Monday, August 22, 2011


Just in case you are interested -

(1) I have applied “Pepto Bismo” for some temporary relief from my computer’s diarrhea issue. But when it does run it is “FSAM” x 3 – three times as slow as before the diarrhea set in, when it was running only FSAM. I can run the computer in “Safe Mode”, but since the fire in my building on Friday (another story) I cannot access the internet in this mode. I can use WORD, but cannot print.

When I can access the internet for brief periods I must make the most use of my time, so I do not “wander” the web looking for BUZZ. And when I am using a public computer I am not going to pay to surf without a business-necessary purpose. So until the situation is fixed I am afraid there will be no BUZZ.

I will be contacting the “Nerd Herd” (or whatever they are really called) early next week for a house call. Wish me luck.

(2) I have either completed, or red-filed, the remaining GD extensions. So now all that is left are red-files (need more info) and extensions for which I have not yet received any information. So the balls are in the courts of the clients.

Of course, this said, as soon as all was up-to-date I received a package in the mail with the “stuff” of one of the “not yet received” clients. There is truly “no rest for the weary” – or is that “wicked”? At this point the newly received package will just have to wait until other matters, like the three corporations that are due in September, are done.

(3) Now that I think of it, I really do want to get the three corporations done before the end of the month. But when my computer is running relatively normally I usually spend the entire morning online “wandering” and emailing and researching, etc. I can access my general ledger program in “Safe Mode” – so if I wait for a week before calling in the “Nerd Herd” maybe I can get the corporations done and out on schedule!

(4) I will try to publish some posts with tax info or commentary during the processing of fixing the computer FU – so you do not suffer complete TWTP withdrawal.

So that’s the story.


Thursday, August 18, 2011


My computer has contracted diarrhea - every time I turn it on it takes a dump (of physical memory)!

Sorry - no BUZZ, or any other posts, until I can get it fixed.


Monday, August 15, 2011


Generally I only hear from my 1040 clients during tax time, except for perhaps a Christmas card, and, of course, if they hear from their “Uncle Sam”, “Uncle Chris” (Christie), or “Uncle Andy” (Cuomo). Several are personal friends, so I do see them in various social settings during the year. And I will occasionally run into a client on the street or in a local store or restaurant.

There are, however, times during the year when I want to hear from my clients. Unfortunately I do not always hear from them at these times.

As I say in the memo I send out with finished returns –

If something of major tax consequence happens during the year . . . send us the details via email or postal mail ASAP.”

What do I mean by “something of major tax consequence”?

· You sell a rental, investment or vacation property.

· You sell stock from ATT or some other company with a history of splits and spin-offs.

· You make a big score in the stock market.

· You take a “premature” distribution from a pension plan or IRA that is not rolled over, or are the beneficiary of a deceased person’s IRA or pension plan.

· You marry or divorce.

One of the reasons I want to know if any of these situations occur is because you may need to make an estimated tax payment, or change your withholding, to avoid being penalized for “underpayment of estimated tax”.

In some cases I want to know before you “do the deed”, such as when you take a distribution from a pension plan or an IRA, so I can advise you of the amount of federal tax to withhold from the distribution.

In the case of a divorce the specific distribution of assets and the wording of the divorce agreement can be very important for a variety of tax-related reasons, especially if there are minor children and/or a variety of types of property and investments involved, so if your divorce attorney is not “tax savvy” you should contact me before the agreement is finalized.

Here is another reason why I want to know about such actions when they happen. During the actual tax filing season (for me February 1 – April 14) time is extremely precious. So if there is anything I can do during the “regular” year, such as determine the cost basis of real estate or stocks sold, it will save me valuable time during “the season”.

I would expect that most competent tax preparers feel the same way as I do – and would want you to contact them during the year if any of the situations I have listed above occur. So please contact your tax preparer during the year when they do.


Sunday, August 14, 2011


A recent visit to the website of New Jersey’s Surflight Theatre in Beach Haven on Long Beach Island introduced me to the theatre’s fall offerings.

Here is what I found –

(1) ALL HANDS ON DECK! - Sept 21 - Oct. 2

ALL SINGING! ALL DANCING! ALL BIG BAND! Based on Bob Hope's 1942 USO tour to the troops in the field, ALL HANDS ON DECK! is a new, two-act revue performed by four sparkling singer/dancer/comics and a 9-piece orchestra featuring the songs, dances and laughs that America has loved since the '40s.

ALL HANDS ON DECK! boasts over 40 classic Big Band hits in original arrangements all packaged in a fun-filled, true-to-life reproduction of the kind of USO show Bob Hope and Jack Benny would have taken to the troops: classic humor and great music from those special days of road shows, war-bond drives, and radio broadcasts.


A celebration of the first lady of television, An Evening with Lucille Ball: “Thank You for Asking” is a touching, funny and uplifting one-woman play performed by actress and renowned impressionist, Suzanne LaRusch, and written by Suzanne LaRusch & Lucie Arnaz. Crafted in the spirit of the amusing lectures Lucy enjoyed giving throughout her career, the evening recreates the comic genius and the magic behind the “Queen of Comedy.” Arnaz also directs the piece with her award winning knowledge of the theatre and of her mother!

