Friday, August 30, 2013


Real [tax] simplification has eluded us because we have failed to address head-on the public’s addiction to tax incentives as a means of providing social services and funding government programs.  Unless we deal with that problem, real simplification is impossible.” – Thomas F. Field (founder of Tax Analysts)

Right on, brother Thomas!

Have made progress on the GD extensions – and still had time to wander the web.

* Check out my items “The Big O” (it is not what you think!) and “When to Contact Your Tax Pro” at MAINSTREET.COM. 

* The series of interviews at MASTERS OF ACCOUNTING that began with me continues with an “Interview with Russell Fox, Principal of the Clayton Financial and Tax Firm”.

* The TAX FOUNDATION was the first to issue a detailed analysis of the Department of Treasury announcement regarding the tax treatment of same-sex marriages - “IRS Issues ‘State of Celebration’ Guidance for Same -Sex Couples - Further Guidance by 24 States May Be Required”.

* Jason Dinesen asks, and answers, the question “Would I Recommend the Tax Prep Industry to a Young Person? Probably Not” at DINESEN TAX TIMES.

Over the past few years I have occasionally thought about this issue from a slightly different perspective – if I were just starting out today would I still choose tax preparation as my profession?  Especially in light such developments as the IRS attempt to regulate all tax preparers, the continuing complexity and changing of the Code, and the excessive due diligence requirements of the Earned Income Credit. 

My answer would probably be yes – and still partly because of the seasonal nature of the job.  I still enjoy preparing 1040s – the thrill is not yet gone.

In my THE TAX PROFESSIONAL post “Ramblings on Tax Practice” I take a different position than Jason.  I talk about limiting a practice to 1040 preparation, which I now do, instead of recommending “diversify and offer other accounting services”. 

I am not as concerned as Jason is about DIY tax preparation software and tax simplification taking away business.  As I have said for years, I do not believe that the creation of a much simpler 1040 would affect my practice, and I do not know of any client who has ever left me to “self-prepare” his/her tax returns using a box.

* Trish McIntire warns us that “6 Weeks Is Not That Much Time”.  She is, of course, reminding us of the October 15th deadline for filing extended tax returns.

My recent bout with “manana disease” is a clear indication that Trish speaks the truth.

* And William Perez reminds us that “2012 Corporate Returns Due September 16”.  As are extended 1041s and 1065s.  

* And ACCOUNTINGWEB echoes an “IRS Reminder: Highway Use Tax Return Due September 3”.

I think that about covers all the upcoming deadlines.

*  There is progress.  The 47% will be 43% for 2013, or so says Roberton Williams of THE TAX POLICY CENTER in “And Now for the Movie: Fewer Americans Pay No Federal Income Tax” –

The percentage of Americans who pay no federal income tax is falling, thanks to an improving economy and the expiration of temporary Great Recession-era tax cuts. In 2009, the Tax Policy Center estimated that 47 percent of households paid no federal income tax. This year, just 43 percent will avoid the tax.”  

Roberton points out (highlight is mine)-

Of the 43 percent of households that will owe no federal income tax this year, nearly half will be off the rolls because their incomes are too low. The rest won’t pay because preferences wipe out the taxes they would otherwise owe. Many of those preferences, such as the Earned Income Tax Credit and the Child Tax Credit, are social policy run through the tax code. If those provisions were considered spending rather than tax cuts, many more people would be counted among income tax payers.”  

I must continue to say that I do not accept the statement that most of the now 43% actually pay federal taxes because they pay FICA payroll taxes.  FICA tax is not really a tax.  The Social Security component is a contribution to a pension plan, and the Medicare part is an advance health insurance premium.


Thursday, August 29, 2013


Meet TURBO, my new "room-mate", formerly of the Dissen Animal Shelter in Honesdale PA.


This just in –
The US Department of the Treasury has announced that “All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes”.
According to the DOT press release (highlight is mine) –
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.”
Treasury Secretary Jacob J. Lew explains –
This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”
The press release points out –
However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.”
As a result of the recent Supreme Court decision -
Legally-married same-sex couples generally must file their 2013 federal income tax return using either the ‘married filing jointly’ or ‘married filing separately’ filing status.
Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.” 
I look forward to detailed posts on this new development from fellow tax bloggers who have been blogging about same-sex marriages and taxes - which I will reference in the next BUZZ.

