Friday, November 30, 2012


As mentioned in Wednesday’s BUZZ, this week I attended the National Association of Tax Professionals’ annual year-end tax update seminar “The Essential 1040” (it was formerly “Famous”, but is now “Essential”) in New Jersey.

While the day was basically an update of what is new for 2012 tax returns, with nothing really new for me, there were a few items of interest.

(1)  The draft version of the 2012 Form 1040 (and 1040A) is available for viewing.  They are the same as their 2011 counterparts, with the same number of lines.  However certain Lines are marked “Reserved” – for the popular tax extenders that expired on December 31, 2011, and have not yet been extended for 2012 by the idiots in Congress, but which the IRS is thinking probably will be.

They include Lines 23 and 34 on Page 1 of the 2012 Form 1040, and Lines 16 and 18 on the 1040A, are “reserved” for the deductions for educator expenses and tuition and fees respectively. 

On Page 2 of the 2012 Form 1040 Line 67 and item b. on Line 71 is also “Reserved”.  Line 67 on the 2011 form was used for the First-Time Homebuyer Creditfrom Form 5405, and item b on Line 71 referenced Form 8839, used for Qualified Adoption Expenses (which was refundable).

The draft of the 2012 Schedule A, for Itemized Deductions, is also available.  Item b of Line 5 (under “Taxes You Paid”) is “Reserved” for the possible extension of the option to deduct state and local sales taxes instead of state and local income taxes.

(2)  The IRS has said that because of the delay by the idiots in Congress in dealing with the extenders, including the annual AMT patch, and more detailed checking to prevent fraudulent returns, refunds from electronically filed 2012 income tax returns will no longer be issued in 2 weeks.  It will not take 4 to 6 weeks to process the refunds. 

This sounds like the processing time we had been used to with manually filed returns.  So it looks like filing electronically will not get your refund to you any faster than filing manually.

(3)  FYI – the “incidental only” (no meals) per diem allowance for business travel is $5.00.  It is the same as 2011. 

This covers fees and tips to airport, train station, and hotel personnel.  It is generally used by business travelers who do not incur meal expenses while “on the road” – i.e. they stay with relatives who feed them, or all meals are included in the price of an event or activity. 

And the special Meals and Incidental Expenses per diem for transportation workers (like over-the-road truck drivers) also remains the same as 2011 - $59.00 per day for travel within CONUS (continental US) and $65.00 per day for OCONUS (outside the continental US) travel.

(4)  The IRS is getting better at matching 1099 information returns to amounts reported on the Form 1040 (or 1040A), and will continue to issue CP-2000 notices when discrepancies are identified – so be sure to report all 1099 items somewhere on your return.

And, of course, just because you do not receive a Form 1099 in the mail does not mean that one was not issued and sent to the IRS. 

(5)  This, I will admit, was new to me.  The interest that has accrued on US Savings Bonds is taxable in the year that the individual bond matures, and not necessarily in the year the bond is cashed in (i.e. a bond matures in 2010, but is not cashed in until 2012).

I verified this via TREASURY DIRECT - 

The interest earned on your savings bonds is subject to federal income tax, which can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first.”  

(6)  Another FYI, especially for tax pros - 43 inmates on death row were issued PTINs (Preparer Tax Identification Numbers) - the number issued by the Internal Revenue Service to paid tax return preparers who have registered with the IRS.

(7)  The seminar leaders, both very good (while some are obviously more better than others -my buddy Beanna Whitlock will have you in stitches while learning something important about tax law – I do not recall ever coming across a bad or unsatisfactory NATP seminar leader), both discussed the “back-ended ROTH” strategy.

A taxpayer wants to contribute to a ROTH IRA for 2012, but has too much income to be able to do so (MAGI of more than $183,000 if married filing joint, $10,000 if married filing separately, or $125,000 for all others).

So the taxpayer puts the maximum $5,000 or $6,000 (depending on age) in a non-deductible “traditional” IRA.  Once this contribution has been processed the taxpayer converts the $5,000 or $6,000 in the traditional IRA account to a ROTH account.  There is no longer an income threshold for converting a traditional IRA to a ROTH IRA. 

As the taxpayer’s basis in the IRA is $5,000 or $6,000, his 2012 non-deductible contribution, there is no taxable income to report.  If the money deposited in the non-deductible traditional IRA account earns $5.00 in interest prior to the conversion, then the taxpayer reports $5.00 as taxable income.

