worth more than $500 make sure to get Copy B of Form 1098-C from the charity before the end of the year. If you have not received it by the middle of December you should call the charity and ask for it. The charity can give you a statement in lieu of Form 1098-C as long as it contains all the necessary information discussed below.

It is possible that you donate a car to charity late in the year and the car is not sold by the charity at auction until the next calendar year. Just note that if you want to claim a deduction of more than $500.00 for the car you must have a Form 1098-C to include with the mailing of your 2009 Form 1040.

Besides the items listed above, additional information will be included on the Form 1098-C depending on what the charity does with the donated car.

(1) If the charity sells the car without significant interim use or material improvement, the Form 1098-C will include the date the vehicle was sold by the charity, certification that the sale was an "arm's length" transaction among unrelated parties, and the gross proceeds from the sale. Your tax deduction is limited to the gross proceeds from the sale.

(2) If the charity intends to temporarily or permanently use the car in its operations, or intends to make "material" improvements to the vehicle before selling it, the Form 1098-C will include a certification and description of either the significant interim use and intended duration of such use or the intended material improvement and a certification that the vehicle will not be sold before such use or improvement is completed.

(3) If the charity intends to sell the car to a "needy" individual at a price that is significantly below "fair market value", or give the car to such an individual, the Form 1098-C will include a certification that the charity will make such a sale or transfer of the vehicle, and that the sale or transfer will be in direct furtherance of the organization's charitable purpose of relieving the poor and distressed or the underprivileged who are in need of a means of transportation.

In situations (2) and (3) you can deduct the "fair market value" of the vehicle. You can use the "private party value" for the vehicle, adjusted for mileage and condition, as listed in the Kelly Blue Book or a similar established used vehicle pricing guide. If the fair market value is more than $5,000 you must obtain a formal appraisal, a copy of which must also be attached to your Form 8283. In these situations the charity will not provide a value - the taxpayer making the contribution must provide and substantiate the fair market value of the car donated.

To recap - in situation (1) the donee charity will tell you what you can deduct. In situations (2) and (3) the donor taxpayer must determine the amount of the deduction, subject to audit by the IRS.
Any questions?.

Wednesday, September 23, 2009


It’s never too soon for another BUZZ. Let’s get back on schedule.

* Monday’s USA Today had “dueling editorials” on the subject of extending the $8,000.00 First Time Home Buyer Credit, which will expire on November 30th.

The paper comes out against extending the credit in “Our View on Economic stimulus: It’s Time to Pull Plug on Tax Break for Home Buyers - Subsidies Drive Up Housing Prices, Helping Lobbies More Than Purchasers”.

The editorial tells us –

For a variety of reasons, the credit should be allowed to expire. To begin with, the housing market is starting to recover. The National Association of Realtors has reported four straight months of increased sales of existing homes. Moreover, tax credits are just another form of government spending, and the government — which is running a $1.6 trillion deficit this year — doesn't have any money to spend. Extending the credit, which has already cost as much as $15 billion, would mean borrowing even more from future generations to aid today's home buyers.”

Presenting the opposing view is David G. Kittle, chairman of the Mortgage Bankers Association, with “Opposing View: Extend, Expand Tax Credit - Letting Incentive Expire Would Jeopardize the Housing Recovery

Mr. Kittle says -

This credit, along with lower mortgage rates, has helped to moderate the decline in home prices by stimulating demand. As many as 350,000 sales so far this year could be directly attributable to the tax credit, according to the National Association of Realtors.”

He believes that the credit should not only be extended but greatly expanded -

Congress should extend it to all home buyers and increase the credit up to $15,000. In addition, Congress should make it available immediately, so that a borrower doesn't need to wait until his or her next tax return, but instead can use it to help make a down payment on the house or pay closing costs.”

I tend to agree with USA Today. While I would love for my clients to be able to get an $8,000, or even $15,000, gift from their Uncle Sam if they buy a home, I must ask, “Where is the money coming from?”

Besides, as you know, I am against “refundable” credits. They encourage and generate too much fraud. And, as I have discussed here before, it is way too easy to get the $8,000 credit. All you have to do is fill out an IRS form. No documentation or signed declaration required.

* Rob Teuber continues his series on Hobby Losses with the entries “Hobby Losses: Safe Harbor Presumption” and “Hobby Losses: How Does the IRS Decide If Your Business Is a Hobby?”.

* Who knew? Apparently there is a patron saint for Tax Geeks, or so TAX GIRL Kelly Phillips Erb tells us in “Happy Feast of St. Matthew, Patron Saint of Tax Geeks”.

* Oops! Forgot to include this item in Monday’s BUZZ.

On September 16th Senate Finance Chairman Max Baucus unveiled America's Health Future Act of 2009. Click here to download the committee’s 15-page summary of the bill.

Kay Bell discusses the “revenue items” in the bill in her post “The Cost of Health Care, Senate Style” at DON’T MESS WITH TAXES. She points out that the bill does not include a surtax on the wealth or any new “sin” taxes.

Howard Gleckman takes a look at the bill in two posts at TAXVOX, the blog of the Tax Policy Center – “The Baucus Health Bill and Taxes” and “Baucus-care: The Gift of the Magi”.

One item in the first TAXVOX post caught my eye immediately (as usual, the highlight is mine) –

Premium Subsidy: The proposal would require everyone to have insurance, but recognizes that many low- and moderate-income people will need subsidies to afford the premiums. The proposal’s mechanism for providing that assistance is a Health Care Affordability Tax Credit. It would work like this: People who buy insurance through a state exchange would report their modified adjusted gross income for the prior tax year. If they are eligible for the credit—which is based on an income-related sliding scale—they’d pay their premium minus the credit to the insurance company and Treasury would pay the difference directly to the insurer.”

It looks like someone finally listened to me! Last September in my post “I Guess There Is Always An Exception”, which discussed Presidential candidate John McCain’s health insurance premium tax credit proposal, I said –

As I mentioned above the only alternative to using a refundable tax credit, with the downside that a person would have to pay the premiums first and wait until tax time to get the money, is for the government to send the money directly to the insurance company.

How would this work? I would go to the Horizon Blue Cross and Blue Shield website, for example, and apply for health insurance. After entering my information and choosing the coverage and deductible I would receive a quote. If I chose to enroll the annual premium would be reduced by the amount of the government credit ($2,500 or $5,000 proposed by McCain), and my monthly premium would be determined accordingly

However it looks like the credit does not be begin until 2013 – so that means three more years of no health coverage for many taxpayers.
* BLOOMBERG.COM reports that “IRS to Audit 6,000 Companies to Test Employment Tax Compliance”.