Lucy guides us through the lifetime of personal memories inspiring her timeless sketches on “I Love Lucy,” her 30-year television career and never-before heard personal recollections about her tempestuous and complicated marriage to Cuban bandleader turned impresario, Desi Arnaz. It’s the Lucy the whole world loved – from "Ricardo" to "Mame" – but, more importantly, it’s an evening with the REAL Lucy, as you’ve never seen her before.

- Nov 25 - Dec 23

Another Surflight premiere! A Special Holiday Edition of the hit musical Forever Plaid, PLAID TIDINGS continues the story of the singing group whose lives were lost in an accident involving a busload of teens en route to see "The Ed Sullivan Show." Encouraged by a heavenly phone call from Rosemary Clooney, the high-spirited boys of Forever Plaid – Frankie, Sparky, Jinx and Smudge – are transported from the ethereal cosmos to stage a nostalgic holiday extravaganza for world-weary mortals on Earth. Stuffed with such "Plaid-erized" Christmas standards as "Mr. Santa," "Let It Snow" and "Have Yourself a Merry Little Christmas," this PLAID TIDINGS is one holiday treat that is truly heaven-sent.

I would like to see all three – I just have to check my calendar. Maybe I will see you at one of the productions!

Click here for more info and to order tickets.


Saturday, August 13, 2011


* If you haven’t already done so – check out the August 2011 issue of LOIS, my free newsletter. As usual, it contains lots of interesting stuff! Feel free to pass it along to friends and family.

* Did you see my guest post on “Regulating Tax Preparers” in “The Wandering Tax Pro Meanders to Forbes” at Peter J Reilly’s PASSIVE ACTIVITIES blog at FORBES?

Sincere thanks to Peter, who continues PASSIVE ACTIVITIES AND OTHER OXYMORONS, for allowing me to appear in the FORBES venue!

* Back at the end of July Peter discussed the issue of hobby losses in “Drag Racing and Amway – Fun Not Profit” at FORBES, with some interesting examples. In one case the Court actually accepted Feng Shui as a business plan!

I always recommend that you read the comments whenever I suggest a post. When reading the comments here be aware that my colleague did not murder his mother.

* I recently reminded you that, for tax purposes, like Vegas, what happens in an IRA stays in an IRA – so you get no tax deduction for losses in tax-deferred accounts. William Perez suggests a possible strategy to take advantage of paper losses in your IRA or 401(k) investments in his post “Market Losses Inside an IRA or 401(k)? Consider Converting”.

* I am certainly glad the NATP annual conference was in Austin TX last year. Austin resident Kay Bell recently tweeted “you know it's too damn hot when the radio DJ says ‘It's only 103’”. It was bad enough in Austin in the 90s!

I wonder how hot it is in St Louis, the site of this year’s conference? Why does NATP always have its conference in the hottest places in the country at the height of the summer?

* Another “tweet” from Kay led me to “Congress Less Popular Than, Well, So Many Things” from the WASHINGTON POST, a companion to an online article I referenced in the last BUZZ installment.

Cloning sheep. Cloning humans, even. Caning teen vandals. Believing that aliens have descended from space and abducted humans.

These are all things that, at one time or another, have enjoyed more public backing than Congress is getting right now

I bet caning members of Congress would receive wide support.

Some good news in related surveys -

And a new Washington Post poll found that only 17 percent of Americans surveyed thought their representative should be reelected in 2012.”

Let us hope this feeling of GRIP (Get Rid of Incumbent Politicians) is still here when it is time to vote next year.

* As my regular readers know, each year the Tax Foundation determines “Tax Freedom Day”, which was April 12th this year. Did you know we also celebrate “Cost of Government Day” each year as well?

Every year, the Americans for Tax Reform Foundation and the Center for Fiscal Accountability calculate Cost of Government Day. This is the day on which the average American has earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government at the federal, state, and local levels.

In 2011, Cost of Government Day falls on August 12. Working people must toil 224 days out of the year just to meet all costs imposed by government, a full 27 days longer than 2008.

In other words, in 2011 the cost of government consumes 61.42 percent of national income

* Speaking of the Tax Foundation, a post at its TAX POLICY BLOG reveals that “FY2011 Data Shows Record Profits for Many State-Run Lotteries”.

Reports of record profits from the lotteries come despite continuing high unemployment and an economy that has been flat or downward-trending for the past two years.”

This comes as no surprise to me. A long-time friend (from high school) and client used to have a deli on the corner up from my apartment that sold NJ State Lottery tickets. He told me that in times of economic uncertainty he would sell less food but more lottery tickets!

* In my web “wanderings” I came across a page of good tax tips for child care providers from Alison Jacks of Fremont CA, a self-employed Enrolled Agent focusing on family child care taxes and payroll. Click here to check it out.


Friday, August 12, 2011


I rarely open “forwarded” emails. It depends on the sender and the description in the “Subject Line”. Here is an item that was recently forwarded by a reliable long-time friend and client -

Congressional Reform Act of 2011

1. No Tenure / No Pension. A Congressman collects a salary while in office and receives no pay when they are out of office.

2. Congress (past, present & future) participates in Social Security. All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and participates in the same health care system as the American people.

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen are void effective 1/1/12. The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.

It does provide some food for thought. Here is some of what I have been thinking -

Members of Congress should not receive a “defined benefit” government pension, funded by “employer contributions” from the United States Treasury. Social Security and Medicare taxes should be withheld from their wages. They should be able to contribute a portion of their salary to a 403(b) plan (with no “employer” match) and a 457 deferred compensation plan.