(8)  Be sure to read my THE TAX PROFESSIONAL post for my commentary on items discussed at the seminar that apply to taxpros.

I have now completed my CPE for the year.  While the IRS requires 15 hours per year, in 2012 I took 24 hours in federal taxation and 8 hours in state taxation (actually all NATP or NJ-NATP classes).  And there were some federal courses offered recently that I would have taken if not for cash flow issues.  First up in 2013 is the excellent NJ-NATP famous State Tax Seminar in mid-January.


Wednesday, November 28, 2012


I am in New Jersey today (Wednesday) attending the annual NATP year-end tax update seminar (which includes the required 2 hours of ethics preaching).  I will post items of interest gleamed from the seminar here on Thursday and/or Friday.  

* The idiots in Congress have done nothing towards avoiding “taxmageddon” yet.  It looks like action on the “fiscal cliff” will not take place until December (if even then). 

Stan Collender warns “Don't Believe the Reports of Progress on the Fiscal Cliff” at STAN COLLENDER’S CAPITAL GAINS AND GAMES –

In spite of what you may be reading elsewhere, we are no closer today to avoiding the fiscal cliff than we were the day after Election Day.”

* A great, and especially appropriate, quote on taxes –

Taxation with representation ain't so hot either.” ~Gerald Barzan

* David Wessel does us the service of “Putting Some Facts in the Tax-the-Rich Debate” at the Wall St Journal’s WASHINGTON WIRE.

* Professor Annette Nellen talks about “Tax Reform and Base Broadening” at 21st CENTURY TAXATION.

* No surprise here.  Charles Babington of HUFFINGTON POST tells us “The old adage, ‘Don't tax thee, don't tax me, tax the man behind the tree’ was never more in vogue” in "INFLUENCE GAME: Tax Them, Not Us, Groups Say” -

In Washington, meanwhile, it's virtually every group for itself, scrambling to protect 100 percent of each tax break and government payout it now enjoys.”

As I have said before, just about every idiot in Congress is for tax reform and cutting “tax expenditures”, except for the ones they sponsored.  And just about every taxpayer wants to close “tax loopholes”, except the ones that benefit them personally.

It reminds me of another good tax quote –

A tax loophole is something that benefits the other guy. If it benefits you, it is tax reform.'' — Russell B. Long.

* Kay Bell considers “Employee vs. Contractor: A Tax Distinction” at her BANKRATE.COM blog.      

* The CCH daily tax headline e-letter reports that another voice has joined the bandwagon in “Bernanke Warns Against Going over Fiscal Cliff”.

The U.S. economic recovery could stall in 2013, unless lawmakers and the White House can agree on a solution to the so-called fiscal cliff of across-the-board spending cut and expiring tax breaks, Federal Reserve Chairman Ben Bernanke said.”

* A SANDY relief development – NJ residents affected by SANDY may apply for one-time Disaster Food Assistance.  Click here for more info.

* Trish McIntire offers some timely tax advice with “Document Your Holiday Giving” at OUR TAXING TIMES.

One good point to remember –

All the small gifts you make, like cash into the Salvation Army bucket, won’t be deductible unless you write them a check or get a receipt. You may have the best intentions but there is no deduction without some documentation.”

* Let me share some “Shameless Self Promotion” from Russ Fox of OUR TAXING TIMES.  And from TAXGIRL Kelly Phillips Erb in “Roll Out the Red Carpet: It's Awards Season”.

* Joe Kristan gives us some “Thoughts on a More Business-Friendly Tax Law” at the ROTH AND COMPANY TAX UPDATE BLOG. 

Good thoughts all.  Especially –

Remove big penalties for foot-fault violations.”

And most important of all –

Whatever you do, make it simple.”

These thoughts would also apply to individual tax law as well.


I hate to sound like a broken record, but . . .

To BO and the idiots in Congress-

Now is not the time to debate tax policy and changing tax rates.  It is too late – you wasted an entire year! 

Just get off your fat arses and extend everything as is (including the expired “extenders” and AMT patch) through the end of 2013, and start next year off with a serious discussion of the various tax reform options to take effect January 1, 2014.

And stop acting like babies – learn to compromise!


Monday, November 26, 2012


The holiday season is upon us.  And so is the 29th annual PNC Christmas Price Index!

The annual survey conducted by PNC Wealth Management tracks the cost of the items gifted by the True Love in the classic carol “The Twelve Days of Christmas” - from a partridge in a pear tree to 12 drummers drumming.