According to the item -

The Internal Revenue Service will audit 6,000 U.S. companies to determine whether they pay all their required employment taxes to fund Social Security and Medicare benefits.

The IRS said the audits will provide data for its first statistical analysis since 1984 of how often companies misclassify workers to duck tax obligations, fail to pay taxes on fringe benefits such as personal use of company cars, and improperly pay taxes for company executives. The audits will begin in February, and the companies will be randomly chosen

* I think I touched on this topic in an earlier BUZZ entry. An LA TIMES item tells us that “Feds Plan to Tinker With Mortgage Interest Reporting”.

The article tells us that – “The Government Accountability Office wants lenders to add more details about mortgages on Form 1098, which would make it easier for the IRS to determine whether taxpayers are complying with the rules”.

So what does the GAO have in mind?

Just a few revisions to Form 1098, the document that mortgage servicers send to both borrowers and the IRS that shows how much interest was paid during the year. The GAO said the one-page sheet should be expanded to include the address of the mortgaged property, the outstanding mortgage-debt balances, an indicator of whether the interest is on a loan refinanced during the year and an indicator of whether the interest was on an acquisition loan or a home-equity loan.”

As a preparer I would be happy with getting the additional info on the Form 1098, as most clients do not keep track of how their mortgage and equity proceeds are used (or at least never tell me).

* Jean Murray interviews Sheryl Schuff, a CPA, in her post “How To Find a CPA/Tax Adviser: Part One” at JEAN’S BUSINESS LAW/TAXES: US BLOG.

CPA Sheryl refreshingly “tells it like it is”. Here are some of her comments (any highlights are mine) –

Business owners should understand that not all tax preparers are CPAs and not all CPAs do tax prep work. While you don’t necessarily need to hire a CPA to do your taxes (there are many competent non-CPA professional tax preparers), you do need to consider what other kinds of services you might need, like choosing accounting software, setting it up and getting trained, data entry tasks, and review of records for tax evaluation.”

And –

EAs are required to have 72 hours of continuing education every 3 years with a minimum of 16 hours every year. Like CPAs, they have to take an ethics course. Unlike CPAs (who can take accounting, management, technology, and personal development courses), EAs have to take all their courses in the area of Federal taxation.”

When asked by Jean, “As a CPA are you required to get updated on the tax laws every year?”, Sheryl properly answers –

Nope. I’m not required to. I almost always take at least 16 hours every year of tax classes, but that’s strictly my personal preference.

As you can see, being a licensed CPA doesn’t guarantee that I know any more about taxes than when I originally passed my CPA exam (for me that was in 1974)

*Stacie Clifford Kitts asks “Do You Suffer From Late Filing Syndrome” in a Busy Season Rerun at her STACIE’S MORE TAX TIPS blog.

As Stacie points out - “this syndrome appears to be a creative and possibly effective attempt by attorneys to protect their clients from criminal prosecution”. Any day now I expect to see it to be used as a murder defense on LAW AND ORDER.

* Over at Beancounter Ramblings Chad Bordeaux reminds us that “Technology Expenses are Now Eligible for Payment under 529 Plans”.

Chad tells us – “In addition to the cost of the equipment, these allowable expenses include Internet access and related services”.

* I know this has nothing to do with taxes – but I will end this installment of the BUZZ with a story told by Alfred Hitchcock on probably THE TONIGHT SHOW years ago, recounted by tax blogger Dan Shaviro of START MAKING SENSE in the post “The New Cat”. It gives you an idea of Mr Hitchcock’s sick mind.


Tuesday, September 22, 2009


As you may recall, back in mid June IRS Commissioner Douglas Shulman put out the call to IRS “stakeholders” for comments on the topic of regulating, registering and licensing paid tax preparers. I answered the call with a detailed letter to the Commissioner outlining my thoughts on the issue at the time, which was expanded from my post “License and Registration, Please”.

Shortly thereafter I received a brief note acknowledging receipt of the letter and telling me that it was not being directed to the Commissioner but to some lacky in the Small Business section.

I heard no more regarding my initial letter to the Commissioner until a week ago this past Sunday, when I found the following letter waiting for me at my mail drop –

Dear Mr Flach:

I am writing in response to your letter dated June 22, 2009, addressed to the Commissioner of the Internal Revenue Service regarding oversight of tax preparers. Thank you for taking time to express your views on this very important topic.

As you are aware, the role of tax return preparers within the tax system has increasingly become more critical. Large percentages of taxpayers use a return preparer to prepare their tax returns. Consequently, the IRS is committed to strengthening our partnership with the return preparer community. Our goal is to improve the service taxpayers receive from all preparers by increasing our emphasis on preparer’s adherence to professional and ethical standards.

The IRS recognizes there are large numbers of tax preparers who are diligent and provide exceptional service to taxpayers. When tax professionals like you provide clients with accurate, complete and timely assistance, you ease the burden for them and the IRS. We comment and acknowledge your important role.

We are still in the initial phase of the return preparer review, currently gathering opinions and input from a broad range of external and internal stakeholders. This review is very broad and it includes potential options around licensing, registration, testing, enforcement, ethics and the expanded use of the PTIN. We recognize any changes we make will also impact taxpayers, and we want to ensure all taxpayer rights are adequately and consistently addressed.

Again, thank you for providing input on the topic of tax return preparers. Your feedback has also been provided to the team that is assessing all of the comments. We value all of our stakeholders’ comments and appreciate your continued support as we strive to maintain the fairest and most effective system of voluntary tax compliance in the world.


Karen L Hawkins
Director, Office of Professional Responsibility

I had also written directly to the “team” with my updated and “evolved” thoughts on the regulation of tax preparers in response to a later call for comments. My letter was included in the post “Dear IRS”. I received a very brief letter of acknowledgement, which I quoted in “FYI – This Just In”.

Stacie Clifford Kitts quoted an IRS notice in her post “Unenrolled Preparers - IRS Wants Your Comments -Tax Payer Standards” which announced that “the third and final public forum to gather input on tax return preparer standards will be held on Wednesday, Sept. 30, in Chicago. It will feature two panels of representatives from the software and unenrolled preparer industries and be moderated by IRS Commissioner Doug Shulman.”