I do agree that Congress should not be able to vote for their own pay raises. Pay increments for “Congresscritters” should be liked to the CPI and be the same as the increments for Social Security beneficiaries and other government “employees”.

Members of Congress should be able to participate in the same health care plan as other government “employees” during their term in office only, but should be required to contribute toward the cost of the plan, as most non-government employed Americans currently do. When they leave office they should be able to buy health insurance from the government for a limited period of time, a la COBRA.

Congresspersons should obviously abide by all the laws of the land, and be subject to the same penalties as “normal” Americans if they break these laws. They should be subject to the same monetary penalties and possible jail time as the rest of us if they cheat on their taxes (i.e. Geithner and Rangel). A mere slap on the wrist and being told you are a bad boy in front of the class, when any other taxpayer would serve a jail sentence, is not acceptable.

A “Congresscritter”, or government official, cheating on his/her taxes is like an employee stealing from his/her employer. Those who do should be automatically and immediately removed from office or fired.

While the forward does not mention the issue, perhaps there should be term limits on the idiots in Congress. A total of 12 years is plenty of time for one individual to screw the American public.

What do you think?

BTW, here is another Congress-related “forward” I recently received -

Having already downed a few power drinks, she turns around, faces him, looks him straight in the eye and says,

"Listen here, good looking, I will screw anybody, anytime, anywhere, their place, my place, in the car, front door, back door, on the ground, standing up, sitting down, naked or with clothes on . . . It doesn't matter to me. I just love it."

His eyes now wide with interest, he responds,

‘No kidding... I'm in Congress too. What state are you from?’"


Thursday, August 11, 2011


Stop whatever you are doing and go to “The Wandering Tax Pro Meanders to Forbes” at Peter J Reilly’s PASSIVE ACTIVITIES blog on FORBES!

It features a guest post by yours truly on REGULATING TAX PREPARERS.

My TWTP posts are often referenced and linked to on a page in the WALL STREET JOURNAL online venue – and now I am in a FORBES online venue!

Thanks, Peter!


Whenever I visit the Lake District of PA I always pick up a copy of OUR TOWN, a free 8½ x 11 “adzine” that also contains a multi-page editorial beginning on the cover (usually of a more conservative bent, although not without some basis in common sense), and jokes, humorous stories, notices and pearls of wisdom submitted by “faithful Our Town readers”.

The issue I picked up when I was there last week included the following item -


Here are possibly the 5 best sentences you’ll ever read:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it.

5. When half the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they worked for, that is the beginning of the end of any nation

You do know that under our current Tax Code about half of the country either pays absolutely no federal income tax or actually makes a profit by filing a Form 1040.

Food for thought indeed.


Wednesday, August 10, 2011


Since there was no BUZZ last Saturday due to my wonderful and totally 1040-free time off in PA, as you would expect today’s installment is “chock-a-block”. There was lots of good stuff from “the usual suspects” and others while I was relaxing and reading alongside Lake Wallenpaupack and the Delaware River.

* Here it is – the August 2011 issue of LOIS, my free newsletter. As promised, it contains lots of interesting stuff! Feel free to pass it along to friends and family.

* Oops! He did it again! It seems the pompous ass offending/offensive tax blogger has once again proven he is a pompous ass by the tone and content of his latest personal attack, which continues to lie about and misrepresent what I have said in previous posts. I expect that my regular readers, if they come across his rants, know me well enough to know that he is just a jealous arsehole.

My fellow, more respectful and responsible, tax bloggers have advised me that the fool is only after attention, and have told me to ignore his excrement and not give him any attention (which is why I never refer to his name or link to his posts). Good advice. Unless he goes overboard in the future this is the last I will mention of the fool. Let’s hope he just fades away.

If I may be allowed one last time - what an arsehole!

*While I was gone Kay Bell posted her “Tax Carnival 89: Dog Days” – a day late but certainly not a dollar short!

As Kay observes, it’s “Too hot to do much of anything … except hold a Tax Carnival!” So she lets loose the hounds of tax.

Kay ends her carnival with my “Bring Me the Head of the US Tax Code” post, with some good stuff on the way there.

* Kay celebrated the 100th birthday of Lucille Ball with “If the IRS Asks, You Got Some ‘Splaining to Do”.

She offers some words of wisdom for taxpayers -

Remember, the burden of proof when it comes to an IRS audit is on you.

The IRS examiner starts from the premise that your claims are wrong. Unless you can prove otherwise, then your claims for such things as a dependent and any related tax breaks, business expense write-offs and charitable deductions will be disallowed.

To prevent that, you need clear and convincing proof. That means documentation.

A receipt is your best defense. Make sure it has all the relevant details -- such as type of expense or donation, when, where, who else was involved, for example, attendees at a business meeting -- or add that information yourself directly on the receipt. Without adequate records, the IRS can estimate your income and/or expenses, usually not in your tax favor

Her final words of advice are also wise (the highlight is mine) –

Yes, an audit is nerve wracking. But don't make it worse by worrying needlessly. If your claims are legitimate and you have the records to back them up, then you should be OK.

And your audit can serve as a learning experience to help ensure that you never go through the process ever again

* And it is a trifecta for the Yellow Rose of Taxes. Check out Kay’s post “Downgrading Capitol Hill” over at BANKRATE.