The cost for 2012 is $25,431.18, up $1,168.00, or 4.8%, from 2011.

The biggest price increase on the list is the 6 geese-a-laying, which jumped 29.6%, from $162.00 to $210.00.  Half of the animal prices showed double-digit increases, the other 2 in the teens, and half remained unchanged.  While the cost of the partridge was the same as last year, the price of the pear tree in which the partridge sits was up 11.8%.  The only other double-digit increase was for the 5 gold rings, up 16.3%.

On the labor front - although the performer’s union has usually done better for its members than the musician’s union, with the dancers and leapers earning substantially more than the pipers and drummers, this year there was no change in the price of the dancers or leapers.  But the musician’s union was able to get their members a 5.5% pay raise.  The poor milking maids, considered “unskilled labor”, are paid the minimum wage, which did not go up in 2012.

As a point of information, each dancing lady gets $699.34 while a milking maid gets only $7.25 (the musicians each get slightly over $230.00).  At $58.00, the 8 maids-a-milking is the least expensive item on the list (if you could the partridge and pear tree combined).  On the other end the swan is the most expensive item at $1,000 each. 

PNC also calculates the “True Cost of Christmas”, which is the total cost of all 364 gifts from repeat giving in each verse of the song.  For 2012 this is $107,300.24, up $6,180.40 or 6.1% from last year.

And it also determines the price of the items if purchased over the internet, which, at $40,439.53, is $15,008.35 more than the base CPI.    However, the increase in cyber prices from 2011 to 2012 is only $579.47, or 1.5%. 

PNC Wealth Management tells us –

In general, Internet prices are higher than their non-Internet counterparts because of premium shipping costs for birds and the convenience factor of shopping online.”

So it does pay to stand on line on Black Friday instead of ordering from the convenience of your home on Cyber Monday.  Since I no longer exchange gifts, I do not have to do either!


Sunday, November 25, 2012


I am sure that by now you have heard about the 20-something fool who took pictures of herself and a friend behaving badly (which today is glorified and encouraged by reality tv shows like THE JERSEY SHORE and similar steaming piles of excrement) at the Tomb of the Unknown Soldier in Arlington National Cemetery.

Her real mistake, however, was posting these pictures on Facebook for the world to see. 
She has publicly apologized and, I expect, removed the pictures from her Facebook page – which does not necessarily mean removing them from existence on the internet.  And she will soon be forgotten when some other idiot does something stupid and claims his/her fifteen minutes of infamy.

But let us go forward 20 years.  This fool, now older and wiser, applies for a job and is being seriously considered.  The personnel department will no doubt “google” her and what will they find – the story of her foolish act as a stupid 20-something, with the offending pictures.  Do you think she will get the job?

If I want to share my vacation pictures with my intimate circle of close friends and family around the country (for, honestly, who else but my intimate circle of close friends and family would give a flying sex act about my vacation pictures) I will mail them prints, or send the pictures to them as an email attachment.

A large segment of the great unwashed masses are stupid.  But even smart people can have a momentary lapse of judgment and do something stupid.  The purpose, and the legacy, of Facebook is to proclaim this stupidity to the world and to posterity.


Saturday, November 24, 2012


I trust you had a “successful” Thanksgiving. 

* Check out my post “We Are Now Not Only Tax Preparers, But Social Workers As Well!” at THE TAX PROFESSIONAL.  

* I have always said that you do not have to raise taxes, or cut necessary programs, in order to balance the budget.  All you have to do is cut the tons of waste. 

A “tweet” from Joe Kristan led me to an excellent example of wasteful government spending provided in “Q: Who the Hell Would Pay $22,000 For an Oil Portrait of Tom Vilsack? A: You Already Did!” from’s HIT AND RUN blog.

* Jason Dinesen posts a winter “rerun” at DINESEN TAX TIMES - “Dinesen Tax Greatest Hits: Thoughts on Preparer Regulation”.

Jason says -

I agree with the concept of regulation of tax preparers. I just have zero faith the the IRS can successfully oversee it. And I doubt that regulation will change anything for the better.”

And –

I think this is just going to create more government bureaucracy without solving any problems.”

Jason is basically against the new RTRP regime and believes that the requirement to register and receive a PTIN is sufficient.

We both agree that the basic competency test has no real value.  But I disagree with him on the aspect of requiring CPE. 

