Saturday, November 7, 2009


* It seems most tax bloggers and many personal finance bloggers have posted about the Worker, Homeownership, and Business Assistance Act of 2009, which, among other things, extends unemployment benefits and the First Time Homebuyer Credit. As I mentioned in an earlier post I will publish an analysis here at TWTP once I have had a chance to review it in depth – probably early next week.

* A “tweet” led me to “The 10 Most Common Payroll Mistakes” at the website of Complete Payroll, Inc.

I would add an 11th common payroll error - Improper reporting for partners.

According to Internal Revenue Service Revenue Ruling 69-184 you cannot be both a partner in and an employee of the same partnership. A partner cannot receive a salary from the partnership, and should not be given a W-2. Over the years I have come across this error by CPAs several times.

If you are a partner who received “guaranteed payments” during the year and you receive a Form W-2 from the partnership you should go to the partnership’s accounting firm and tell them that they goofed. You can quote me.

CPI also has a blog on payroll issues.

* Fellow tax blogger Stacie Clifford Kitts, of STACIE’S MORE TAX TIPS, was recently interviewed on the OC Talk Radio online program “Critical Mass”. Stacie discussed how her use of social media has affected her practice. Check it out.

* Fellow blogger John Sheeley led me to “Liberty Tax Makes a Bid for Bank” in a tweet.

It seems, “Liberty Tax Service wants to build on its rivalry with H&R Block Inc. by buying a bank.”

I guess Liberty is not satisfied with just screwing its clients with usurious Refund Anticipation Loans. Now it wants to emulate Henry and Richard by screwing its clients with high fee bank services, which, I expect, will include, like H+R, an IRA investment that is guaranteed to lose money.

* Trish McIntire reports on a change in the Form 1040A supplemental schedule filing regime in “Tax Simplification?” at OUR TAXING TIMES.

I have not yet seen the draft for the 2009 Form 1040A, but is appears that the former 1040A Schedules 1, 2 and 3 have been done away with. According to Trish, for 2009 you would use instead the Form 1040 series form (i.e. Schedule B, Form 2441, or Schedule R).

I haven’t filed a Schedule R in several dogs’ ages.

* A couple of times over the years I have been asked by a client if he can claim the child of a “live-in” girlfriend as a dependent. An item from the JOURNAL OF ACCOUNTANCY discusses the issue of “Unrelated Child as a Qualifying Relative”.

* Tax attorney Robert W Woods gives us his list of “Ten Ways To Audit Proof Your Tax Return” at FORBES.COM.

Woods’ list is a bit controversial, but he does make some good comments –

"• So don't be scared to take deductions and losses you're entitled to, but don't take tax positions you aren't comfortable defending. If you take reasonable tax positions, you'll likely find you won't end up needing to defend them. And if you do face an audit, it will likely be far easier.

• There are many old wives tales saying that certain items trigger an audit: home office deductions, passive losses, schedule C (sole proprietorship) activities, etc. You can't predict the trigger (and you can drive yourself crazy trying), but you can adopt the "be reasonable" mantra about every item on your return, including these.

• Some argue a return prepared by a professional is less likely to be audited, but there's little reliable data to support it. Nevertheless, having a professional prepare your return--or at least advise on anything quirky--is a good idea.

• You'd be surprised how many professionals and amateurs alike try to submit too much information. True, if your return is complex, you may need to add explanations or disclosures in footnotes. Be concise, truthful and accurate, but don't provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS

He takes a controversial position, and knows he will “take considerable heat for my opinion on this”, in advising “Don't file electronically”.

Why –

Paper filing means it's more work for the IRS to access all the information in your return. Your duty as a taxpayer is to be truthful and accurate, but you don't have to make it easy for the IRS. . . you are giving the IRS easy electronic access to information it would otherwise have to enter, enabling the agency to examine your return and mine the data more easily than it otherwise could.”

I don’t file electronically because I cannot do so directly to the IRS free of charge via the IRS website, and not because doing so will increase one’s chances of an audit. However, tax professionals will be required to file electronically beginning with 2010 tax returns.



Stacie Clifford Kitts said...

As ever a great Buzz.
Thanks for the mention.


Anonymous said...

Anyone who would think Henry or Richard Bloch screwed clients has lost all credibility in my mind. I know this is a blog and you can say what you want, but you really should try to learn a little of what you speak.