Wednesday, August 28, 2013


Complexity does not enter the tax code so much out of malevolence as through misguided reform efforts and excessive demands made on tax laws as the vehicle for implementing public policy.” – Sheldon D. Pollack (Professor of Law & Political Science. University of Delaware)

I couldn’t let a week go by without some BUZZ – so here is a special mid-week edition.

* Did you see my interview at MASTERS IN ACCOUNTING – “Interview Robert Flach, 40-Year Veteran Tax Professional”?  Well what are you waiting for?

They also interview fellow tax blogger Joe Kristan.

* A TWTP post made it into TAXPRO TODAY’s weekly BUZZ-like “In the Blogs”.

* And TAXPRO TODAY gives us a slide show of “Disappearing Tax Deductions” – “deductions, credits and other provisions that are slated to go at the end of the year”.

* Jamaal Solomon continues his “Confessions of A Mad Tax Accountant” with “#6: Arrogance of Some (Not All) Young Tax Accountants” at THE TAX FACTOR.

My experience as a young tax accountant was, and is, different from Jamaal’s.  I do not now know, or actually ever known, many young tax accountants – other than fellow tax bloggers like Jamaal and Jason Dinesen (whom I have actually never met in person).  During my 40+ years I have never “networked” or even socialized with other accountants (other than those who I had known from high school or with whom I worked during my brief tenure at Deloitte Haskins + Sells in the late 1970s) or tax pros, except for recent associations with members of the NJ chapter. 

I have been going to NATP conferences for 25+ years and I only went to the chapter luncheons at the last two I attended, and have never gone to the formal end of conference dinner.  I am always sociable and engage in conversation with those sitting next to me at sessions, but have never attempted to “make new friends” or interact with my fellow conference attendees after class.

I do believe, as JS has found, that many CPAs, especially the younger, less experienced variety, feel unjustifiably superior to non-CPA accountants and tax pros, who may very well be better accountants and tax preparers than a lot of CPAs. 

A few years back I was personally attacked online by a tax blogger who thought CPAs walked on water.  Thankfully this person has apparently disappeared from the Tax Blogosphere.     

* The August Personal Finance Newsletter from Jean Keener includes an item on “Fixing an Error on Your Credit Report” -

If you haven't reviewed your credit report lately, you can get one free credit report from each of the three agencies once a year at 

If you discover an error, your first step should be to contact the credit reporting agency in writing to indicate that you are disputing the information contained on your credit report. The credit reporting agency usually has 30 days to complete an investigation of the disputed information. Once the credit reporting agency investigation is complete, they must provide you with written results of their investigation.”

* THE SLOTT REPORT discusses “IRA Contributions After Death”, including an issue concerning a spousal contribution that I dealt with for a client this past tax season.

* Melissa of FREE FROM BROKE echoes advice I have been giving clients and readers for years now – “If Your Teen Has a Job, It’s Not Too Early to Think About Retirement”.  Specifically, “Open a Roth IRA for Your Child”.

* The title of this Russ Fox post at TAXABLE TALK caught my attention immediately – “Attorneys Behaving Badly”.  It is not about a new reality tv piece of excrement,

He ends the post with (highlight is mine) -

One last remark regarding preparer regulation: Both individuals I’ve written about are members of the Bar. Both subscribe to supposedly stringent ethics rules. Clearly, both individuals were guilty of violating the canons of their profession. The idea that just because someone has a license bad behavior will vanish is, of course, foolish.”

* Nothing new here – “New Jersey Isn't 'Tax Friendly' for Retirees, Study Shows” from NJ.COM.

A Kiplinger study released last week ranks New Jersey 41st when it comes to tax-friendliness for retirees.”

Hey, that’s better than I would have thought.

* Jason Dinesen provides some interesting food for thought, as usual, in “Evaluating the Cost of Working” at DINESEN TAX TIMES.

* And Jason begins a series titled “Glossary of Tax Terms” with a description of the “HSA”.

* The SOUTH PITTSBURGH REPORTER explains “How to Get a Transcript or a Copy of a Prior Year Tax Return”.

* 360 DEGREES OF FINANCIAL LITERACY suggests some good ways of “Getting an Early Start on Saving for Retirement”.

The bottom line –

Saving even a little money can really add up if you do it consistently. Consider ways to free up more money to save for retirement--by reducing discretionary spending, for example. And, put retirement ahead of competing goals, even important goals like saving for your child's education.”