Kay provides ratings for the various components of the idiots in Congress, and for BO. The Tea Party gets a very appropriate “F” –

You, however, are like the young Chicken Hawk latching onto Foghorn Leghorn's ankle; you're convinced you're much more important than you are. And your insistence on rigid extremism and willingness -- desire in some cases -- to push the country into default were major factors in shaping the mishmash of a debt deal that resulted.”

* Do you remember the movie FIVE EASY PIECES from the early 1970s? Jack Nicholson and, I think, Karen Black. Kelly Phillips Erb, FORBES’ TAX GIRL, is ”Breaking Down the Debt Ceiling Fix in 10 Easy Pieces”.

Her 10th “easy piece” –

Nobody really won in this scenario. Not President Obama. Not Senate Majority Leader Harry Reid (D-NV). Not Senate Minority Leader Mitch McConnell (R-KY). Not House Majority Leader Eric Cantor (R-VA). Not House Minority Leader Nancy Pelosi (D-CA). And not Speaker of the House John Boehner (R-OH). And certainly not the American people.”

The American people rarely win when Congress acts – or rather reacts.

At least the idiots got it done by, literally, the deadline.

* And Kelly keeps us up-to-date on the airline ticket tax story in “IRS, Congress Now Say No To Ticket Tax Refunds”.

Kelly points out that as the result of a “quick fix” by the idiots in Congress (“goodness knows, the sitting Congress can’t do anything long term”) -

“. . .passengers who purchased tickets prior to July 23 and traveled between July 23 and the date of enactment of today’s legislation are not entitled to a refund of the airline ticket excise tax.”

* Let’s make it another trifecta. Kelly puts out a “Call for Guest Posts About Taxes and the Economy”.

* I agree with at least the first part of Prof Annette Nellen’s post “Payroll Tax Cut Should Expire as Intended - We Need to Stop the Tax Cut Addiction” at 21st CENTURY TAXATION.

While this method was much better than Dubya’s rebate checks for getting money in the hand of taxpayers, it was a PITA for payroll preparers.

And, surprisingly for something from BO, it put over $4,000 in the hands of some couples earning over $200,000! I thought he wanted them to pay more taxes, not get more rebates.

* Apparently most of America now joins me in thinking that the members of Congress are idiots. The NEW YORK TIMES reports “Disapproval Rate for Congress at Record 82% After Debt Talks”.

A record 82 percent of Americans now disapprove of the way Congress is handling its job — the most since The Times first began asking the question in 1977, and even more than after another political stalemate led to a shutdown of the federal government in 1995.

More than four out of five people surveyed said that the recent debt-ceiling debate was more about gaining political advantage than about doing what is best for the country. Nearly three-quarters said that the debate had harmed the image of the United States in the world.”

* Joe Kristan gave us a daily double on August 4th.

First he discusses the governor of his home state of Iowa’s “Earned Income Credit Veto: Heartless, or Good Policy?”.

The Earned Income Credit is best understood as a welfare program. It applies when taxpayers have some income from wages and self employment income, but it phases out quickly as income rises. If the credit computed exceeds tax liability, the taxpayer gets a check for the difference

The Earned Income Credit, like other refundable credits, is a fraud magnet. The GAO estimates a 25% error rate in claiming the credit for 2010. Assuming that rate applies to Iowa's piggyback credit, that means $7 million of the $28 million would have been issued in error

Then he answers the question “When is a Tax Deduction the Same as Spending?”.

The easiest cases to identify as spending are refundable and transferable tax credits, like the Ethanol credit, the Earned Income Tax Credit, and the late Iowa film credit. These turn the income tax return into a payment claim voucher.”

* Trish McIntire tells us about the helpful government website “Mymoney,gov” over at OUR TAXING TIMES.

* And over at her MOM AND POP’S blog, in a post on the question of “Employee or Not?” she voices the frustrations of many a tax preparer –

The worse problem with being a tax preparer is that I don’t hear about an issue until the client comes in to get their taxes done. That’s when they tell me about the 401K distribution, starting social security, a new business or hiring an employee. Too often, I’m told that the business paid $XXX in labor costs. No 1099MISC was issued and serious questions if those paid are really employees not contract labor. Then I have to clean up the mess.”

This post goes on to discuss the classification of an employee as an independent contractor.

* CPA Michele Edwards offers up another blog list in “Top 10 Things You Need to do When Starting a Business”, a guest post at Joe Arsenault’s CAFÉ TAX.

I certainly agree with her advice -

Choosing a business structure is not a task to be taken lightly. It is important that you understand the pros and cons to each structure.”

* And Joe himself tackles a question I have been asked many times over the years – “Pay Down Debt or Save Money?”.

Joe wisely recommends -

Try using this simple 3 step process to make your choice.

1. Identify the variables
2. Run an analysis on the different scenarios
3. Choose and implement the best scenario for you

I have always favored paying down debt first for a variety of reasons. Perhaps most important is that paying down debt usually provides a better “return on investment”, especially in today’s market. Credit card debt is often double-digit, and, while mortgage interest rates are relatively low, bank interest rates on savings are abysmal, and the stock market is in turmoil.

If you have no credit card debt, and the interest rate of your mortgage interest is 4%, and you can earn 6% or more in an investment I might consider saving money before paying down the mortgage.

* IRS Information Release IR-2011-83 announces “2010 Form 8939 is Due Nov. 15; Reporting Option Applies to Many Large Estates”.