The notice goes on to say that - “The forum will convene at 9 a.m. CT in the J.R. Thompson Center at 100 W. Randolph St., Chicago, IL 60601, in the lower level auditorium. Anyone interested in attending should confirm attendance by sending an e-mail message to”

The “unenrolled preparer industries” I would expect refers to the likes of Henry and Richard, Jackson Hewitt, and Liberty Tax Service.

I have reported on the “testimony” given at the previous two public forums in several posts here at TWTP, and will also do so for this final forum in the beginning of October.


I realize that I am late in discussing this topic, but better late than never. As pointed out earlier this month in a Wall Street Journal, “IRS to Mine Payment Data on Mortgages”.

The article reports that - “the Internal Revenue Service will expand a program designed to catch tax cheats that searches for inconsistencies between mortgage payments and income”.

It also tell us – “The data could also be used to target for audits individuals who don't file tax returns, or who report less income than they paid in mortgage interest, according to a letter released Monday by the Treasury inspector general for tax administration”.

A recent TIGTA report found that, “tens of thousands of homeowners who paid more than $20,000 in mortgage interest in 2005 either didn't file a tax return or reported income that appears insufficient to cover their mortgage interest and basic living expenses”.

This is something that first occurred to me over 20 years ago. I had seen several returns where the combination of the mortgage interest, real estate tax and personal exemption deductions was more than the total income reported on the 1040, which generally consisted of a W-2 and some interest. I remember one return in particular for a full-time waiter at a Chinese restaurant who was married with children.

If I thought this odd I wondered why the IRS did not also. Yet in 37 years I have never come across an IRS audit in such a situation.

During an audit of a doctor client many, many years ago I asked the IRS auditor why the return was selected for review. I was told that it was the policy of that IRS office to audit returns of self-employed professionals with high income. Hey, I thought at the time (and still do), you should actually be auditing the returns of self-employed professionals with low incomes! I do believe the audit of my doctor client resulted in “no change”.

The IRS uses income reported on 1099s and W-2s to catch non-filers, so why not also use deductions reported on 1098s.

I realize that there could be several scenarios where the mortgage interest reported on a Form 1098 could be more than the taxable income reported on the 1040. One is income from tax-exempt investments (i.e. muni bonds or muni bond funds). But this income, while not taxed, is still reported on the Form 1040 on Line 8b. The sale of an investment or other asset for substantial gross proceeds (which are not reinvested) could produce a reported capital loss or minor capital gain. The gross proceed information would, however, be reported on Schedule D.

The article suggests another scenario – “Highly paid former employees of investment banks who lost their jobs in the financial crisis but who, thanks to their savings, are still making their mortgage payments”. And, then. the mortgagees could also be getting help from parents or other relatives.

Obviously claiming mortgage and real estate tax deductions in excess of taxable income does not automatically mean that there is unreported income. Perhaps the first contact from the IRS in such a situation could be a letter of inquiry, requesting that the taxpayer explain and document the source of funds used to make the mortgage payments. Those who do not respond, or who do not provide sufficient documentation, could then be subject to a full-blown office audit.


Monday, September 21, 2009


BUZZ. BUZZ. The BUZZ is back!

I hope you enjoyed my series of “Totally 1040 Free” posts last week. Minimal comments were received – doesn’t anyone else have something to say about my thoughts on reality tv and movies?

* Trish McIntire ended the week before last with a great post at OUR TAXING TIMES appropriately titled “Legislative Spam”. In it she provides a list of questions that she has regarding the recently proposed “"Humanity and Pets Partnered Through the Years (HAPPY) Act”, which I had referenced in an earlier BUZZ entry.

But the true “meat” of the post is in her final paragraph (highlights are mine) -

“I am sure more questions will pop into my head but I think I have made my point. The idea of a pet deduction is a fun diversion on a dreary Friday afternoon but it highlights a major problem with the US Tax Code. Congress and the Executive branch, both sides, have for too long used the tax code to reward, punish or encourage the behavior of individuals and businesses. The tax code should fairly raise money to run the country. It's nice to be assured of job security as taxpayers need help getting through the tax maze. However, the US has some major issues to deal with and bills such as this waste the time and resources. They are nothing more than Legislative Spam.”

* It seems that everybody and their brother blogged, wrote or commented about the tax advice given to a filmmaker and friend posing as a pimp and prostitute by ACORN. Perhaps the best post was “ACORN Officials Offer Tax Advice (and a Word or Two About Being a Pimp)” by TAX GIRL Kelly Phillips Erb.

I like Jay Leno’s comment on the situation –

ACORN is an organization that gets government money to help poor people. Well, now they’re in trouble. These two film-makers went to ACORN posing as a pimp and prostitute saying they wanted to buy a house and run it as a brothel. ACORN gave them advice on how to do it and how to avoid prosecution and how to avoid paying taxes. If they want to get away with prostitution and not paying taxes, they should go to Congress. These are the professionals.”

* Responding to TAX GIRL Kelly Phillips Erb’s post on the ACORN disaster, Jean Murray provides some ways to check out a potential tax preparer and how to spot bad advice in her post “Don't Get Tax Advice from These Folks!” at JEAN’S BUSINESS LAW/TAXES: US BLOG.

* In light of all the talk about the ACORN tax advice, here is an interesting Tax Court case, discussed in the post “Costs of Prostitutes and Pornographic Magazines Not Medical Expenses” at G. Christopher Wright’s THE TAX LAW REPORT blog.

I wonder if the decision would have been any different, at least for the pornographic materials, if the “treatment” had been prescribed by a doctor. Like medical marijuana, the services of a prostitute would still have been disallowed as being illegal.

* It seems that the retired tax lawyer who claimed a ton of deductions for prostitutes and porno is not going to take the Tax Court’s decision lying down! Check out “Tax Lawyer Fights Rulings Barring Deduction For Prostitutes: William Halby insists the U.S. Constitution protects sex-for-pay write-offs” at FORBES.COM.

* JOE TAXPAYER provides a good overview of “Inheriting or Bequeathing an IRA”.

* Before heading off to recuperate I got an email from TIGTA with the headline “NEW TIGTA AUDIT ENCOURAGES MANDATORY E-FILING BY PREPARERS”. The email referred to a recent TIGTA report.

The email stated -

The Treasury Inspector General for Tax Administration (TIGTA) today publicly released an audit report recommending that the Internal Revenue Service (IRS) seek mandatory e-filing of individual tax returns prepared by paid preparers.

