Wednesday, October 31, 2012


The Internal Revenue Service today announced it is granting taxpayers and tax preparers affected by Hurricane Sandy until Nov. 7 to file returns and accompanying payments normally due today. 

The relief applies to taxpayers and tax preparers in an area affected by Hurricane Sandy or otherwise impacted by the storm that hit the Mid-Atlantic and Northeastern United States this week.

This relief primarily applies to businesses whose payroll and excise tax returns and payments are normally due today. No action is required by the taxpayer; this relief is automatic. Regular federal tax deposits are due according to current rules. However, the IRS notes that if taxpayers or tax practitioners receive a penalty notice for this period, they can contact the IRS at the number on the notice to request penalty abatement due to reasonable cause on account of the storm.”


I hope those of you on the East Coast survived SANDY.  I am certainly glad that I moved from NJ to Northeast PA.  There was rain here, but not excessive, and I did not lose power (although apparently some others in my county did).  My sister, who lives, as I used to, in Hudson County NJ was without power from 9:00 PM Monday night through Tuesday.

* Nothing to do with taxes, but - looking for a great escape this winter?  Click here.  Peter runs great trips!

* Oi vey!  Bill Perez reports that “South Carolina Suffers Cyber-Attack, SSNs & Credit Card Numbers Stolen” at ABOUT.COM.

Anyone who has filed a tax return in South Carolina from 1998 through 2012 may have had their Social Security number, credit card number or debit card number compromised by the data theft.”  

Deadlines for filing and paying taxes has been suspended for the period from October 26, 2012 through November 14, 2012. Tax returns and tax payments that are due during this period are now due on November 14, 2012

Click here for the official announcement from New York.

* I discovered a new, to me, tax-related blog from a “retweet” by Kay Bell, the yellow rose of taxes.  The blog is GETTING YOUR FINANCIAL DUCKS IN A ROW FROM (Advice on IRA, Social Security, income tax, and all things financial) from Blankenship Financial Planning, Ltd of Illinois.

The recent post “Long Term Care Insurance – Protecting Your Nest Egg” discusses, as you would expect, long-term care insurance.

I have found that LTCI is basically for the middle and upper-middle classes who have accumulated substantial savings.  If long-term care, especially nursing home care, is needed, the poor are covered by Medicaid from dollar one, and the rich can afford to pay out of pocket.  It is the middle and upper-middle classes who have saved all their life or have substantial equity in real estate that need it.  These people are forced to bankrupt themselves before being covered by Medicaid.

It is also for people with beneficiaries.  While I considered buying it, I feel I do not need LTCI because if I am bankrupted by nursing home care nobody loses.  I do not have a spouse or children, or even nieces or nephews, who would lose an inheritance.

* Eric S. Fletcher tells you who, and to whom you must issue a Form 1099-MISC, and what you may be penalized if you don’t in “What's Your TIN again? Helping the IRS Close the ‘Tax Gap’" at the BOND BEEBE firm blog.

Basically -

Anyone engaged in a trade or business is required to file Form 1099-MISC for each non-incorporated vendor (including LLC’s) to whom they have paid at least $600 cumulatively during the year to {certain recipients – rdf}.”

Thankfully the rules that the idiots in Congress had passed without reading a while back – which would have required millions of more 1099s being filed – have been repealed.

* Joshua Wilson also adds to the discussion of 1099s with “2012 Preparation of 1099'S 

* The JOURNAL OF ACCOUNTANCY reminds us in “Facing the Tax Cliff” that “A surprising number of tax changes loom as year end approaches”, and provides a good listing of the many expiring tax provisions.  

The item reminds us that the idiots in Congress “had nine years to prepare for the sunset of the lower income, estate, and gift tax rates enacted in the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), P.L. 107-16, and seven years to prepare for the sunset of the lower capital gains tax rates enacted by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), P.L. 108-27”.

This “Tax Cliff” situation is a direct result of the inaction of the idiots in Congress.

* TAX MAMA Eva Rosenberg answers a question from a person who wants to start a professional tax practice after having “been doing returns for friends and associates for the past 2 years” with good advice in “Starting a Tax Practice”.