The RTRP designation should exist, and there should be no competency test required (or at the very least a grandfathering exemption), but acquiring and keeping these initials, and one’s PTIN, should be based on maintaining CPE in federal taxation (and CPAs and attorneys are NOT required to take any CPE in federal taxation).  I would keep 15 hours, but do away with the annual 2 hours of ethics preaching requirement (I hour ethics update every other year is enough).

* Jean Murray provides answers the timely question “Holiday Gifts for Employees - What's Taxable?” at ABOUT.COM.     

* The TAX ADVISOR gives us some guidance on Handling Expenses Incurred in Acquiring a Residence”.     

* While it is too early to talk about New Year’s resolutions yet, Jim Blankenship has been touting a good one lately at GETTING YOUR FINANCIAL DUCKS IN A ROW – “C’mon America! Add 1% More to Your Retirement Savings This Year!”.

* According to ACCOUNTING TODAY the Internal Revenue Service Oversight Board has joined the bandwagon – “IRS Oversight Board Urges Congress to Patch AMT.

The Internal Revenue Service Oversight Board has sent a letter to the leaders of Congress’s two tax-writing committees urging them to act swiftly to patch the Alternative Minimum Tax to keep it from spreading to millions more taxpayers.”

The IRS itself had previously sent a similar letter to the idiots in Congress.

* Kiplinger, via the DAILY FINANCE, lists “The 10 Most Tax-Friendly States for Retirees”.  My new home state of Pennsylvania made the list at #10.

Pennsylvania is one of only two states (Mississippi is the other) that exempts all retirement income -- including public and private pensions, IRAs and 401(k) distributions -- from its state income tax.”

On the other hand. my former home state of New Jersey is #9 on the list of “10 Least Tax-Friendly States for Retirees”, just ahead of New York.  Connecticut is the worst state for retirees.

Once again it looks like I made a good move!


I am listening to the Stage and Screen music channel on cable while compiling this BUZZ installment.  One selection was from AVENUE Q – with a lyric line that helped me to get through most of the first decade of the new millennium.

The lyric line –

George Bush - is only for now.” 


Friday, November 23, 2012


MISSOURI TAXGUY Bruce McFarland’s recent “McTax Hangout” online “tv show” discussed the issue of Form 1099-K.

Bruce reported that the IRS just sent out 20,000 letters to small business taxpayers regarding the issue of 1099-K income.

IRS Form 1099-K reports “gross” receipts that were “run through” a credit card.  This would include sales tax and, for restaurants, tips for waitpersons – and could also include “cash back” requested by customers using debit cards. 

So it is obvious that the “gross” receipts reported on a Form 1099-K by a third-party credit card provider is NOT the same as gross receipts from sales or services received by the taxpayer.

The problem is that, while I do not think that the 1099-K numbers are to be entered separately on the IRS tax forms (1040 Schedule C and E and 1120, 1120-S and 1065), the IRS will use the numbers reported on 1099-Ks for audit purposes, and possibly also for CP-2000 purposes.

What to do?

One solution, which is technically not correct, is to include the gross amounts reported on Form 1099Ks in the line for “gross” receipts, and deduct out customer “cash backs” perhaps in the line for “returns and allowances” or along with sales tax remitted and employee tips in the Cost of Goods Sold section on the line for “other costs”, with a statement attached to the return identifying the specifics of these “other costs”.  

Of course with the Form 1099K rules it is more important than ever for the small business owner to keep super-detailed records of all receipts and disbursements.


Thursday, November 22, 2012


I found this Thanksgiving Blessing by Brian McLaren in a local advertiser from Sussex County NJ -
We have rested, and we think of all those whose lives are hard and who enjoy little rest.
We have eaten the fruit of our labors, and we think of those who have neither work or money.
We have feasted, and we think of all those whose stomachs  are hungry and have too little.
We have felt safe and at home, and we think of those who live in danger and turmoil, in war and fear, and all who have been driven from their homes.
We have been together, and we think of all those who are lonely and alone.
We have laughed, and we think of all those whose hearts are heavy.
We have shared stories, and we think of all those who need a listening ear.
We have counted our blessings, and we ask that our gratitude can now be translated into the desire to be a blessing to others.

Wednesday, November 21, 2012


As per IRS Notice 2012-72 - beginning on January 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

 •56.5 cents per mile for business  

 •24 cents per mile for medical or moving

 •14 cents per mile in in service of charitable organizations

A penny increase each for business miles and medical/moving miles.  The 14 cents per mile for charitable miles is set by the idiots in Congress, and hasn’t been increased in a dog’s age.