TIGTA also recommended that IRS use readily-available scanning technology to convert paper returns into electronic files. The IRS employs up to 5,000 individuals during filing season to enter data from individual tax returns into its database

In response the IRS “told TIGTA that it is seeking legislative authority from Congress for mandatory preparer e-filing as part of its Fiscal Year 2010 budget request.”

Will the legislation read that all tax preparers “who use tax preparation software” must e-file (like the New York State law reads) or will it authorize the IRS to provide a free online system for e-filing, similar to NJWebFile, or will it provide free downloadable e-filing software? If tax preparers are required to e-file then the process by which to do so must be made available free of charge. The government should not force me to spend thousands of dollars for otherwise unnecessary tax preparation software.

* Kay Bell began a new blog series at DON’T MESS WITH TAXES – Third Tuesday Tax Tweets (aka T4). She introduced and explained the series in the post “Welcome to Tax Twitter Tuesday”.

* PHILLY.COM reports in “A Pennsylvania Tax Idea Goes Up In Smoke” that the new PA state budget proposal includes a 25-cent-per-pack hike in the cigarette tax. Yet “still no tax on smokeless tobacco or cigars”.

Why? “Because the majority of people negotiating the budget are cigar-chomping men," says Johnna Pro, press secretary for the House Majority Appropriations Committee.

I am truly glad that PA did not add a tax on cigars. The first stop I made on my visit to PA this past week-end (and on every visit) was the local Tobacco Road shop to stock up on cigars.

* A client recently asked me if I thought the First-Time Homebuyer Credit (of up to $8,000), a fully refundable credit, would be extended. It currently expires on November 30th – so you must close by November 30th to be able to qualify for the credit. I said I did not think so, and advised that one should not act based on the assumption that it will.

However, a BLOOMBERG.COM item, titled “Homebuyer Tax-Credit Extension Gains Lawmaker Support (Update1)”, suggests that there is growing support for extension of the credit. It points out - “Realtors, bankers and homebuilders have joined in the push, starting a campaign that encourages Congress to extend the program for one year with the tag line: ‘Don’t Let America’s Real Estate Recovery Expire’”.

* I totally agree with Michael Rozbruch of the TAX RESOLUTION UNIVERSITY blog when he says “Filing a Delinquent Tax Return is Better Than Failure to File Taxes”.

* Right on to USA for the September 16th editorial “Merrill Bonus Case Highlights How Shareholders Get Fleeced”.

The editorial was about the action taken by the SEC in response to this situation –

Last year, for their skill at losing $27 billion and driving a storied 94-year-old securities firm to the brink of ruin, Merrill Lynch executives decided it was time to reward themselves and thousands of other employees with up to $5.8 billion in bonuses. Then, when Bank of America bought Merrill Lynch, it got shareholder approval for the purchase without bothering to share information about the bonuses.”

The editorial makes the following comments –

The reality is that until executives, directors, attorneys and accountants know that they can be held financially liable as individuals, the government won't have much more success than shareholders in promoting better behavior. Whatever efforts regulators can muster can be deflected with legal fees and minor fines, also borne by shareholders.
It's not unlike the way some mining companies, airlines and toy companies deal with safety issues. They see it as more cost effective to simply pay for violations than to actually comply with the regulations. After all, why play by the rules when, if you get caught, you can use other people's money to make the problem go away?


Friday, September 18, 2009


I love the Turner Classic Movies cable tv station. On occasion TCM runs episodes of classic detective movie series from the 30s and 40s. It is just another reason why TCM is the absolute best cable, or broadcast, television station around.

Here are some of the series that I have seen on TCM over the past few years-

* Two famous film series about literary detectives that began with George Sanders as the star – "The Saint", more famous as a British tv series with Roger Moore, and "The Falcon".
Interestingly enough, after making 3 Falcon films Sanders decided to retire from the role, and in the 4th of the series, THE FALCON’S BROTHER, Sanders was killed in the end and his fictional brother, played by Sanders real-life brother Tom Conway, took over as the new Falcon and continued for all but the last three of the 16-film series.
A point of information – when called in one title THE GAY FALCON the reference was not to the detective’s sexual preference. Back then gay meant something else entirely.

* The adventures of retired jewel thief Boston Blackie, brought to life by Chester Morris, a real-life amateur magician who shared the hobby with his screen character, and his sidekick “Runt”. I had seen many of the Blackie movies during my youth on Saturday afternoon television. It was one of the few series in which the same actor played the lead throughout the run.

* The Perry Mason series, which, while keeping the actual ESG mysteries intact, took too many liberties with the characters, portraying Perry as a drunk bon vivant amateur chef who marries Della Street in one episode, a far cry from the more true to the books portrayal of Raymond Burr with which all boomers are familiar, and Paul Drake as a typical bumbling movie sidekick nicknamed “Spudzy”.

* Another retired jewel thief who appeared in a series of 15 files over 14 years – Michael Lanyard, aka "The Lone Wolf". This literary detective’s nickname was actually the source of the popular term “lone wolf”, used to describe “one who prefers to go without the company or assistance of others.”

* The uniquely named debonair detective Philo Vance, whose initial entry, THE CANARY MURDER CASE was completed as a silent film and hastily adapted for sound for its 1929 release. This series included THE GRACIE ALLEN MURDER CASE, not among the TCM offerings, written especially for the comedienne by Vance’s creator S.S. Van Dine. A later entry in the series, CALLING PHILO VANCE, was actually a remake of the earlier THE KENNEL MURDER CASE, both of which have been shown on TCM.

* A very interesting series I had never heard of before about Nick and Nora–ish rare booksellers Joel and Garda Sloane, from a novel by famous screenwriter Harvey Kurnitz writing as Marco Page. There were three films with three separate sets of actors playing the couple – Melvyn Douglas and Florence Rice in FAST COMPANY, Robert Montgomery and Rosalind Russell in FAST AND LOOSE, and Franchot Tone and Ann Sothern in FAST AND FURIOUS, directed by Busby Berkeley.

* And of course, the father of all such detective series – William Powell and Myrna Loy as Nick and Nora Charles. Of course you do know by now that the Thin Man was not Nick Charles but a character in the first book that never reappeared, despite the movies’ titles.