There's certainly room for you in the profession. But just doing friends' tax returns isn't enough experience – or expertise - to build an entire tax practice around.  Without education or training, there's no way to do an adequate job for strangers, people you don't know anything about, when they bring you their information. You have no basis to understand their lifestyle, what are reasonable earnings for their profession or job – or very much, really.  .  

* Bruce, the MISSOURI TAXGUY, considers “Small Business Health Care Tax Credit, Do you Qualify?”.

If you’re a small business owner with fewer than 25 full-time equivalent employees you may be eligible for the small business health care credit that went into effect in 2010.”

Last week Howard Gleckman addressed BO’s tax proposals at TAX VOX.  This week he explains “What is Mitt Romney’s Tax Plan?”.

* The Taxpayer Advocate’s office “tweeted” this tax fact –

Last year, #IRS processed about 145 million #tax returns. The average taxrefund was nearly $3,000.”

* Speaking of the Taxpayer Advocate Service – A while back it asked the public to submit suggestions for tax reform.  It has now released a 19-page report of “Tax Reform Suggestion Box: Selected Comments”.


Tuesday, October 30, 2012


I have always said that bloggers love lists.

And I have also always said that David Letterman, and the overdone “bits” on his late night talk show, is/are not funny.  The only regular feature on his show that consistently provides any degree of humor is the Top Ten List.

So let me provide a list of the top ten facts, not necessarily in any order, that THE WANDERING TAX PRO blog continually tries to get across to readers, especially for new visitors.

(1)  The current members of Congress are idiots.  Like any nonproductive employees they should be “fired” and replaced.

(2)  The purpose of the federal income tax is to raise money to run the government, and nothing else.  The US Tax Code should not be used to distribute social welfare or other government benefits or to redistribute income.

(3)  The current Tax Code is a “mucking fess”.  It needs to be rewritten from scratch to be simpler and fairer.

(4)  Refundable tax credits are bad.  They are magnets for tax fraud.

(5)  Despite popular public, and journalist, misconceptions, a CPA is not automatically a 1040 expert merely by virtue of possessing the initials.  Just because someone has the initials CPA after his/her name does not mean that he/she knows his/her arse from a hole in the ground when it comes to 1040 preparation.

(6)  The tax preparation services of fast-food tax preparation chains like that of Henry and Richard “ain’t cheap”, or even reasonable, especially when compared to the quality of the service provided.  It is like paying gourmet restaurant prices for a Big Mac.

(7)  Refund Anticipation Loans (RALs) are bad.  Tax return preparers, and preparation services, should not be allowed offer them.

(8)  No tax preparation software is a substitute for knowledge of the Tax Code. And no tax preparation software is a substitute for the services of a trained tax professional.

(9)  CPAs, attorneys, and supervised employees who want to prepare federal individual income tax returns for compensation should not be exempt from the RTRP initial competency test or the annual CPE in taxation requirement.

(10)     The Internal Revenue Service must permit a grandfathering exemption from the RTRP competency test for veteran tax preparers.


Monday, October 29, 2012


While some states may permit same-sex marriages, the IRS does not permit these couples to file federal tax returns as married.  This is because the 1996 Defense of Marriage Act (DOMA) defines marriage as the legal union of one man and one woman for federal and inter-state recognition purposes in the United States.

Recent court cases, the most recent in the Second U.S. Circuit Court of Appeals, have found that DOMA’s definition of marriage to be unconstitutional.  If the issue goes to the US Supreme Court and the lower court decisions are upheld this would open the door for same-sex couples legally married in states that permit same-sex marriages to be able to file federal income tax returns as married, either joint or separate. 

I question why same-sex couples would want to be able to file federal returns as married couples, and be hit with the infamous “marriage penalty”.

The Tax Foundation reports that about 67% of married couples filing federal returns are dual-income working couples.  I expect at least the same percentage, if not a higher one, would apply to same-sex couples.  It is dual-income couples who are hit with the marriage penalty. 

Despite some attempt by the “Bush tax cuts” to alleviate the marriage penalty for lower-income couples, it is very much alive, and will be more so if the “Bush” cuts expire.  The marriage penalty can be very costly, especially because married couples who choose to file separately are penalized for doing so in many circumstances, and will pay more tax, sometimes much more, than if they just “lived together” as two Single-filers.