The release is relatively brief, so I will quote it here in entirety -

The Internal Revenue Service issued guidance today on the treatment of basis for certain estates of decedents who died in 2010. The guidance assists executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply. Form 8939, the basis allocation form required to be filed by executors opting out of the estate tax, is due Nov. 15, 2011.

Under the guidance issued today, an executor must file Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, to opt out of the estate tax and have the new carryover basis rules apply. The IRS expects to issue Form 8939 and the related instructions early this fall.Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. This recent law allows executors of the estates of decedents who died in 2010 to opt out of the estate tax, and instead elect to be governed by the repealed carry-over basis provisions of the 2001 Act. This choice is to be made by filing Form 8939

* A reminder – the Taxpayer Advocate Service agrees with me that “The Time for Tax Reform is Now!".

To help this dialogue along, the Taxpayer Advocate Service has established a vehicle to receive taxpayers’ suggestions about tax reform.”

Click here to submit your suggestion.

* The Tax Foundation’s TAX POLICY BLOG explains “The Facts Contradict Obama's Calls for Higher Taxes on the Rich and Corporations”.

The post’s bottom line –

Obama’s repeated statements that the wealthy and corporations are not paying their fair share of taxes are simply false. The facts show that the very taxpayers Obama wants to raise taxes on are already paying more than their fair share of taxes and that the majority of Americans are getting the benefits of government spending while contributing next to nothing to its basic cost. That is a recipe for fiscal and social instability.”

* A “tweet” from fellow tax “twit” taxbrain offered some good advice –

If you itemize be sure to keep track of your medical expenses throughout the year. It’s surprising how quickly they add up.”

* Michele McDonald compiles some “Outrageous Tax Stories” over at the National Society of Accountants MEMBER CONNECT page.

While I have had my share of “interesting” clients and tax returns over the past 40 seasons, thankfully I have never had clients as “outrageous” as those in Michele’s post. And, also thankfully, as I am no longer accepting new 1040 clients, I never will.

* Let’s end with some good news. MA Attorney General Martha Coakley tells us that “H&R Block Mortgage Company Will Provide $125 Million in Loan Modifications and Restitution - Settlement With AG Coakley’s Office Resolves Allegations of Unfair Lending and Discriminatory Practices Against Thousands of Latino and African-American Borrowers by Major Subprime Lender”.

I have always said that one reason Henry and Richard overcharges and oversells to customers in order to cover their many court judgments and legal settlements.

I am trying to get some work done (including the last of the GDEs) – so there may be no posts until Saturday’s BUZZ installment.


Tuesday, August 9, 2011


The value of many taxpayers’ investment portfolios, both in “regular” accounts and in tax-deferred retirement, education or medical savings accounts, has substantially dropped as a result of the reduction of the rating of the United States from AAA to AA+, or more appropriately because of the actions, and inactions, of the idiots in Congress.

However there is no tax consequence in such a drop for a “regular” investment unless you actually sell the investment at a loss – it is sold for less than it originally cost. And there is no tax consequence whatsoever for the tax-deferred accounts, even if investments within the account are actually sold.

If an investment was worth $10,000 last week, but is now worth only $6,500, your portfolio suffered a $3,500 “paper” loss. However, if the investment cost only $5,000 when it was originally purchased and it is sold for $6,500 there is a $1,500 taxable gain, which, if it was held for one year or more, will be taxed at the federal level at the appropriate special capital gain rate – possibly 0%.

If the investment originally cost $10,000 and it is sold for $6,500 there will be a $3,500 net capital loss. This loss must first be applied against any capital gains of the same category – short-term or long-term – and if there is a remaining loss it is applied against capital gains of the other category. If there still remains a net loss it is deductible, within limits, against other taxable income and the resulting tax savings is based on “ordinary income” rates.

The net capital loss deduction is limited to $3,000 per year ($1,500 if married and filing separately), and has been so for decades. If the $3,500 loss is your only Schedule D activity for the year then $3,000 can be deducted against other taxable income and $500 is carried forward to your 2012 Schedule D. If you are in the 25% bracket this $3,000 loss deduction will reduce your federal tax liability by $750, allowing you to recoup some of your loss.

State tax law differs from state to state. Your $3,000 net federal capital loss may or may not also be deductible on your state tax return. It is not deductible on the NJ-1040.

You should be aware that “capital gain distributions” from mutual fund investments are reported as long-term capital gains on Schedule D and can reduce the net capital loss allowable for deduction.

If you want to take advantage of the $3,500 loss deduction on the drop in your investment, but think that it will eventually go back up beyond the initial cost price and want to hold on to it, you can sell the stock today, recognize the taxable loss, and buy back the same investment after waiting 31 full days. Under the federal wash sale rules, which usually also apply on the state return, you cannot claim a loss on the sale of an investment if you buy back the same, or a substantially identical, investment within 30 days.

The wash sale does not apply if you sell an investment at a gain.

Back when I had a storefront office and the stock market dropped substantially (I don’t want to use the term crashed) many clients came into the office at tax time and complained “I lost $200,000 in my retirement plan!”. They were hoping that they would be able to get some kind of tax deduction for this loss.

I had to disappoint these clients. As I have said in a previous post, like Vegas, What Happens in an IRA (or any other tax-deferred retirement account) Stays in the IRA. Losses within a tax-deferred account are not deductible, whether or not any investments are actually sold.