A non-tax BUZZ item from USA TODAY – “N.Y. AG Sues Trump, 'Trump University,' Claims Fraud”.  The highlight below is mine-

New York's attorney general sued Donald Trump for $40 million Saturday, saying the real estate mogul helped run a phony ‘Trump University’ that promised to make students rich but instead steered them into expensive and mostly useless seminars, and even failed to deliver promised apprenticeships.

Attorney General Eric Schneiderman says many of the 5,000 students who paid up to $35,000 thought they would at least meet Trump but instead all they got was their picture taken in front of a life-size picture of ‘The Apprentice’ TV star.”

Tronald Dump has screwed his investors (didn’t he declare bankruptcy twice – without losing any of his own money), so why not his “students”.

Whenever legitimately criticized for his actions, this fool does not respond to the issues of the criticism but instead takes personal shots at his “criticizer”.  When Rosie O’Donnell seriously criticized a Trump action, with legitimate comments on his actions, his response was “Rosie is fat”!

What intelligent person would sign up for a “Trump University” in the first place?  Or want their picture taken with Trumpster?

And this idiot is considering a run for President!


Friday, August 23, 2013


The Congress is a circus.  To the music of braying donkeys, each elephant is led in circles by the tail of another.  While they have the peoples’ attention, the clowns write the tax laws.” – Jim Boren

An excellent description of Congress!

There is a lot of BUZZ today.  I need to finish the remaining GD extensions – so I may not post next week- BUZZ included.

* TaxGirl Kelly Phillips Erb shares “What I've Learned In 1,000 Tax Posts” at FORBES.COM (that is 1000 posts at host – she had many, many more at her old TaxGirl site).

* Ed Slott reviews the pros and cons of “Obama's 6 Retirement Proposals” at FINANCIAL PLANNING.COM.  I do not support any of them.

Actually as a rule I do not support any of BO’s tax proposals.

* A “tweet” from @JKLasser asked the question “Is There a First-Time Homebuyer Credit for Someone Who Buys a House in 2013?”. 

The answer is no.  This disastrous program ended in 2010.  And JK believes –

There’s probably no chance that Congress will change its mind anytime soon because the housing market has picked up”.

Let’s hope JK is correct, and we have seen the end of this mistake.  

* And JK gives us “Three Things Grandparents Can Do to Help Their Grandchildren”.  Three very good ideas indeed.

* The TAX FOUNDATION’s “Monday Map” shows “Migration of Personal Income”, which “illustrates the interstate movement of income over the past decade (from 2000 to 2010)”.

The biggest losers are high-tax states like NY, NJ, CA, and IL.  The winners are low-tax states like FL, TX, and AZ.  I would certainly never move to these too-hot states regardless of my tax situation.  I was surprised that PA was also a loser - #40 on the list.

As I have mentioned before, my move to PA was motivated by savings in health and auto insurance (almost 50%) and occupancy costs, and other personal considerations, and not by state tax savings – although the real estate and sales taxes are less than I would pay in NJ.

* I am a bit late in bringing you this: TAXPRO TODAY reports “IRS Opens Site to Explain Health Care Tax Provisions” –

The Internal Revenue Service has launched a new Affordable Care Act Tax Provisions site at to educate individuals and businesses on how the health care law might affect them.

Topics include premium tax credits for individuals, new benefits and responsibilities for employers, and tax provisions for insurers, tax-exempt organizations and certain other business types.”

* On Tuesday TaxGirl Kelly Phillips Erb got to know Ashley J Wright of Virginia – a CPA and an EA. 

* Rick Newman of US NEWS AND WORLD REPORT lists “11 Things Wrong With Congress”.  Among them -

Members of Congress sometimes reveal a dangerous degree of ignorance on vitally important issues they have considerable power to regulate.”

Politicians manipulate voters every day with half-truths—or outright lies—about taxes, spending, and many other issues that directly affect the nation's prosperity.”

What is wrong with Congress?  They are self-absorbed idiots, incapable of independent thought, whose primary concern is keeping themselves, and members of their party, in office and certainly not the proper administration of the government or the interests of the American public.

Henry and Richard are the 3rd least respected brand.

Those who are well known but have the lowest Favorability are considered the least respected under the Brand Respect methodology.”

Click here to learn more about the methodology of the study.