The members of a same-sex couple legally married in an accommodating state are currently each allowed to file as Single for federal purposes, or, more better, one as Single and one as Head of Household, and take full advantage of all the deductions, credits, and phase-out ranges that apply to Single or Head of Household filers.

I can think of many “traditional” married couples who would be as happy as pigs in reality tv to be able to file tax returns as two Singles or one Single and one Head of Household.

I expect that the real reason for pursuing federal acceptance of same-sex marriages lies with the federal estate tax and the unlimited marital deduction, which would apply to a much smaller number of such couples, and other beneficiary issues.


Saturday, October 27, 2012


Still enough BUZZ left over for a Saturday entry.

* Don’t forget to take advantage of my “October Half Price Sale”.

* Joyce M. Washington gives the correct answer to the question “Do I Really Need A Separate Checking Account For My business?” at COMMON CENTS.

YES, you do need a separate checking account for your business”.

* Bonnie Lee lists “Five Tax Tips for Non Filers” at FOX BUSINESS.

If you do not file a federal income tax return, and are required to, the IRS will eventually prepare one for you based on income information in its matching system.  The IRS-prepared return will use the worst possible filing status, not include any dependents or deductions, and assume that the cost basis of any investments sold is “0”. 

Obviously if you receive a bill from the IRS based on a “reconstructed” return do not pay the amount due, but contact a tax professional immediately.

I wrote a post on the subject here at TWTP in 2008 titled “What Happens if You Do Not File Your Federal Income Tax Return”.

* Another example of why refundable tax credits are bad.  WRAL in North Carolina reports that according to “Investigators: Child Tax Credit Allows Fraudsters a Chance to Cheat” (highlight is mine) -

North Carolina is part of what federal investigators call a nationwide tax fraud scheme among suspected illegal immigrants. It’s a system auditors believe invites fraud and abuse topping more than $4 billion a year.

WRAL Investigators found federal reports dating back more than a decade that warned the Internal Revenue Service about the problem. Yet, the IRS has done little to fix it.”

* TAXPRO TODAY asked Harlan Rose, president of the National Society of Accountants, “What is the biggest challenge facing tax preparers today?”.

His answer –

Congress’ lack of ability to pass tax laws during earlier sessions at the beginning of a year and not at year-end for retroactive rules. Congress reconvenes during December and may pass laws effective for the entire 2012 year on a December 26 date. This lateness affects a preparer’s ability to plan, software companies are delayed in offering up-to-date programs and the IRS cannot get its computers programmed to e-file. This is happening with the 2012 extenders.”  

They really are idiots, aren’t they?

* Howard Gleckman does a good job of explaining “What Is Barack Obama’s Tax Plan?” at TAX VOX.


Baba Wawa recently commented on Donald Trump’s latest play for attention on “The View”.

Donald, you and I have known each other for many years, and you know that I am your friend, and I think you are a brilliant businessman, and you are great on television and you have a fascinating personality.  Donald, you’re making a fool of yourself.”

Barbara was right on only one item – he did make a fool of himself. 

Witless wonder Tronald Dump, as he is referred to in the unique pig latin of the Capital Steps comedy troupe, is NOT a brilliant businessman, is NOT great on television, and does NOT have a fascinating personality.  He is a self-absorbed fool who loves the sound of his own voice and, pardon my French, undeservedly thinks his shit is ice cream.  Nobody with any intelligence takes him seriously.

Donald Trump makes a fool of himself every time he opens his mouth.


Friday, October 26, 2012


The BUZZ intended for Saturday is so “chock-a-block” with good stuff so far that I decided to post a day early!    

It is hard to think of a bigger arsehole than the Dumpster.  Does the fool realize that nobody with any intelligence takes him seriously? 

* Have you taken advantage of my “October Half Price Sale” yet? 

* Peter J Reilly agrees with me that the problem with the Tax Code is the fault of the “idiots in Congress” and “steals” my description of the Tax Code in his post “Same Sex Couples - Registered Domestic Partners - Community Property -What A Mucking Fess” at FORBES.COM.

I did not create the term “mucking fess”, but I guess I have made it mine in referring to the Tax Code.