While the individual detectives had their unique quirks and subtle differences, to be perfectly honest in many cases the characters and stories are interchangeable. All the heroes are handsome, urbane, witty, and intelligent, generally with some kind of shady past or underworld connection. They usually have a comic relief sidekick and, even if married, are often in the company of a beautiful dame. And they are frequently at odds with a hard-boiled police lieutenant or inspector with a blundering sergeant. They become involved in the mystery or adventure to help a friend, or one of the aforementioned beautiful dames, or to clear themselves of wrongful charges. As some of the films were made during the war years, the heroes occasionally tangled with Nazis and foreign spies.

While these films were considered to be “B” films they often featured actors and actresses who would later go on to greater fame on the big and and small screens early in their careers. One young dame who crossed paths with Boston Blackie was Harriet Hilliard, who would later marry a band leader named Nelson and raise her two boys on radio and television.

As with any genre, some series were better than others. And as with any episodic series, some entries, usually the earlier ones (although not always), were better than others. With few exceptions, different actors portrayed the various detectives during the runs of the individual series, and some casting choices were far superior to others. But they all were entertaining.

A few of the movie series were later translated to the small screen – Boston Blackie, The Thin Man (which starred Peter Lawford as Nick Charles), and of course Perry Mason and the Saint.

TCM has also offered the comic series about radio detective "The Fox", which starred Red Skeleton “Whistling” in Dixie, Brooklyn and the Dark, and Margaret Rutherford’s classic run as Agatha Christie’s Miss Jane Marple.
Some bits of movie trivia – Joan Hickson, who played Miss Marple in the first BBC series, had a minor supporting role in MURDER SHE SAID (not Wrote). And did you know that before she updated the Marple retired school teacher detective character to modern day Jessica Fletcher, Angela Lansbury was Jane Marple in the 1980 film THE MIRROR CRACK’D, whose cast included Rock Hudson, Liz Taylor, Kim Novak, Tony Curtis and Pierce Brosnan.

PS - That ends my "Totally 1040 Free" week of posts. I will be back Monday with tax-related topics.

Thursday, September 17, 2009


The movies are famous for sequels. Most, like remakes, are “at best unnecessary and at worst an insult to the originals”. However, while there are often revivals (more successful than movie remakes), Broadway musicals are not known for spawning sequels.

There has been no “West Side Story – The Next Generation”, “Return of the Music Man”, “Cabaret II – Back to Berlin”, or “Guys and Dolls and a Baby”.

But there have been, to my knowledge, three actual Broadway musical “sequels” – new musicals with the same characters and similar situations that take place after the original production. Since you have probably not heard of them you can correctly assume they were not box office, or critical, successes. Only two actually made it to Broadway.

The first is “Bring Back Birdie”, obviously a sequel to the classic “Bye Bye Birdie”, which had 31 previews and only 4 performances (the original had 607) back in early 1981 at the Martin Beck Theatre. It reunited the creative team of Charles Strouse and Lee Adams and librettist Michael Stewart. Chita Rivera reprised her roll as Rosie, but Albert and Mae Peterson, originally Dick Van Dyke and Kay Medford, were played here by Donald O’Connor and Maria Karnilova. There was no sign of the Peterson family from the original, the patriarch of which was Paul Lynde.

In the sequel, 20 years after the end of the original, Albert is offered twenty thousand dollars if he can find Conrad, who has disappeared into obscurity, and persuade him to perform on a television show. Albert takes a leave of absence from his job teaching English and locates Conrad, now overweight and the mayor of Bent River Junction, Arizona.

I was in the audience for one of the 35 performances. There was an unsuccessful try at updating the innovative “Telephone Hour” production number idea using videos. And Donald O’Connor almost attempted to reprise his “Singing in the Rain” off the wall back flip during one of his solo numbers – but thought better of it considering his age.

Despite its short run, Chita Rivera was nominated for a Tony and a Drama Desk Award as Best Actress in a Musical for BBB2. The original “Bye Bye Birdie” was nominated for, and won, many Tonys 20 years earlier, including a win as Best Musical, a nomination for Chita Rivera as Best Featured Actress in a Musical and wins for Gower Champion as Best Direction and Best Choreography. Dick Van Dyke also won a Tony.

Ken Mandelbaum writes in his book “Not Since Carrie, 40 Years of Broadway Flop” – “’Bring Back Birdie’ may rank as the worst Broadway musical ever to be created by top-level professionals. The book was tasteless and ridiculous.”

I met BBB librettist Michael Stewart, who also wrote the books for “Hello Dolly” and “42nd Street”, when he was a guest lecturer on one of my post-tax season transatlantic crossings on the QE 2 back in the 1980s. I saw the original "Bye Bye Birdie" during its Broadway run, but with "Match Game" host Gene Rayburn and not Dick Van Dyke.

“Annie”, which first promised Broadway audiences in early 1977 that “The Sun Will Come Out Tomorrow”, had not one but two attempts at a sequel. The first was “Annie 2: Miss Hannigan's Revenge”, which opened at the John F. Kennedy Center for the Performing Arts in Washington, D.C. in December 1989 to “universally disastrous reviews”. Wikepedia reports that “extensive reworking of the script and score proved futile, and the project was aborted before reaching Broadway”. The second attempt was made in 1993, with a completely different plot and score. “Annie Warbucks” opened off-Broadway at the Variety Arts Theatre, where it ran for 200 performances. It never made the transition to Broadway. I have not seen either sequel.

It is a coincidence that the music for “Annie” and “Annie Warbucks” was also written by Charles Strouse, although the lyrics were by Martin Charnin.

The third Broadway musical sequel, which did briefly make it to Broadway, was “The Best Little Whorehouse Goes Public”, which ran for 28 previews and 16 performances in the spring of 1994. The same creative team returned for the sequel, including Tommy Tune as co-director and co-choreographer. This musical told the tale of the best little whorehouse in Las Vegas.

Miss Mona, “madam” of the original Texas “Chicken Ranch”, is coaxed out of retirement to take over Las Vegas brothel “Stallion Fields”, which has been seized by the government and is being run by the IRS in the hope of recovering $26 million in back taxes. Mona is once again at odds with a zealous right-wing politician trying to close the “house” down.

The New York Times review indicated that, while it had all the glitz one expects from Las Vegas - and even had Siegfried and Roy (portrayed by one actor, half of whom is made up as Siegfried, the other half as Roy) - “What it ain't got is fun”.

Dee Hoty, “Miss Mona”, was nominated for a 1994 Tony as Best Actress in a Musical. I also did not see this apparent fiasco.