* Tax pros - check out my post “The IRS Responds” over at THE TAX PROFESSIONAL.

* Professor Annette Nellen informs us that “the fiscal cliff the federal government is facing also affects the states” in “The Fiscal Cliff and the States” at 21st CENTURY TAXATION.

* As I expected “Special Dividends Surge Fourfold as Tax Increase Looms in U.S.”, as Thomas Black tells us at BLOOMBERG BUSINESSWEEK.

From the end of September to mid-November, 59 companies in the Russell 3000 stock index declared a one-time cash payment to shareholders, up from about 15 in the year-earlier period, according to data compiled by Bloomberg. More than a dozen said they acted because of a pending dividend-tax increase.”

* Joe Kristan’s Monday Tax Round-Up at the ROTH AND COMPANY TAX UPDATE BLOG opens with disturbing quotes from a TAX ANALYST piece -  

Asked by reporters about the AMT patch, which has caused anxiety for IRS officials preparing for the coming tax return filing season, Ways and Means Chair Dave Camp, R-Mich., responded, “I’m hopeful that we will address AMT by the end of the year.” He added that he doesn’t think a patch will be passed as stand-alone legislation.”

And -

“Ways and Means ranking minority member Sander M. Levin, D-Mich., also expects the AMT patch and the extenders to be included in a larger deal on the fiscal cliff. ‘I think it’s preferable for everything to be put into a package. They relate to each other,’ he told Tax Analysts.” 

It is hard for me to keep my promise not to whine about the idiots in Congress.

* William Perez reminds us of the effects of Congressional procrastination on tax filings in the past in “Possible Delay to Filing Season Due to Late-Passing Legislation, IRS Warns” at ABOUT.COM.  Sort of a preview of what we could expect (at the very least) in the upcoming tax filing season.

In 2007, the IRS scrambled to address the Tax Relief and Health Care Act of 2006, which extended several lapsed tax deductions. That legislation was passed both chambers of Congress by December 9, 2006, and was signed by the President on December 20, 2006. For the tax returns that year (2006), we had to manually "write in" special codes on Form 1040 and Schedule A to indicate tax breaks that were extended but weren't printed on the forms.

In 2011, the IRS delayed accepting certain tax returns until February 14, 2011. The delay was caused by the Tax Relief Act, which had passed both chambers of Congress by December 16, 2010, and was signed by the President on December 17, 2010. That legislation extended some already lapsed tax deductions, notably for the sales tax deduction, classroom expenses, and the tuition deduction.”

One of the strategies is –

Harvest stock gains, rather than losses, prior to year-end. Taxpayers have long been trained to sell loss-generating stock prior to year-end in an effort to offset otherwise taxable capital gains. In the waning days of 2012, however, you should consider selling appreciated stock, not only to lock in the soon-to-expire 15% preferential rate currently afforded long-term capital gains, but to avoid the impending 3.8% Medicare tax as well.”

Please remember that, as Tony points out –

The 3.8% Medicare tax applies only when your modified adjusted gross income, or MAGI (unless you have foreign earned income, this will be the same as your adjusted gross income) exceeds certain thresholds: $200,000 for a single taxpayer, $250,000 for a married couple filing jointly, and $125,000 for a married couple filing separately.”

* Paul Neiffer reports “Talk Brewing of Extending the Payroll Tax Cut” at FARM CPA TODAY.

In his Tax Round-Up Joe Kristan has a good comment on this possibility (highlight is mine) –

It seems unwise to accelerate the demise of social security by reducing funding, but wisdom isn’t found much in our political class.”


A recent “tweet” suggested that “20% who qualify for the EIC don't claim it”.

An interesting statistic , considering that (at least) 30% of those who do claim it do so fraudulently.


Monday, November 19, 2012


Many individuals, instead of or in addition to making cash donations to relief organizations, are offering hands-on assistance to victims of Sandy.

If you are able to itemize on Schedule A you may be able to claim a tax deduction for any “out of pocket” expenses connected with your Sandy-related volunteer efforts.

It is important to note that, to be deductible, you must be a volunteer with an IRS-qualified organization, such as the Red Cross.