To be honest, usually the client did not actually lose any money. The value of his retirement account may have dropped by $200,000, but it was still worth almost twice what he/she had contributed to the account over the years via payroll deduction.

There is a way to get a tax benefit for losses in an IRA (not in any employer-sponsored retirement plan) – but only if you withdraw all the monies in all your IRA accounts in one year and the total amount of what you get out is less than what you put in over the years. But that is the subject for another post.


Monday, August 8, 2011


The August 2011 issue of LOIS is here – with, as usual, lots of interesting stuff!

Here is what you will find in the new issue –

· DID YOU KNOW – trivia about Rodgers + Hammerstein’s SOUTH PACIFIC.
· TAX BLOGGERS OFFER THEIR BEST ADVICE – just as the title suggests.
· UNCLAIMED PROPERTY – how an item on a morning tv news program led to my family putting $5,000+ in the bank!
· LBJ TOOK THE IRT DOWN TO 4th STREET USA. . . – about our love of acronyms.

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Sunday, August 7, 2011


Before leaving for PA I booked my tickets for the upcoming 2011 NEW YORK MUSICAL THEATRE FESTIVAL.

The New York Musical Theatre Festival provides a launching pad for the next generation of musicals and their creators to ensure the continued vitality of America's greatest art form. We discover, nurture, and promote promising musical theatre artists and producers at all stages of development, and inspire a diverse audience through vibrant, accessible, powerful new work.

The largest annual musical theatre event in the world, the Festival presents 30 productions each fall in the heart of New York City's theatre district, alongside a dazzling array of readings, concerts, and other special events. It is attended by an audience of more than 30,000 theater lovers and by producers, talent scouts, and other industry insiders. Of the more than 270 new musicals presented at the Festival since its inception in 2004, more than 70 have gone on to successful productions on Broadway, off-Broadway, in almost every U.S. state and in more than a dozen countries around the world

My $100 Silver Membership entitled me to 4 tickets. Here is what I chose.


Book and Lyrics by Bret Carr, Mick Bonde, Brandon Ellis, Michael "Tuba" McKinsey, and Nick Vering / Music by Various Composers

Take an unruly quintet of testosterone-laden performers and a brilliant talent on the piano, add in the reinterpretation of a few old musical theater ‘chestnuts’, and POW! You get a hilarious hour and a half of entertainment! Bridged with heartfelt moments, Balls unabashedly celebrates its own inappropriateness. It’s a parody show from a totally new vantage! Sooo…Buckle your seatbelts and join us as we examine the role of the straight male in musical theatre!


A Musical Comedy by The Seligmann Brothers

The Big Bank of Brooklyn revels in foreclosing on homes and dreams. But the bank's rising star, Stuart Stevens, has lost his passion for repossession and finds himself falling in love with Iris, the owner of a flower shop he's been ordered to foreclose on. Meanwhile, a radical environmentalist and his precocious 11-year old daughter, Parsley, plot their revenge. Will the bank go bust? Or BOOM!? A wacky wonderful musical for our time.”

The Brain That Wouldn't Die! In 3D!!!

Book and Lyrics by T. Sivak and E. Gelman / Music by T. Sivak

It’s 1961 and Dr. Dick Cuttingham will go to any lengths to further science ---even Murder! When his fiancee is accidentally decapitated, Dick keeps her head alive in a baking pan. Add a Monster in the Closet, a one-armed lab assistant, a model with "a body to die for," and a live rock band and you have the formula for one dangerous evening of entertainment. WARNING: You may laugh your head off.”


5 of the sexiest, sassiest, and brassiest ingénues of the Broadway Stage are strutting their stilettos down to NYMF this year in the debut of “TOUR DE FIERCE." This ambitious stage production mixes elements of Broadway, Cabaret, Fashion, Performance Art and Film, in a non-stop song and dance concert. The best of Broadway and Pop music is belted, twirled and tipped by these remarkable ladies, as they tell the story of their road to Broadway. 5 women, 2 hours, 1 word: FIERCE. Get into it.”

Off-Broadway musical productions in an intimate theatre for only $26.00 and change each (when you add in online processing fee)!

I look forward to these productions. Maybe I’ll see you there.


Wednesday, August 3, 2011


Not much BUZZ this time around. I am off for a week in the Lake District of Pennsylvania, so no posts for a while. I did get one GDE in the mail before leaving – and only 2 are left in the “to be done” box for when I my return.

I wrote the August issue of LOIS – but have not had time to have it “pdf-ed” or posted to the LOIS website. Will do when I return. I can tell you that is has lots of interesting stuff!

* What an arsehole! You know who I mean (not a member of Congress this time).

* Two great quotes via “tweets” from THE MISSOURI TAX GUY Bruce -

I don't make jokes. I just watch the government and report the facts.” Will Rogers.

And –

Death is not the end. There remains the litigation over the estate.” Ambrose Bierce

* Bruce also “tweeted” about his post “How to Prepare for a Successful Retierment”, which turned out to be from last December. It is just as informative this summer as it was last winter.

* And while we are on the subject, Joe Arsenault asks “Is My Retirement Plan Qualified” at CAFETAX, providing a good overview of the various types of pension and retirement plans in the proces.

* Jean Murray “Time for Your Mid-year Business Tax Tune-up - Part 1” at ABOUT.COM BUSINESS LAW/TAXES

* William Perez “Gay Couples Can File as Married Couples in New York” at ABOUT.COM TAX PLANNING: US.