Peter is welcome to “steal” any of my trademark descriptions – which also include “GD extensions” and “dreaded AMT” (and identifying reality tv programs like “The Jersey Shore” and anything with a Kardashian as “steaming piles of excrement”).

I agree with Peter’s suggestion that we “take our system of individual filing statuses – Married, Married Filing Separately, Single, Head of Household and chuck it”. 

In a fair and simple Tax Code, as Peter recommends - “There would be only one filing status for an individual.  We could call it something really clever like maybe – Individual.

* Jason Dinesen begins a new series of posts on the “Small Business Health Insurance Credit — Nice in Theory But Not in Execution” at the DINESEN TAX TIMES.

That description could apply to a multitude of tax and other items enacted by the idiots in Congress.  

Jason begins the first post in the series –

Like a lot of tax credits, the credit available to small businesses that provide health insurance is nice in theory but is horribly executed.”

* Howard Gleckman discusses “The Ten Biggest Differences between the Romney and Obama Tax Plans” at TAX VOX, the blog of the Tax Policy Center.

One important difference of note where I am concerned –

Obama has shown little interest in broad-based tax reform. Romney wants to fundamentally rewrite the revenue code.”

* You’ve got to be kidding!  Kay Bell reports on a recent Gallop Poll that suggests “We Think Congress is Doing a Better Job” at DON’T MESS WITH TAXES.

Gallup says Americans now have the most positive view of Congress that they've had in more than a year.

‘Twenty-one percent of Americans approve of the job Congress is doing’, reports Gallup on its website.

That's substantially more than the 13 percent Congressional approval measured in September, according to Gallup, and the highest rating in any month since May 2011.”

Kay is as shocked as I am, but thinks she knows why –

The only explanation I can come up with for Gallup's results is that the House and Senate have been in recess since Sept. 21.”

She may have a point.  The members of Congress are idiots – and certainly do a better job when they are not working then when they are.

* The results of a recent Tax Foundation study are not surprising - “State and Local Tax Burdens Highest in New York”.

The Annual State-Local Tax Burden Ranking report estimates the average total tax burden for residents of each state, including both the in-state taxes they are subject to as well as taxes they pay to other states, such as those paid by virtue of working in, traveling to, or buying products from other states. This method takes the point of view of the individual taxpayer, counting all taxes they pay, no matter to which state they are paid.”

As a point of information, a resident of New York City could have a marginal combined city-state income tax rate of over 10%, added to a 25% - 35% federal marginal rate.  If the top federal rate goes back to 38%, and you consider the 1.45% Medicare tax, high income individuals could be paying at least half of each additional dollar earned in taxes.  Still say the rich do not pay enough taxes?

It is also no surprise that my former home state of New Jersey is #2 (no pun intended – but if the shoe fits . . .).  Pennsylvania, where I currently live, is #10 – so my move was a good one.

Russ Fox gives a good overview, listing the top and bottom ten, in “Tax Foundation Releases State & Local Tax Burdens” at TAXABLE TALK.

Russ ends his post with an interesting observation –

One interesting observation I have is that almost all of the low-tax states are ‘Red’ states (they tend to vote Republican) while almost all of the high-tax states are ‘Blue’ states (they tend to vote Democratic). I suspect that this is not a coincidence.”

* The Tax Foundation also explains “The Economic Impact of High-Earner Tax Hikes” (the highlight is mine) -

President Obama’s proposal to raise taxes on individuals earning more than $200,000 would slow economic growth and reduce future incomes across the board, according to a new analysis by the Tax Foundation. The amount of income that would be lost over the next ten years because of higher taxes varies by state, ranging from $2 billion in Vermont to as much as $241 billion in California.

‘President Obama’s campaign to raise taxes on high-income earners presents an overly simplistic view of the economy, as if tax increases only affect those people who write checks to the IRS’, said Tax Foundation chief economist William McBride. ‘When high income families are hit with additional taxes, they reduce spending on goods and services and invest less. All of this hurts economic growth over the long run, resulting in fewer jobs and lower wages.’

In dollar terms, the states most affected are large, high-income states. California stands to lose $241 billion over ten years as a result of the president’s tax policies, followed by New York at $186 billion, Texas at $131 billion, Florida at $104 billion, and Illinois at $74 billion.”

