Wednesday, October 10, 2012

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION


Sorry there have been no posts so far this week.  I am busy with GD extensions and other items – and I really do not have anything special to say at the moment.

* Bill Perez recently tweeted a 2011 post of his at ABOUT.COM TAX PLANNING:US titled “Deducting Health Insurance”.

While an old post, it does provides a timely reminder, considering that this is the time for open enrollment in most employer-sponsored medical expense Flexible Spending Accounts, as well as reminding us not to “double dip” and deduct pre-tax health insurance (or other medical FSA payments) on Schedule A (highlights are mine) -

Be aware, however, that employees who paid health insurance using pre-tax dollars through payroll deductions won't be able to take a further deduction for these same expenses. Or to phrase this differently, paying for health insurance as a pre-tax salary deduction is more advantageous than the itemized deduction. That's because pre-tax health benefits reduce your taxable salary, so the deduction comes "off the top," so to speak, and isn't clawed back by the 7.5% threshold. Further, health insurance premiums are deducted pre-tax for income tax, Social Security tax and Medicare tax on an employee's paycheck, making this employee benefit triple-tax free. (Quadruple tax-free if your state allows for pre-tax health insurance benefits.)

If I may add – any medical payment from a pre-tax FSA is more better than a deduction, as it reduces not only taxable income (and FICA taxable income) but AGI as well.

And all states do not allow for pre-tax health insurance (or other medical FSA) benefits.  NJ does not (state taxable wages will be higher than federal taxable wages on the W-2), so any such federal pre-tax payments are deductible as medical expenses on the NJ-1040.

* And Bill continues his series on year-end tax moves with “Consider Funding  an Education Savings Account”.

* He completes the trifecta by discussing the reactions of the “fringe” candidates to the topics discusses in the Presidential debate in “Tax Issues from the First Presidential Debate”.

* Kay Bell reminds us of  the coming of “Taxmagedden” and gives some predictions on what will happen after the election in “Fiscal Cliff’s Costly Prospects” at her “other blog” at BANKRATE.COM.

If Mitt Romney wins and the Republicans control or at least have decent numbers in both the House and Senate, the GOP won't do anything in the lame duck session. They'll just wait until the new president takes the oath of office in January and then push through at least some of the tax and spending changes they've been wanting to enact for years.

If President Barack Obama keeps his job, don't be surprised to see the partisanship on Capitol Hill continue. This will be especially evident if Republicans make gains in both legislative chambers. With no election to worry about, the president can hold firm to his principles as he looks to shape his administration's legacy in its last four years. And the GOP lawmakers could see short-term voter pain, even if it threatens their electability, as an eventual longer-term win for the party and its fiscal goals.”

So, if Kay is correct, as she may well be, there will be no tax extenders passed until January of 2013.  What does that mean for taxpayers and the IRS?

The 2012 tax forms and instructions printed by the IRS, based on law in effect as they “go to press”, will be incorrect, and taxpayers will have to enter special codes on certain lines to identify retroactively extended provisions, as was the case a few years back (although much more special entries this time).

And there will no doubt be a delay in processing tax returns, and issuing refunds, as the IRS has to rewrite its software during the actual tax season.

Once again the idiots in Congress will have proven that they are indeed selfish, partisan idiots with no concern for the country or its people.  Bear that in mind as you are in the voting booth next month. 

And, in her weekly recap at DON’T MESS WITH TAXES, Kay observes that –

That topic {the extenders and Taxmagedden}, however, didn't come up during the first presidential face-to-face between Barack Obama and Mitt Romney. In fact, there essentially was no new tax news in the debate.”

* At ACCOUNTING WEB Ken Berry (not, I expect, the actor of “Mayberry RFD”, “F-Troop” and “Mama’s Family” fame) gives us the news that “Attention, Shoppers: Tax Returns on Sale!”.

Ken tells us –

Beginning next tax return season, Liberty Tax will set up shop in more than 300 Walmart stores around the country.”

And –

Jackson Hewitt . . . will replace longstanding tenant H&R Block at Sears stores in 2013.”

Shoppers beware – these fast-food tax preparation chains ain’t necessarily cheap.

I wonder if Walmart’s low price guarantee will apply to the tax preparation services it will sell.  If clients can prove that a local independent tax professional will prepare the return for a lower price than Liberty (I expect this will be true in many instances) will they be charged the lower fee?

* Jason Dinesen admits that he “can find connections to taxes in strange places, such as baseball” and makes a great case for tax reform, in his post “Connecting Strange Baseball Rules to Taxes” at DINESEN TAX TIMES.

After a lengthy discussion of a recent baseball incident he explains -

Five-thousand pages of tax code, 20,000 pages of regulations, and tens of thousands (or maybe even hundreds of thousands) of pages of IRS revenue rulings and procedures, IRS notices, court cases, etc. make some tax situations more complicated than the infield-fly rule could ever be.

Two competent, ethical tax pros can look at the same situation and reach two different conclusions. And if audited, different IRS auditors may have different viewpoints on the situation.”

* The TAX FOUNDATION has issued its “2013 State Business Tax Climate Index”.

The Foundation “collects data on over a hundred tax provisions for each state and synthesizes them into a single easy-to-use score. The states are then compared against each other, so that each state’s ranking is relative to actual policies in place in other states around the country. A state’s ranking can rise or fall significantly based not just on its own actions, but on the changes or reforms made by other states.”

Wyoming, South Dakota, and Nevada are the top three states, with the best “business tax climate”.  My former home state of New Jersey is #49 – not quite the worst – just ahead of New York and behind California.  No surprise there.  My new home state of PA is #19, so my move was a good one in another way.

* Not necessarily a 1040 issue (except possibly Schedule C), but Joe Kristan gives some good advice in his Tuesday “Tax Roundup” at the ROTH AND COMPANY TAX UPDATE BLOG.

Joe talks about a recent IRS lien filed against a local outside payroll company that took client employers’ payroll tax withholdings and matches and ran. 

His advice -

That’s why you should verify your employment tax payments even if you outsource your payroll compliance function.  You can do this by signing up for EFTPS, the Electronic Federal Tax Payment System.  Employers enrolled in EFTPS can go online to verify that their employment taxes are being remitted.  If your payroll outsourcing provider doesn’t remit in a way that lets you verify via EFTPS, that means you can’t verify, but only trust.  That can end badly.”

I use EFTPS for my few business payroll clients.

* And Joe’s Roundup “turned me on to” an item on a tax scam here in PA (though not my area of the state) - “Bogus Tax Returns Easy Money for Drug Dealers”.  I expect it is not limited to parts of PA.

I expect that the largest component of the fraud involves the refundable Earned Income Credit.  Need I say more?

THE FINAL WORD –

I am listening to the Stage and Screen music station on my cable tv while working on the BUZZ.  A song from MISS SAIGON (“The American Dream”) has a great lyric that made me think of so-called “reality tv”.

You can sell shit and get thanks.  That’s what I learned from the yanks.”
 
I also like the line - "Perfume can cover a stench.  That's what I learned from the French."

As HL Mencken said –

Nobody ever went broke underestimating the intelligence of the American public.”

TTFN

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