Here is the word on deducting your expenses from the “Out-of-Pocket Expenses in Giving Services” section of IRS Publication 17 (Your Federal Income Tax), with some comments from me (any highlights are mine) -

Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be:

• Unreimbursed,

• Directly connected with the services,

• Expenses you had only because of the services you gave, and

• Not personal, living, or family expenses

If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. {Using the standard mileage allowance is probably the better choice.  FYI, this rate is set by Congress and not the IRS and has not changed in a dog’s age.  It is possible that Congress may pass legislation to increase this rate for Sandy-related travel only, as they have done in the past with high-profile natural disasters – rdf}

You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate.

You must keep reliable written records of your car expenses.  {This is very important.  Keep a mileage log in, for example, your pocket date book of all the miles driven for Sandy-related relief efforts.  Actuually you should keep good records of ALL of your relief-related expenses. - rdf}

Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure {However, on this issue the IRS also says – “The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip.” – rdf}, recreation, or vacation in the travel. This applies whether you pay the expenses directly or indirectly. You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses.

Deductible travel expenses.   These include:

• Air, rail, and bus transportation,

• Out-of-pocket expenses for your car {see above – rdf},

• Taxi fares or other costs of transportation between the airport or station and your hotel,

• Lodging costs, and

• The cost of meals. {Unlike business meals you can deduct 100% of the cost of meals – you are not limited to 50%. - rdf}”

As I mentioned above, Congress may pass legislation to add or liberalize deductions for Sandy-related travel, as they have done in the past with high-profile natural disasters.  If they do I will let you know here at TWTP.

If you donate canned or other food items to a charity for Sandy victims be sure to keep your supermarket receipt and circle the items donated.  And if you donate used clothes or household items be sure to make a detailed listing of what you are giving.

Remember, you must give these items to a recognized charitable organization.  If you put together a care package and give or send it directly to a specific needy individual or family you cannot claim a deduction on Schedule A.


Sunday, November 18, 2012


Today in History - November 18 (courtesy of

1477- William Claxton publishes the first dated book printed in England. It is a translation from the French of “The Dictes and Sayings of the Philosopers” by Earl Rivers.

1626- St. Peter's Cathedral in Rome is officially dedicated.

1861- The first provisional meeting of the Confederate Congress is held in Richmond, Virginia.

1865- Mark Twain's first story "The Celebrated Jumping Frog of Calaveras County" is published in the New York Saturday Press.

190- The second Hay-Pauncefote Treaty is signed. The United States is given extensive rights by Britain for building and operating a canal through Central America.

1905- The Norwegian Parliament elects Prince Charles of Denmark to be the next King of Norway. Prince Charles takes the name Haakon VII.

1906- Anarchists bomb St. Peter's Basilica in Rome.

1912- Cholera breaks out in Constantinople, in the Ottoman Empire.

1921- New York City considers varying work hours to avoid long traffic jams.

1928- Mickey mouse makes his film debut in Steamboat Willie, the first animated talking picture.

1936- The main span of the Golden Gate Bridge in San Francisco is joined.

1939- The Irish Republican Army explodes three bombs in Piccadilly Circus.

1949- The U.S. Air Force grounds B-29s after two crashes and 23 deaths in three days.

1950- The Bureau of Mines discloses its first production of oil from coal in practical amounts.

1953- Robert D Flach, the internet’s “Wandering Tax Pro”, is born in Jersey City NJ.

1968- Soviets recover the Zond 6 spacecraft after a flight around the moon.

1978- Congressman Leo Ryan is announced missing on a visit to Jonestown, Guyana.

1983- Argentina announces its ability to produce enriched uranium for nuclear weapons.

1984- The Soviet Union helps deliver American wheat during the Ethiopian famine.


Saturday, November 17, 2012


Once again, there is enough BUZZ for two consecutive installments.

* Over at the Tax Foundation’s TAX POLICY BLOG Joseph Henchman tells us “Colorado Debates Marijuana Tax; Would Be First Genuine Revenue-Raising Tax on Illegal Drug” -

Colorado and Washington State have passed ballot initiatives to legalize and tax marijuana, with Maine and Rhode Island legislators now considering it as well. The Colorado initiative specifically authorized the state legislature to impose an excise tax of up to 15 percent on marijuana sales, although officials are debating whether it is written in a way to satisfy the state’s strict tax increase limitation requirements. The Washington initiative sets up a license system for producers and retailers, initially set at $250, with $1,000 for annual renewals.