* The CCH daily tax headlines for Wednesday included the item “No Extension of RTRP Examination Deadline, IRS Spokesperson Confirms”.

In recent weeks, there has been some discussion at accounting and tax conferences about a possible extension of the December 31, 2013, deadline. ‘There are no plans to extend the deadline for competency testing’, the IRS spokesperson told CCH.”

As I point out in my post “There MUST be Grandfathering” at THE TAX PROFESSIONAL –

There are only about 14½ months left before the December 31, 2013 deadline for ‘provisional’ tax return preparers to take and pass the RTRP competency test.  Will that be enough time for the 325,000+ to do so?  To be perfectly honest, I doubt it very much.  It may be a logistic impossibility.

So what will happen if on December 31, 2013, there are still 250,000 or more tax preparers have not taken the test?   Will the IRS put them, many if not most of whom will no doubt be veteran experienced and highly competent and ethical tax professionals like me, out of business?

As I state in that post – the solution is not to extend the deadline, but to initiate a grandfathering exemption for veteran preparers.

I have written to the new regulation regime “czar” on this issue (click here), but my letter has apparently been totally ignored.

* In addition to writing the ROTH AND COMPANY TAX UPDATE BLOG, with a daily BUZZ-like Tax Roundup that frequently references my TWTP posts, and speaking out against the IRS preparer regulation regime, CPA Joe Kristan also writes for IOWA BIZ.  His latest item there – “Payroll Taxes: Once is Enough” - provides some good advice, which I believe I had highlighted from another source in an earlier BUZZ installment.

Outsourcing payroll administration is common for good reasons, but most taxpayers don't realize how much risk they are taking when they make that decision. That's why even when you outsource your payroll taxes, you should still monitor the provider. 

Fortunately, you can do so. Taxpayers enrolled in the Electronic Federal Tax Payment System (EFTPS) can go online and check that their payroll taxes are being remitted by the third-party payroll service.”   

* Over at the online STREET JOURNAL David Wessel gives us “Campaigns Pave the Way for Tax Reform”.

Like so many presidential campaigns, this one is criticized for confusing voters more than elucidating issues, for turning more on trivia and debate zingers than on competing policies.

Yet is it possible that this campaign has softened the ground for one of those overhauls of the federal tax code that comes along every 25 years or so?

David believes –

There is more widespread understanding that, in a phrase that deficit-fighters Erskine Bowles and Alan Simpson popularized, there is a lot of ‘spending through the tax code’."

And that -

An overhaul of the tax code remains a long shot. But if it actually occurs, the conversation that Simpson-Bowles began in late 2010 and that Mitt Romney pursued in 2012 will have made it possible.”

So there is some hope!


Wednesday, October 24, 2012


* Have you taken advantage of my “October Half Price Sale” yet? 

* Tax professionals should check out my posts “There MUST be Grandfathering!” and “A Potential Disaster” at THE TAX PROFESSIONAL.

* I join Kay Bell of DON’T MESS WITH TAXDS in saying a sad farewell to George McGovern. 

1972 was the first Presidential election I voted in (having actively campaigned locally for reducing the voting age to 18 when I was in high school) – and my vote was for McGovern.

The same is true for fellow tax blogger Peter J Reilly, a couple of years my senior, who reminisces in “George McGovern Passes On - Where Were You In 1972?” at FORBES.COM.

Where was I in 1972?  In February through April of 1972, a college freshman, I was working my very first season as an apprentice tax preparer for James P Gill and Co just off Journal Square in Jersey City. 

* Kay also addresses the same subject as my “A Potential Disaster” post referenced above in “Income Tax Tables and Much, Much More Missing from Annual IRS Inflation Update”.

As her “tweet” promoting the post says –

Congressional inaction (again) leads to IRS -- and ultimately taxpayer – troubles.”

She joins me in suggesting –

Remember all this undone tax work as you head out in a couple of weeks to vote for who stays or goes in Washington, D.C.

* Bruce McFarland hosts a guest post by Alisa Martin titled “Things That You Can Do To Get Ready For Tax Season” at the MISSOURI TAXGUY.