While “Lorelei”, which I did see, opens and ends years after the original “Gentlemen Prefer Blonds” story takes place, is not so much a sequel as a revival of GPB – created to capitalize on the popularity of Carol Channing after “Hello Dolly”. So it doesn’t count. Lorelei remembers her earlier Atlantic crossing while embarking on another after many years of marriage.

“Lorelei” opened January 27, 1974, at the Palace Theatre and ran 320 performances. While it has updated lyrics by Betty Comden and Adolph Green and a new book by Kenny Solms and Gail Parent, it is really just the original "Gentlemen Prefer Blondes" by Anita Loos and Joseph A. Fields with lyrics by Leo Robin with a few new scenes and songs thrown in to book-end the original story and score. The show also featured Peter Palmer (Broadway’s “Lil Abner”), Dody Goodman, and Lee Roy Reams, who would many years later again appear with Carol in one of her revivals of Dolly.

So there you have it – the extent of Broadway’s experimentation with sequels. Did I miss any?


Wednesday, September 16, 2009


Most movie remakes are at best unnecessary and at worst an insult to the originals. Yet Hollywood continues to crank out mediocre remakes featuring actors who are inferior to the stars of the originals (I am waiting for an announcement that THE WIZARD OF OZ will be remade with Miley Cyrus).

While not a bad movie, NEVER SAY NEVER AGAIN was totally unnecessary. The sole motivation for making the movie was money – to cash in on Sean Connery returning to the role of James Bond for one last time.

Adam Sandler is no Burt Reynolds, let alone a Gary Cooper (one critic wrote, “Adam Sandler is to Gary Cooper what a gnat is to a racehorse.”). His remake of THE LONGEST YARD was totally unnecessary and his remake of MR DEEDS GOES TO TOWN was an insult to a classic movie.

A literal shot-by-shot remake of Alfred Hitchcock’s PSYCHO added absolutely nothing to the original.

There was even a remake of the classic Cary Grant-Audrey Hepburn romantic thriller CHARADE, perhaps "the" classic film of its genre, titled THE TRUTH ABOUT CHARLIE, which lasted about a day and a half in the theatres, and rightfully so.

Some remakes are not really remakes - they simply steal the title and a basic plot idea. The producers hope to boost the box office of their movie by evoking memories of a far superior film. The Steve Martin CHEAPER BY THE DOZEN films had absolutely nothing to do with the Clifton Webb original other than the fact that both films are about a family with 12 children, and was, to say the least, an inferior film.

Don’t get me wrong. There have been remakes that have improved and expanded on the original film – though this is the exception and not the rule. In two of the best examples of this exception the remake was done by the same director. Alfred Hitchcock remade his THE MAN WHO KNEW TOO MUCH some 22 years after the original. And Frank Capra remade his 1933 film LADY FOR A DAY as POCKETFUL OF MIRALCES in 1961. Although I have not seen the original films, the remakes are certainly top notch classic films.

KING KONG was remade twice. The 1933 original was a breakthrough masterpiece. The first remake, made in 1976, was totally unnecessary, and inferior in every way, even though I was in the film (my friend Howard Bernstein and I were among the crowd that ran across the top of the World Trade Center tower to avoid a falling Kong). The recent “threemake” was better, and relatively respectful to the original, although I was not keen on the casting of Jack Black.

So, does anyone out there want to suggest a movie remake that you think was better than the original?


Tuesday, September 15, 2009


Contrary to the popular belief of people who make movies today, the various secretions, excretions and expulsions of the human body are not funny. Neither are human genitalia or violence thereto.

Well actually in the right hands anything can be funny. In the right context, with the right set-up and direction, and with the right actor, passing gas or stepping in shit can actually be humorous.

The operative words above are “in the right hands”. Trust me, the likes of Adam Sandler, Mike Myers, Ben Stiller and others, who have made careers out of playing down to the level of pre-teen boys, and the writers and directors who they team with, do not have the right hands.

IT’S A MAD, MAD, MAD, MAD WORLD is perhaps the funniest movie ever made. At the very least it has the best cast of any comedy ever made. It featured just about every well-known comic that was breathing at the time, including Joe E Lewis and the 3 Stooges. {As an aside – it could never be remade in today’s world considering the salary demands of the equivalent level of actors and comics – very few of whom are of the caliber of the stars of the original. There have been a few pitiful attempts at making a similar film, with affordable B, C and D level comics and poor direction and writing.} As I recall there was not a single fart in the film.

Nor do I recall either Tony Curtis or Jack Lemmon being kicked in the groin in SOME LIKE IT HOT.

Neither Hope and Crosby, Abbott and Costello nor Martin and Lewis had to resort to bathroom humor to make funny, and profitable, movies.

Back in the days of the popularity of Andrew Dice Clay it was my considered opinion that yuppies had no wit. But if you said “fuck” or “shit” every fifth or sixth word they would think you were hysterical. It seems that today’s movie audiences are the ones without wit. Their sense of humor stopped developing in the 5th and 6th grades.

It is a sad commentary that even a film like Walt Disney’s ENCHANTED of a few years back, with a truly unique idea and witty execution, had to be spoiled by a totally unnecessary and humorless chipmunk shit sight gag.

That is not to say that there are no more truly witty comedies being made. But they are getting fewer and farther between.


Monday, September 14, 2009


This week will be "Totally 1040 Free"!
It will not be all play – I will begin the week with some 1120 work (corporations) – but most if it will be of a recuperative nature.

I have decided to make THE WANDERING TAX PRO also “Totally 1040 Free” this week – with a series of posts on “Anything But Taxes”.

I hope you enjoy this escape from the Tax Code.


I realize that it is a bit early – but do you want to know what I want for Christmas? I would like all the steaming piles of excrement of the “reality tv” genre banned from broadcast and cable television by the FCC.

Granted “little people”, while faced with some unique challenges, are just like anyone else, and have families and lives just like anyone else. But I do not want to watch them go about their everyday life.

I do not want to watch a woman give birth, or a family raise children.

I do not want to watch the lower classes bicker at work, whether at a beauty parlor or a tattoo parlor or anyplace else.

I do not want to watch brain dead college drop-outs living and playing together.

I do not want to watch the work and personal lives of anyone unfold, regardless of their level of income or degree of celebrity.

I do not want to watch total idiots degrade themselves for the sake of greed or to get a mate.