These may the first drug excise taxes that are actual taxes (designed to raise revenue from a legal transaction) as opposed to disguised efforts to prohibit or penalize drug sales or use.”

Isn’t that the only reason for legalizing non-medical marijuana in the first place?

* Kay Bell brings us up to date on the Occupy Wall Street cafones in her post “Forgiven Debt or a Gift?” at her BANKRATE.COM blog.

Remember Occupy Wall Street? After staging protests nationwide to protest greed and corruption in the financial sector, it has branched out to more public service activities.

The group's latest effort is still financially focused, but its latest targets are not high-powered financiers. They're regular people, the 99 percent, who are deep in debt.

Through its new project Rolling Jubilee, the Occupy folks plan to randomly buy securitized debts from creditors on pennies on the dollar and then write it off.”

Why should individuals who have irresponsibly overextended themselves be let off the hook in this way?  How does this benefit society?  Chances are these individuals will just go out and build up a ton of debt all over again.

My original impression of the Occupy Wall Streeters has not changed.  Fools to the left of me, jokers to the right.  They are indeed fools.

* TAXPRO TODAY discusses the IRS Advisory Council’s 2012 annual report in “Advisory Council Urges IRS to Combat Identity Theft”.

I agree with the council that the IRS should do whatever possible to combat identity theft.  However, I take serious exception to another of the report’s suggestions –

The panel also recommended specifically enumerating tax return preparation and tax advice as constituting ‘practice before the IRS’.”

Read my lips!  Tax return preparation and providing clients with tax advice is NOT, and should not be constituted as, “practice before the IRS”.  Tax return preparation and providing clients with tax advice is tax return preparation and providing clients with tax advice.

* At CNN MONEY Jeanne Sahadi warns “Fate of Paychecks Rests on Fiscal Cliff” –

Lawmakers may cut a deal to avert the fiscal cliff by Dec. 31. Or they may not.

If they don't, paychecks in January will get smaller and millions of workers may face weeks of uncertainty about what their true take-home pay will be. Families that live paycheck to paycheck could feel the sting of limbo most acutely.”

The bottom line:

If lawmakers let the country go over the cliff for even a short while in 2013, workers will be left wondering just what they'll be paid and what they owe in taxes.”

* REUTERS reports “Top U.S. House Tax Writer Vows Tax Reform in 2013” (highlight is mine) -

The House of Representatives' top Republican tax writer on Thursday pledged to tackle a full-scale overhaul of the tax code in 2013, but offered few specifics on how to get it done.

Republican Dave Camp said in the text of a dinner speech that the House Ways and Means Committee, which he chairs, ‘will write, act on and pass comprehensive tax reform legislation in 2013’.

He added, ‘Let me repeat that: we intend to move a comprehensive tax reform bill in 2013 - no matter what’."

I would really like to believe this. 

* Kelly Phillips Erb announces that her annual “12 Days of Charitable Giving 2012 Starts Soon” -

As with last year, I’m asking readers to submit, via email to, the name of a charity that most deserves a boost this year for the 12 Days of Charitable Giving. Ideally, it would be one that you have supported financially over the past year or that you plan to support before the year end. In addition to the name, I’ll need the city where the charity is located, what it does and why you support the charity (personal stories would be great). A link to the web site and the best way to make a donation would be terrific: the more information that you can provide, the better.”

The deadline for nominations is November 30, 2012 at 11:59 p.m. What are you waiting for? Go, do something good!


Friday, November 16, 2012


Another early BUZZ.

* Jason Dinesen gives his take on what I discussed in my THE TAX PROFESSIONAL post “Is There Any Real Value to the RTRP Competency Test?” in “No To Additional Preparer Testing, Yes To CPE Requirements” at DINESEN TAX TIMES.

“I’ve written before that I don’t think CPAs or attorneys should be required to take the RTRP exam to prepare tax returns. I stand by that belief, even though I am in the minority among people who aren’t a CPA or an attorney (I’m an enrolled agent).

But I do think CPAs and attorneys should be required to show continuing education in the tax field. Currently, the IRS doesn’t require this of CPAs and attorneys.”  

Jason and I both agree that the RTRP test does not have much value.  And we both agree that CPAs and attorneys who want to prepare 1040s for compensation should be required to take the same 15 hours per year in federal taxation as “previously unenrolled” RTRPs (actually 13 hours – since CPAs are already required to take 2 hours in ethics annually, I think).  We also agree that if a test is to be given there should be “grandfathering” for experienced preparers.