While the post is just a basic plug for using a tax professional, I do like her description of tax preparation -

Preparing Taxes Is Part Art Part Science.”

My tax returns (prepared for clients) have often been referred to as a “work of art” by the IRS and other tax pros.

* Did you know that Bruce also has a blog for Quickbooks users?  Click here.

* CCH reports that “Amended Return Will Not Automatically Trigger Audit, IRS Manager Says” – putting to rest an “urban tax myth”.

Many taxpayers are afraid to file an amended return for a legitimate reason because they think it will result in an audit.  This fear is unfounded. 

In my 40+ years of preparing 1040s I have never seen an audit of a Form 1040X I, or anyone else, has prepared, or an audit of the original 1040 that was amended as a result of filing an amended return.  

* A new report by the Treasury Inspector General for Tax Administration tells us “Expanded Controls Over Refundable Credits Could Reduce Lost Dollars”.

Millions of dollars in refundable credits that were determined to be erroneous after taxpayers received them may never be recovered by the Internal Revenue Service (IRS), according to a new report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).

Refundable tax credits, which not only have the potential to reduce a taxpayer’s liability to zero but can provide cash payments to taxpayers, are highly vulnerable to fraud. TIGTA initiated its audit to determine the effectiveness of efforts by the IRS to recover refundable credits disallowed during post-refund examinations and to consider options the IRS could implement to decrease the issuance of erroneous refundable credits. Examples of refundable credits include the Earned Income Tax Credit (EITC), Additional Child Tax Credit (ACTC), First-Time Homebuyer Credit, and American Opportunity Tax Credit.”

I have a much better solution to the problem – NO REFUNDABLE CREDITS!

* No surprise here – “N.J.'s Local Tax Bills Keep Spiraling Upward” from PHILLY.COM.


The Christie administration, which took office in 2010, blames the increases on ‘unrestrained spending, overgenerous benefits, and the expansion of government at the local and state level’, said spokesman Michael Drewniak.”

* Trish McIntire gets on The Soapbox with some good advice for 1040 clients in her post “Tax Backup” at DON’T MESS WITH TAXES.

Using a tax pro for your tax returns doesn’t get you out of taking some responsibility for your tax situation. All taxpayers need to keep a copy of their tax return and all supporting documents for at least 3 (I suggest 5) years. You may never need those documents. But if you get audited or even need a copy of your return for a bank loan you’ll be glad you kept them.”

To go a step further – I tell my 1040 clients to make and keep a copy of their W-2s when sending me their “stuff” at tax time.  This way they won’t waste my time having to make and send them copies which they end up needing for a variety of reasons.

* A good tax tip “tweet” from Kathy Bylkas‏ (aka @URTaxlady) –

Don't let penalties for underpaid taxes increase your tax bill next April. Check the total tax you've paid in for 2012 through withholding and/or quarterly estimated payments. If you've underpaid, consider adjusting your withholding for the final pay periods of 2012.

Withheld taxes are considered paid in equal amounts during the year regardless of when the tax is withheld. Therefore, a year-end adjustment to your withholding could help you avoid a penalty.”

* Oops!  Did I forget to mention the “IRA Contribution Limits for 2013” in my recent post on inflation adjustments?

Bill Perez tells us –

Individuals can save up to $5,500 through an individual retirement account (IRA) for 2013, according to new limits announced by the IRS (IR-2012-77). This new $5,500 limit is the first change in IRA contribution limits since 2008. For the years 2008 through 2012, IRA contributions were capped at $5,000.

The $5,500 IRA contribution limit for 2013 applies to traditional IRAs and Roth IRAs collectively. Taxpayers can choose to contribute either to a traditional IRA or to a Roth IRA or to both in any combination, as long as total contributions don't exceed the annual limit.”

While I could not find it in the IRS Information Release, I expect that the IRA “catch-up” for taxpayers age 50 or older at the end of the year remains at $1,000.

So, if I am so inclined, I can contribute $6,500 to a traditional or ROTH IRA for 2013.  And, if I wanted the biggest potential bang for my buck, I would make the contribution on January 2, 2013.

Saturday, October 20, 2012


Lots to talk about today!