H+R Block certainly does not deserve any respect.

* According to the US Department of Justice atheism is a religion.  USA TODAY explains “Feds Say OK to Atheists on Religion Tax Break” –

In a brief, the Justice Department argued leaders of an atheist group may qualify for an exemption. Buddhism or Taosim don't include a belief in God and are considered religions, the government's lawyers argued, so why not atheism?

How did this come about?  Read the story.

* Trish McIntire discusses “Back-to-School Expenses and Receipts” at OUR TAXING TIMES.

Trish is correct when she says –

The burden of proving you qualify for the programs rest with you and you need to keep records.

It doesn’t matter if you might qualify for a credit or deduction or need to show that withdrawals are for educational expenses, you need to be proactive about keeping records. Don’t rely on the 1098T that the college will send out. Schools have gotten more accurate completing the 1098T but they can be misleading.

To be honest, I have found that more often than not the Form 1098T is as useful as tits on a bull!

Trish ends with -

Believe me; it’s better to put the info aside as you get it than to try to find it in February.”

I certainly do believe Trish, and echo her words.  This does not just apply to education expenses – but to any deductible expenses.


Wednesday, August 21, 2013


The recent issue of NATP’s TAXPRO MONTHLY discussed David P and Veronda L Durden v Commissioner (TC Memo 2012-140).  This was another case where the Tax Court upheld the IRS disallowance of a legitimate charitable contribution made to a qualified charity because the taxpayers did not comply with the strict letter of the law.

In 2007 the taxpayers did legitimately donate over $20,000, in several separate contributions of more than $250, to a qualified 501(c)(3) organization eligible to receive tax-deductible donations.

The taxpayers were audited in 2009, and produced cancelled checks and a statement from the church, dated January 10, 2008, that documented the full amount they had deducted.  Unfortunately the statement from the church did not specifically indicate that no goods or services, other than intangible religious benefits, were provided in exchange for the donation, and was therefore not accepted by the IRS.

The couple obtained a second statement from the church, dated June 21, 2009, that clearly indicated that no goods or services were provided.  But the IRS ignored this second statement because it was not “contemporaneous” – i.e. received from the done organization before the earlier of the date the original tax return is filed or the extended due date of the tax return.

The first letter, dated January 10, 2008, was contemporaneous but did not contain the requirement statement.  The second letter, dated June 21, 2009, contained the required statement but was not contemporaneous.

I do agree it is right to require proper documentation to support a charitable deduction.  Before the stricter rules that require a hard-copy receipt for every single dollar contributed to a church or charity in order to claim a tax deduction on Schedule A I would venture a guess that at least 50% of all charitable deductions claimed on Schedule A each year were at least slightly overstated.  And I do believe that recipient organizations should be required to verify that no goods or services were provided in exchange for the donation.  But I draw the line at this strict adherence to a “contemporaneous” statement.

If the taxpayer can provide proper documentation that the money was actually given to the charity, via cancelled checks, and that it was an actual charitable donation, via an acknowledgement from the charity, and the charity confirms to the IRS or the Tax Court either in writing or by oral testimony that no goods or services were provided, the deduction should be allowed.  The written statement that no goods or services were provided, if not contemporaneous, should be allowed to be provided, under penalty of perjury, either during the audit or in court.

I do understand, and know full well, that cancelled checks by themselves are not sufficient proof that a donation was actually made. 

I am reminded of the tale of the church member who approached his pastor one Sunday after the service.  The member told the pastor that he noticed there was a lot of loose cash in the collection plate each week, which would be kept in the church overnight before counting and depositing, and that he, as a retail business owner, needed lots of cash at the beginning of each week for his cash register.  He proposed that after the service each Sunday he write a check to the church in exchange for all the loose paper bills in the collection plate.  This way the church would not have excessive cash in its office overnight and he would have extra cash for use at his retail location – a benefit for both parties.

Each week the businessman would write a personal check to the church for $100-$200 and take the cash home with him.  On his tax return he claimed a deduction for the total of all the checks he wrote to the church for the year.

{I have told this story to prove a point, and not to suggest a way to cheat on your taxes!}

So it is better to have both cancelled checks and an independent individual or cumulative receipt or statement, regardless of the amount of each separate contribution.    
I discuss the court case and the rules for documenting donations in more detail in "Documenting Charitable Deductions--Don't Get Screwed by the Tax Code" at

Do you agree with me that the Tax Court decision, while legally appropriate, was basically wrong in this and other similar cases, and that “non-contemporaneous” statements regarding the receipt of goods or services should be acceptable?