And what’s with all these “Real Housewives” shows? Who gives a rat’s arse about the private lives and infighting of self-absorbed spoiled surgically-enhanced trophy wives?

Pardon my “French”, but there is really no other word that describes what America has mis-named reality television than shit – human excrement.

At its worst it is gross (and bad) soft-core pornography (i.e. the VH1, MTV, and E! offerings) and at its basic bad it is people of low intelligence and no self-esteem being humiliated. None of these offerings have an ounce of entertainment, educational, or socially redeeming value. And I challenge anyone to provide an intelligent explanation otherwise.

So Santa, do you have any pull at the FCC?


Saturday, September 12, 2009


* Nonprofit publisher Tax Analysts released a book today containing 32 essays offering recommendations on tax reform to the President's Economic Recovery Advisory Board. The compendium, written by top tax professionals, addresses a range of issues currently at the heart of the tax-code review.

Click here to download the 130-page book or here to request a hard copy of the book.

One of the essays is by fellow tax blogger Daniel Shaviro of START MAKING SENSE.

* Mary O’Keefe posts an interesting article by Martin Vaughan of Dow Jones Newswires titled “White House Tax Panel Stays Out Of Public Eye” at BED BUFFALOES IN YOUR TAX CODE.

Basically – “A task force appointed by President Obama to recommend changes to the tax code by December has held no public meetings, and the White House is not revealing with whom the group has met in private.”

* Bill tells us of the latest IRS-related email scam in “Latest Bogus IRS Email” at his APRIL15.COM blog.

This warning always bears repeating – “In any event, the IRS does not use email to inform taxpayers of potential audits or changes to their tax liability. If you receive such an email, the IRS requests that you forward the email to them at”

* Richard Close, the IRS HITMAN, reports on “The IRS's Latest Failure: $10 Million Spent on Abandoned Project”.

Rich is talking about the much anticipated “My IRS Account”, a great idea that would have provided taxpayers with online access to their federal tax return and account information. The project “was abandoned close to completion, due to poor planning”. We had been told by the IRS back in 200 that “My IRS Account” -

• would be available around the clock, every day,

• would provide a secure online environment to ensure privacy,

• would allow users to view and download their account by tax years, and

• would have the ability to view and print tax return and account information for the current and previous three years.

There is hope. Richard points out that, “The IRS intends to reuse most of the hardware developed so far. This means it could be available anywhere between 2009-2013.”

I, for one, was looking forward to such a system, and hope that IRS can eventually get it up and running (before I decide to retire).

* TAX GIRL Kelly Phillips Erb returns from vacation, and a week of guest posts at TG, with two good timely (considering that school is starting) entries – “School Uniforms, Other Expenses Not Deductible” and “529: As Easy as A-B-C”.

* Speaking of 529 plans, the Treasury Department and the White House Task Force on Middle Class Working Families has issued a report titled “An Analysis of Section 529 College Savings and Prepaid Tuition Plans”.

* Kelly the TAX GIRL is on a roll this week. She ends it with an analysis of the “Hope Credit and the American Opportunity Tax Credit”. Kelly refers to the new AOTC as “the Hope Tax Credit on steroids”.

* Trish McIntire continues her series of “taxpayer tips for working with a tax professional” at OUR TAXING TIMES with “Buyer Education III”. In this entry Trish discusses “Signing the Return”.

* The internet’s TAX MAMA, Eva Rosenberg, devotes one of her “Tax Quips” to “Obama and His Health Care Plan”, which summarizes the high points of President Obama’s recent Health Care speech.

Here is the area in which I am most interested -

Folks who don’t presently have health insurance will have affordable choices:

... There will a health insurance exchange offering competitive prices.

... There will be tax credits to help those who cannot afford even those lower rates. (How will we be paying for this?)

... However, just as with auto insurance, buying coverage will be mandatory for all Americans.

... Those who still cannot afford any coverage whatsoever and cannot get it work will get a hardship waiver

If the goal is to make sure every American is covered what good is a “hardship waiver”. Why not provide free subsidized coverage for these individuals, once the hardship or low income can be proven.

And as for the credits for “those who cannot afford even those lower rates” – I expect this will be “after the fact” on completed tax returns. A person who cannot afford insurance needs the money now to pay for the premiums. They are not able to pay “up front” for the insurance and then wait a year or more to get “reimbursed”. Here, too, instead of credits how about a subsidy to be applied directly against the premium.

Another example of using the Tax Code to provide benefits that should be done so elsewhere.

* According to the TAX POLICY BLOG post “Beatles' Friend: Taxes Helped Break Them Up” – “Long-time Beatles' friend Tony Bramwell blames the high British taxes of the time for contributing to the break up of the famed group.”

The friend, Tony Bramwell, says in his book “Magical Mystery Tours” that the Beatles were “told they had to make £120,000 in order to keep just £10,000”.

The post says that - “In 1970, the year that Paul McCartney struck out on his own, the top British income tax rate was 83 percent, before other taxes”.

* As part of its Summer Tax Tips series the IRS gives us “Five Facts about the Making Work Pay Tax Credit”.

I first discussed the problem with the Making Work Pay credit in my post “THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 – WHAT’S NEW FOR 2009 – PART II”.


PS – Next week will be “Totally 1040 Free”, so there will be no Wednesday or Saturday BUZZ. I may do a special Monday BUZZ on September 21st.

Friday, September 11, 2009


Police Officer Maurice Barry
PATH Emergency Service Unit
P.O. Shield #1038
A Port Authority officer for 16 years, Maurice "Moe" Barry, 48, was assigned to the PATH commuter train system. The resident of Rutherford, NJ, upon hearing the reports of the terrorist attacks, was one of the first on scene when he rushed from Jersey City to Lower Manhattan and then into the North Tower to help in the rescue efforts. As thousands fled the searing flames and smoke of the Towers, Officer Barry was attempting to reach trapped and frightened workers on the upper floors. The last time he was seen, he was on his way to the higher floors to get people out.
Moe had a history of heroism - he was involved in rescue efforts during an airplane crash at La Guardia airport; he once climbed a bridge to retrieve the body of a person electrocuted there; he was involved in the rescue effort during the 1993 bombing of the World Trade Center; and he rescued a woman from her home, by boat, during
Hurricane Floyd. Moe was also a volunteer for the Rutherford Ambulance Corps.
Moe was a longtime friend and client. He would always come in on the last day to have his tax return prepared. We knew the season was over when Moe came in the door. One year he came in on April 10th and we told him to go home and come back on the 15th.
In memory of Moe I no longer work on 1040s on April 15th (or whatever is the last day of tax filing season).