* The IRS has issued “Return Preparer Office Federal Tax Return Preparer Statistics” with up-to-date data current as of 10/01/2012.

It appears that there are still 325,203 “preparers with provisional PTINs who have not yet passed the RTRP test”.  I am not alone.

* Jason Dinesen concludes his series on the plight of the Enrolled Agent with “Would a Name Change Help Enrolled Agents? Part 3” at DINESEN TAX TIMES.

While I do believe that the title of “Enrolled Agent” should be changed to perhaps “Enrolled Tax Return Preparer” (ETRP) to tie in to and complement the new RTRP designation, Jason does make a good point (highlight is his) -  

But the name isn’t the problem. The problem is that no one has heard of us! Like I wrote in Part 2, 87% of the population has never heard of an enrolled agent.”

I do agree that the general taxpayer public is not aware of the special nature of the Enrolled Agent, and those that have heard the name are confused.  I have tried to “spread the word” on the EA designation here at TWTP. 

I have toyed with the idea of creating a RTRP organization, not to provide CPE as those that have already sprung up are concentrated on, but solely to promote the designation via public education.  Perhaps such an organization can be expanded to include EAs and RTRPs. 

It is important that the public be made aware that, while a specific CPA may be proficient in 1040 preparation, only those individuals with the initials RTRP and EA have proven competency by taking a test in tax preparation and are required to remain current in federal tax issues by maintaining annual continuing professional education. 

That is a fact.  I am not being “crabby”, Joe.

* TAXPRO TODAY gives us some “Tax Stats” -

In fiscal year 2001, the IRS closed about 538,000 mail audits of individual tax returns, and assessed about $1.4 billion in additional taxes. Ten years later, the IRS more than doubled the number of mail audits, with about 1.2 million correspondence examinations, and $8.7 billion in additional assessed taxes for fiscal year 2011. That represents a more-than-sixfold increase from 2001. With such a high return on investment, the IRS will likely continue to use mail audits to close the tax gap.”

They are talking about CP 2000 notices.  Unfortunately I think much of the monies collected from these notices are the result of taxpayers being intimidated by receiving correspondence from “Sam” and paying what they are asked for without questioning whether the notice is correct.

In my 40+ years in “the business” I have found that IRS notices are more often than not incorrect (and state notices even more so). 

Whenever you receive a notice from the IRS or a state tax authority check it out carefully.  If you paid a tax professional to prepare the return in question, send the notice to the tax pro ASAP.  If you self-prepared the return and you do not understand what is being questioned, contact a tax pro immediately.

Do not ever just automatically pay a balance due tax notice, and do not ever ignore a balance due tax notice!

* Kay Bell does a good job of covering the tax points discussed in the 2nd Presidential debate in depth in “Taxes Discussed, Sort of, in the Second Presidential Debate” at DON’T MESS WITH TAXES.

Kay tell us that, as expected (I did not watch the debate – I watched two movies about blind detectives on TCM), tax-wise “we didn't get much more at the Hofstra University town hall session than what's already been offered”.

I do want to comment on something BO said –

"But what I've also said is if we're serious about reducing the deficit, if this is genuinely a moral obligation to the next generation, then in addition to some tough spending cuts, we've also got to make sure that the wealthy do a little bit more.”

Why do we need "to make sure that the wealthy do a little bit more"?  If the top 5 percent of taxpayers pays 60 percent of the income tax the nation collects, as suggested in the debate, why should they pay more?  Is it fair to charge someone a fee for no other reason than the fact that they can afford to pay it?

Let me rephrase an example I have often used.  A person making over $250,000 per year and a person making much less both walk into a liquor store.  They each want to buy a can of Budweiser.  If it fair for the store to charge the richer of the two $3.50 for the can and the other person only $2.00 for the same can?  If the richer person wants a bottle of high-end champagne he would obviously pay more than $2.00 or $3.50.  But why should he pay $3.50 for a $2.00 can or beer?

And the richer person may voluntarily choose to pay for the can of beer for the “less-fortunate” person.  But it is not the role of government to force the richer person to buy the can of beer for the poorer one.

* And Kay provides us with another reminder about employer-sponsored Flexible Spending Accounts in “It's Workplace Benefits -- Including Spending Accounts -- Enrollment Time”.