Same-gendered spouses in New York can file their state tax returns as married as a result of the Marriage Equality Act. New guidance issued on July 29, 2011, from New York's Department of Taxation and Finance explains how the state's Marriage Equality Act applies to personal income taxes, estate taxes, sales tax and withholding issues.”

But same-sex couples cannot file a federal income tax return as married, so things will be complicated. As William explains -

That means preparing (at minimum) four sets of tax returns: two unmarried federal returns, one married federal return (for NY), and one married NY return. Or if the couple will file separately for New York, then they'll prepare six sets of tax returns: two unmarried federal returns, two married-filing-separate federal returns (for NY), and two married-filing-separate NY returns.”

When William says that the couple needs to prepare married federal returns that is not for actual filing, but for “information only” for purposes of the NY state return(s). Only the initial two unmarried federal returns will actually be filed with the IRS

Peter Reilly also tackles the issue in “New York Marriage Equality Includes Taxes” at his PASSIVE ACTIVITY blog at FORBES. Be sure to see my comment.

* Gott in himmel! ACCOUNTING TODAY tells us that “Tax Preparer Defrauded IRS out of Nearly $8 Million”!

A Southern California tax preparer has pleaded guilty to tax charges, admitting that he caused a tax loss to the government of $7,982,043 for tax years 2003 to 2009 by inflating the amount of mortgage interest on his clients’ tax returns.”

Hey, I thought that the IRS matched mortgage interest reported on 1040s to the amounts reported on Form 1098, which the IRS receives copies of.


Tuesday, August 2, 2011


In the past I have made the following statements of fact in my posts here at THE WANDERING TAX PRO.

(1) Just because a person has the initials CPA after his/her name does not mean that he/she is competent or current in the preparation of federal or state income tax returns.

Similarly, just because a person has the initials JD after his/her name does not mean that he/she knows anything about the preparation of 1040s.

The only initials that currently have any bearing on competence and currency in the preparation of 1040s is EA, which stands for Enrolled Agent.

I believe it is a mistake for the IRS to exempt CPAs and attorneys from the testing and CPE requirements of the new tax preparer regulation regime, and that it is a disservice to individuals with these initials, as well as the taxpaying public, not to allow them to acquire the new initials RTRP (Registered Tax Return Preparer).

A person with the initials CPA or JD after his/her name may be the best tax preparer in the country, but that distinction has to do with the specific education, training, experience, continuing education, and temperament of the individual and nothing to do with the possession of the initials.

(2) In 40 tax seasons of preparing 1040s I personally have never used expensive and flawed tax preparation software to prepare individual income tax returns. At this point in my career I have no intention of starting now. I am comfortable preparing tax returns manually, and can prepare them quickly and accurately this way.

I have no problem with the majority of tax return preparers who use tax preparation software, as long as they have an independent knowledge of tax law and remain current via CPE.

I firmly believe that all tax returns prepared by tax professionals using tax preparation software need to be carefully checked for accuracy. One should not automatically assume that a tax preparation software program has prepared a correct return. The same process that is used to check and double check a manually prepared return should be used to check and double check a computer-generated return.

I also firmly believe that the best way to initially learn how to prepare 1040s is to actually prepare 1040s - manually. Once the education has been completed the new preparer can certainly elect to use tax preparation software in his practice.

(3) It is bad tax advice to recommend that every single business entity, including every single sole proprietorship, should incorporate solely to avoid being audited.

Operating, or filing taxes, as a corporation is one option that is available to the business owner. However operating, or filing taxes, as a corporation is not the correct option for all business activities. As is the case with any tax or financial matter, before making such an important, and potentially expensive and agita-generating, decision a business owner, or any individual, should carefully consider all the facts and circumstances of his/her particular situation.

There is no blanket tax advice, other than “don’t cheat”, that applies to all taxpayers in all situations.

I do believe that most business activities should organize as a Limited Liability Company (LLC) for liability protection.

Lawyers make money by incorporating businesses and serving as "Registered Agents".

(4) The genre that has become known as “reality tv” is pure excrement. It provides no legitimate entertainment value, or any kind of “socially redeeming value”, other then to demonstrate that there are a lot of idiots out there.

When I discuss “reality tv” I am not referring to legitimate documentaries or to home improvement programs, such as those on HGTV or DIY, or “wardrobe improvement” programs like WHAT NOT TO WEAR, which do not purposefully and constantly humiliate and berate those whose wardrobe is being critiqued, or legitimate talent competitions, again where the sole purpose for the show’s existence is not to humiliate and berate participants.

Those who watch these offending reality programs possess low intelligence and poor self-esteem.

(5) I am not a fan of, or a participant in, “social media”. I do not have the need to make my personal and private information available to the “great unwashed masses”. If I want to share pictures and videos with family and friends I can send them an email. I cannot think of any circumstance where I, personally, would participate in Facebook or My Space or similar venues.

I do not see the value to a business in having a Facebook page, when having a website for the business is a much better method of promotion and business development.

I do participate in Twitter. I use Twitter to promote my writings and as a resource to keep up-to-date on the posts of fellow tax and personal finance bloggers, online tax-related articles, and IRS developments.

I have never “dissed” individuals who have embraced social media, nor have I ever called them “idiots” or “mental midgets”. I have merely stated my reaction to the phenomenon - it is not for me, I do not understand its attraction to others, and I have absolutely no interest in the more socially-related common “tweets” that I come across.