Thursday, September 10, 2009


It is time to finally put to bed the question – Do I need a separate business checking account?

By now you should know that the answer is a definite yes.

Why should you have a separate checking account for your business? Let me count the ways (in most cases the emphasis is mine) –

* “One of the first things you should do when you start a business is open a business checking account. You should keep your business account separate from your personal checking account. The business checkbook is your basic source of information for recording your business expenses. You should deposit all daily receipts in your business checking account. You should check your account for errors by reconciling it.”

IRS Publication 583 (Starting a Business and Keeping Records)

* “With the IRS appearance and perception is very important. You want to do as much as possible to give your self-employment activity the appearance of a real business entity so that the IRS does not come back and say that it is really a ‘hobb’”. Keeping your personal and business activity as separate as possible is one way to do this.

The IRS will be taking a closer look at Schedule C businesses in the coming years, especially those that report losses, as part of its war on the ‘Tax Gap’. The more you can do to appear to operate in a business-like manner the better

Robert D Flach (“You Do Need A Business Checking Account”)

* “Mr. Flach gets it right. You will save yourself a lot of time at tax time, and a lot of grief in an IRS exam, if personal is personal, business is business, and that's that. Run your business like a business.”

Joe Kristan (“If You Have a Home Business, Should You Have a Business-only Checking Account?” at the ROTH AND COMPANY TAX UPDATE BLOG)

* “Based on 21 years of tax return preparation (and 2 having micro businesses) my experience has taught me...While good documentation of business expenses from a personal account may help in an audit, I would never want to convince an IRS agent that flowers for my mom were a business expense even if they were.

Hobby vs Business classifications are easier if the owner is acting like it is a business and takes on the responsibility of a business account.

It's really cheaper. My business account is free most of the time and even if it wasn't a few bucks a month is much cheaper than paying the tax professional to clean up someone's personal/business account to do taxes. I can't think of a client with a merged account who didn't need me to spend extra time (and charge more) to audit their account for legitimate expenses. If you want to buy the kids' school supplies and copy paper and toner for the business together from one account. Be prepared to pay me to separate them and pro-rate the tax. Much cheaper to separate them and pay for them separately from different accounts

Trish McIntire (comment submitted to The Wandering Tax Pro and June Walker’s blog)

* “Whether or not a taxpayer has a separate banking account for a business and/or comingles funds between the business and personal accounts is an issue that has come before the US Tax Court. The court always holds against the tax payer any comingling of funds and/or failure to maintain a separate account. A taxpayer must then prevail on other facts and circumstances to win their case that they are conducting a business. At a minimum, anyone advising a taxpayer to not maintain a separate bank account should also advise them that they stand a greater risk in a tax audit and before the US Tax Court if they fail to maintain the account.”

Hal Leahy (comment submitted to The Wandering Tax Pro – the comment included many examples of Tax Court cases where the taxpayer did not have a separate business checking account)

* “The important thing is to have an account for your business that’s separate from your personal account. The IRS and CRA both recommend keeping all personal and business finances separate. This can be a bookkeeping challenge for many home-based businesses, but the painstaking record keeping will be worth it if the government ever calls on you to justify your business deductions.

The other advantage is that a separate business account may be seen as more professional when you’re dealing with vendors or suppliers. Home-based businesses may not be taken as seriously as conventional businesses, so by showing that you’re running the business professionally, you’re boosting your credibility

Yvonne Jeffery & Sheri Linsenbach ("Opening Business Checking Accounts" at EVERYTHING.COM)

* “Keeping things separate also helps you to see if your business is profitable (the major goal of owning your own business, of course).”

Cindy Morus (“Separate Accounts for Business and Personal Expenses” at MEND YOUR MONEY)

* “Here are some additional benefits of setting up a separate business account:

• It becomes very easy to track day-to-day expenses and manage payments from one source

• You can review business finances at a glance, especially if the statements are available online

• You can speed up your tax process; your accountant can easily see the tracking and progress of all of your business payments, and set up the necessary accounts for reporting purposes with ease

• Business checking accounts may offer you reduced fees and processing charges

• You're eliminating potential scrutiny from the IRS regarding personal and business accounting transactions

• You can monitor incoming and outgoing payments easily

• It's easier to match up your expenses on the general ledger and chart of accounts at the end of the fiscal year

• Deposits and receipts are easier to track and store

• It's simple to match invoices and cash receipts

• If you're using online payments for bills or even payroll, the transfer of funds will be instant-you won't have to balance your personal checkbook every time

• You'll have easy access to the paper trail of your business operations

When you can separate the flow of money from your personal accounts, it becomes much easier to identify revenue and expenses with ease

Sabah Karimi (“Setting Up A Separate Bank Account for Your Small Business” at HUB PAGES)

The most important rule in record keeping for the small business is this: Open a separate checking account for your business and use that checkbook as an audit trail to record all business activity! Without a separate business checking account you cannot possibly keep track of your income or expenses and you are asking for an unfavorable audit.”

AccounTax Professional Services, Inc. (“Easy Record Keeping For The Small Business”)

I could go on and on, but you get the idea. With the one exception (you know who), to a person (I do not want to be called sexist by saying “to a man”) every tax blogger and tax and business professional agrees with me and recommends having a separate business checking account for any business activity, including the non-LLC sole proprietor who files a Schedule C.
I must point out that when a Schedule C is selected for audit the IRS will obviously want to see the bank statements for both the business and the personal accounts and track the deposits to both. They want to make sure that all business income is properly reported. It is very important to maintain proper documentation for the deposits to both the business and the personal checking accounts.

Even though every reliable source, including the IRS, advises that an independent contractor/sole proprietor should keep a separate business checking account, it is not a strict legal requirement. And it does not mean that every independent contractor/sole proprietor will do so. We can talk until we are blue in the face telling clients what they “should” do, but there are always those who thank us for the advice and do just the opposite.

A small business, especially the smaller and simpler side-line business, can get by using the owner’s personal checking account for business transactions, and many do. In such a case as a tax preparer I can still properly complete the Schedule C and Form 1040, and have done so often in the past, although it may involve more work and a higher fee.

But every time I am asked “do you recommend that I” or “should I” have a separate business checking account I will answer with a definite “yes”!