* ACCOUNTING TODAY asks “Is This the Death of the Circ 230 Disclaimer?”.

The item begins by explaining that –

Clients have been confused by e-mails from their accountants to set a lunch meeting that include a warning, often highlighted in bold font and upper case letters, that the invitation could not and should not be considered tax advice and could not be relied upon to avoid penalties.”

So a client meets with his accountant to receive tax advice, which is not to be considered tax advice?  WTF?

Disclaimers like this are completely ridiculous.  Of course the accountant, or other tax professional, is providing tax advice.  That is what the client is paying for.  Saying that it is not tax advice is basically a lie and a waste of words.  Thankfully this nonsense will now end, or at least there will be less nonsense.

Many of the relatively new regulations regarding client “privacy” are similarly ridiculous.  I will elaborate if asked.

* Robert W Woods of FORBES.COM thinks “No Matter Who Wins the Election, Higher Taxes are Certain”.

He explains why -

For those who want to sell investment property at 15%, now might be a good time. There may never be another chance.”

I also think it might be a good thing to sell investment property in 2012 to lock in the 15% (or 0%) tax rate.  As I have explained in previous TWTP and TheStreet posts, you can sell an investment at a gain and buy it back the next day, so that it will remain in your portfolio.  There is no “wash sale” adjustment if you sell at a profit – only if you sell at a loss.

* Tax pros should real my THE TAX PROFESSIONAL post “A Milestone”.

* Russ Fox explains what could indeed be a real problem with the 2013 tax filing season in “Why the 2013 Tax Season May Give Me Lots More Gray Hair” at TAXABLE TALK.

The IRS won’t be able to update their computer systems until after the legislation passes in late January. A few years ago, there was a tax season where we couldn’t file most returns until mid-February because Congress waited until mid-December to pass extender legislation. Yes, it could be mid-March before we’re able to file many tax returns. Imagining a compressed one-month “normal” tax filing season is not pleasant for a tax professional.”

I have been gray for years.


A seasonal funny, again from the local OUR TOWN adzine –

Jean Claude Van Damme, Steven Seagal, and Arnold Schwarzenegger decide to go out trick-or-treating together for Halloween as historic musical composers.  They go to a costume store.

Jean Claude sees a costume he likes.  “I think I’ll go as Beethoven”, he announces.

Steven sees one that grabs his attention.  “I’ll be Mozart.”

Arnold was having a tough time finding a costume, but finally he discovered one that appealed to him, and says, “I’ll be Bach!”

Did you see it coming?


Friday, October 19, 2012


The Internal Revenue Service has announced the annual inflation adjustments for many tax provisions for tax year 2013.

For example –

• The maximum elective deferral for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500.

• The catch-up contribution limit for employees aged 50 and over who participate in these types of plans remains unchanged at $5,500.

• The deduction for taxpayers making contributions to a traditional IRA is phased out for Singles and Head of Household filers who are active participants in an employer sponsored retirement plan with a Modified Adjusted Gross Income (MAGI) of between $59,000 and $69,000, up from $58,000 and $68,000 in 2012.

For Married Filing Jointly, where the spouse who makes the IRA contribution is an active participant, the phase-out range is $95,000 to $115,000, up from $92,000 to $112,000. 

For contributions to the IRA of a spouse who is not an active participant the deduction is phased out if the couple’s MAGI is between $178,000 and $188,000, up from $173,000 and $183,000.

• The ROTH IRA contribution phase-out range is $178,000 to $188,000 for Married Filing Joint, up from $173,000 to $183,000 in 2012.  For Single and Head of Household filers the phase-out range is $112,000 to $127,000, up from $110,000 to $125,000. 
• The upper AGI limit for the Retirement Savings Contribution Credit is $59,000 for Married Filing Joint, up from $57,500 in 2012, $44,250 for Heads of Household, up from $43,125, and $29,500 Single and Married Filing Separate, up from $28,750.

• The annual gift exclusion is increased to $14,000, up from $13,000 for 2012.

• The Foreign Earned Income Exclusion is $97,600, up from $95,100 in 2012.

I will bring you additional inflation adjustments for 2013 as they are released.