(6) I welcome comments from readers who may disagree with the above statements and are willing to engage in a serious, intelligent and responsible discussion of the issue or issues. I always attempt to remain professional in my writings, and have engaged in many excellent dialogs and debates with competent and intelligent fellow bloggers, fellow tax preparers, and readers here at THE WANDERING TAX PRO over the years.

I have never maintained that I am 100% correct 100% of the time, whether on tax or other matters, nor that my word is "gospel" – nor do I think that because a person disagrees with me he/she is automatically an “idiot” or a “mental midget” (I have identified the fact that the members of Congress are idiots, but no one has disagreed with me there). I have never lambasted a reader for simply disagreeing with me.

I do know of at least one tax blogger who does.

“Nuff said!



I am not a fan of or a participant in “social media”.

As I have said in the past, the last thing I would ever do is join Spacebook or My Face. Why on earth would I want to make my private and personal information available to the great unwashed masses? If I want to share pictures or videos with friends and family I will use email!

While I am no longer looking for clients for my tax practice, even if I were I would not use Spacebook as a marketing tool. That is what a website is for.

I am, however, a twit. I joined Twitter to promote my writings and to use it as a resource for tax information for the BUZZ and for my personal education. I follow a small and select group of fellow tax bloggers, non-blogging tax professionals and the IRS (see below).

Believe me I have absolutely no interest in hearing what someone’s precoucious 6 year old just said or did. And I don’t give the proverbial rat’s hind quarters where certain twits happen to be every hour of the day.

Hey, I don’t even have a cellphone!

The Internal Revenue Service, however, has embraced social media, and has several social media and mobile technology tools that provide tax information to the public, including tax refund information. -

The best source of federal tax information of any kind is the actual IRS website. Here you can access tax forms, instructions and publications, find out about your refund, sign up to receive email alerts and newsletters, and lots of other stuff.

IRS2Go -

This app, available for such Apple and Android devices as iPhone, iPad, iPod Touch, allows taxpayers to access information about the status of their tax refund as well as tax tips and updates to help with tax planning and preparation.

YouTube -

The IRS has its own YouTube channel with short videos on tax information available in English, American Sign Language, and a variety of foreign languages.

Twitter -

You can follow the IRS, and the Taxpayer Advocate Service, on Twitter for tax-related announcements and news.

· @IRSnews - IRS news and helpful information,
· @IRStaxpros - IRS news and guidance for tax pros,
· @IRSenEspanol - News and information in Spanish, and
· @YourVoiceatIRS - Taxpayer Advocate Service.

You can also follow individual IRS employees for more local information. For example, I follow Dianne Besunder (@DianneIRS), the IRS Media Relations Specialist for New York State, at!/DianneIRS.

Facebook -

I have absolutely no clue what the IRS has a Facebook page when you can go directly to the IRS website for whatever you need. You can “friend” the IRS, I suppose

Audio Podcasts

The IRS has audio podcasts with information on tax related topics available through iTunes and on the IRS web site. Click here.


PS- Sorry for the above spacing FU - it has been very frustrating trying to fix it, and a huge waste of valuable time, with no luck!

Monday, August 1, 2011


++ Fools to the left or me, jokers to the right!

One of the things that John Stewart’s THE DAILY SHOW on Comedy Central does so well is string together groupings of clips of politicians of the same party, or newscasters, commentators and pundits of the same political bias - whether Republican or Democrat or liberal or conservative - all saying, word for word, the exact same phrase or statement (regardless of whether the statement is actually true) over and over. It is as if they are all reading verbatim from a script.

This technique clearly demonstrates that these people are totally incapable of independent thought. They must be told what to think and say by political bosses and consultants.

Is anyone else reminded of INVASION OF THE BODY SNATCHERS?

It is obvious that these people are idiots. Or perhaps arseholes is a better description.

{Perhaps not. On one hand the arsehole performs an important function in the operation of the human body. But on the other hand the function of the arsehole is the expelling of excrement.}

I would like all of my readers to take a pledge. Regardless of your individual political affiliation or persuasion I want you to pledge that in the next few federal elections you will vote against any incumbent Congressperson.

Let’s throw the bums out on their arses!

++ I thought of another reason why a tax preparer needs to have the previous year’s tax return in front of him/her when preparing the current returns (see my post “When Going To A New Tax Preparer Be Sure To Provide Copies Of Prior Year’s Returns”).

Let me quote a story I told in a post from 2006 –

During my early years you were also not required to list the Social Security number for dependents claimed on your return. One year a married client, let's call him John and call his wife Mary, left his "stuff" off at the office, which included a handwritten sheet listing, among other deductions, "dependents" John, Mary, Paul and George. The college student who prepared the return that year (not me) listed as dependents John, Mary, Paul and George. The client received the refund requested on the return without question.

The next year John came in and stayed while I prepared the return. I asked if he was still claiming his four kids, John, Mary, Paul and George, and he told me that he only had two children - Paul and George! It appears that the student who had prepared the previous return had forgotten our first, and most important, rule of tax preparation - always review the prior year's return when preparing the current 1040

FYI – the post pointed out “At the recent IRS Tax Forum it was reported that in the first year you were required to list a Social Security number for all of your dependents about 5 Million dependents disappeared from tax returns”.