Where we part company concerns the CPA and attorney exemption from the test.  If a test is going to be required, it should be applied equally to all those who want to prepare 1040s for compensation.  CPAs and attorneys should not be exempt.  They should, however, be covered by any “grandfathering” provisions.

The bottom line (on which I believe we both agree) – do away with the test requirement and require all PTIN holders to take at least 15 hours of CPE in federal taxation annually.  

* Lori Montgomery of THE WASHINGTON POST warns that “AMT Could Keep 60 Million Taxpayers from Filing Returns till March, Delaying Refunds” –

Nearly half of U.S. taxpayers would be unable to file their 2012 returns — or receive their refunds — until at least late March if Congress fails to enact legislation by the end of this year to restrain the alternative minimum tax”.

The item quotes IRS Acting Commissioner Steven T. Miller’s recent letter to Sen. Orrin G. Hatch –

“The IRS would likely be able to open the 2013 tax filing season with minimal delays for most taxpayers {if Congress passes new legislation before the end of the year}.”

However, if there is no AMT patch enacted by the end of the year there would be serious repercussions for taxpayers.

Without an AMT patch, about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year {2012}.  In addition, in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes.

Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later. Tens of millions of these taxpayers would unexpectedly have to pay additional income tax for 2012, leaving them with a balance due return or a much smaller refund than expected.”

The item ends with –

If the AMT is not patched, those hit with the tax could see an average increase of $3,700 in their 2012 tax bills, according to estimates by the nonpartisan Tax Policy Center.”

I expect you know what I would like to say here – but I promised!

* The recent issue of NATP’s “Taxpro Monthly” included an item titled “Taxpayer Denied the ‘Turbo Tax’ Defense”.

The item discussed Brenda F Bartlett v. Commissioner, TC Memo 2012-254 (the highlight is mine) -

The court sustained the IRS determination as to both the tax and penalty.  It stated that while it was apparent that a portion of the information entered by the taxpayer into the Turbo Tax program was incorrect, the error was not the result of software computations.  They reminded her that Turbo Tax is only as good as the information entered – in other words, garbage in, garbage out.”

Another one of many examples of the fact that 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!

* TaxGirl Kelly Phillips Erb tells us that what happens in Vegas does not necessarily stay in Vegas in her post “Janeane Garofalo Finds Out She's Been Married... For 20 Years” at FORBES.COM. 

An interesting story with a potential tax consequence.

* Another effect of the inaction of Congress.  USA TODAY reports that “Stocks at 4-Month Lows as Fiscal Cliff Looms”.

Please do not panic.  Actually now is a good time to buy.  As the article points out –

Meanwhile, some stocks are getting reasonably priced, says Karl Mills of Jurika, Mills and Keifer. ‘Some really good companies are getting cheap,’ he says.”  

* The TAX RESOLUTION BLOG post “Your Tax Problem and the National Debate over Tax Increase” by Dean Alexander makes some very good points -

Now the President is going to try to raise taxes on what he claims to be ‘the rich’. I think he is misguided. The ones that the Obama guys call rich are a couple of engineers who happen to both work and each one makes over a hundred thousand dollars. Is this the nouveau rich that Obama calls rich? Hardly!!

And –

The nation does need both the increase of revenue and reduction of expenses. But raising revenue should not necessarily increase taxes. The reduction of expenses does not mean that we throw the poor under the bus.”

And –

The country needs fundamental original thinking that accommodates the few such as the elderly and the disabled that cannot fend for themselves and at the same time fanatically balances its income and expenses which we call the budget. In a family with children, you balance the budget but you feed your children and send them to the doctor. It is a matter of an honest dialogue and smart allocation of resources.”

It is hard to use the words “honest” and “smart” when it comes to Congress (sorry – I couldn’t resist).

* A good reminder from Arden Dale at THE WALL STREET JOURNAL – “For IRS, Charities Must Say More Than Thank You” –

When a charity receives a gift, it needs to say more than a simple thank you.

The Internal Revenue Service requires that a donor produce a record from the charity to show a gift over $250 had no strings attached. A thank you note can be a good enough record, as long as it includes the magic words: ‘No goods or services were received in exchange for the contribution’.

Without that phrase on paper, donors stand to lose their write-offs, and end up with penalties to boot.”  

Cover your arse - make sure any receipt or acknowledgement you receive from a charity to which you have contributed contains the magic words!