Tuesday, August 20, 2013


Politicians certainly must be considered the most formidable barrier to fundamental tax reform.” – David A Hartman

* Peter J Reilly talks about the NJ Property Tax Reimbursement program (aka Senior Freeze) in “Misinformation Causes Loss Of Senior Property Tax Rebate” at FORBES.COM.

I submitted a comment about the program, in which I referred to NJ politicians as “cafones”.  PJR asked me to explain what I mean by “cafone”, and I replied -

I was told by my mentor many, many, many years ago that it meant a simpleton, and that is how he used it. But apparently it has come to mean “an uncouth person or lowlife” in American slang.

I think when it comes to NJ politicians lowlife is appropriate – ‘a person who is considered morally unacceptable by their community, especially those who exploit others for their own selfish purposes’.”

For that matter lowlife is also an appropriate description of the idiots in Congress.

* Last week MISSOURI TAXGUY Bruce McFarland’s “McTax Hangout” talked about “Obamacare”.

* At the WALL STREET JOURNAL Tom Herman explains to a reader that “Filing Time Doesn't Affect Tax Audits”.

The reader wants to know if filing an extension will increase your chances of an audit, and the answer is no.  It is also an “urban tax myth” that extending your return and filing it in October will reduce your chances of an audit.  A return is chosen for audit based on the information reported on the return, and not when it is received by the IRS.

* Trish McIntire tells you how to “Get Credit for Saving for Your Retirement” at ANSWERS.COM.

FYI, the income threshold for this credit is fairly low.

According to NJ.COM –

Bayonne is launching the Shop Bayonne Property Tax Reward Program this week as part of an effort to encourage Bayonne residents to shop locally.

The program provides property tax credits for homeowners and rebate checks for renters every time they patronize local participating merchants.

Rebates and tax credits will be determined by each business separately and can be a percentage or a dollar amount based on the price of the product or service.”

It actually sounds like a good idea.

* The IRS has a page on “Identity Protection” where “you will find a wide range of information. Depending upon your personal circumstances, the information found here will cover a variety of scenarios involving identity theft, ranging from contacting us with a case of identity theft to providing tips to help keep your records safe.”   

* Along these lines, George G. Jones and Mark A. Luscombe discuss “Tax Strategy: Best Practices for Individuals and Businesses Against Tax ID Theft” at TAXPRO TODAY.

* Beverly DeVeny and Jared Trexler of THE SLOTT REPORT review the rules for “IRA Contributions When You Contribute to an Employer Retirement Plan”.

I am maxing out my 401(k) or I am contributing to a 401(k), can I also make an IRA contribution? We get asked that question a lot.

The answer is, YES. But, you may not be able to deduct your IRA contribution.”


Monday, August 19, 2013


What the idiots in Congress fail to do when they add “tax expenditures” to the Tax Code is take into consideration the special record-keeping requirements that apply to specific deductions and credits.

Thankfully they did recently require basis reporting on Form 1099-B.  Surprisingly, for Congress, that was a step in the right direction.

Here is one example –

Interest on home equity debt (money not used to buy, build, or substantially improve real estate) is deductible only on principal up to $100,000.  Form 1098 is used to report mortgage interest paid, but it does not differentiate between acquisition debt and home equity debt.  The taxpayer must internally keep track of the difference between their home equity debt and home equity debt over the life of the debt. 

This is easy if there is one acquisition mortgage and one separate home equity line of credit, and never the twain shall meet.  But in reality, taxpayers refinance and consolidate debt multiple times, often more than once in a single year, co-mingling acquisition and home equity debt, and the treatment of closing costs on mortgage refinance or consolidation is an issue.  I do not personally know of one single taxpayer who keeps records of the separate allocation of acquisition debt and home equity debt.

I would expect that as much as half of the Schedule A deductions for mortgage interest could be incorrect – due to complexity and not intentional fraud.  

In rewriting the Tax Code the idiots in Congress must take into consideration the real world requirements of complying with whatever “tax expenditures” they deem appropriate to keep.

I have recommended limiting the mortgage interest deduction to acquisition debt on a principal primary residence. This would require special new rules and regulations for banks and mortgage companies for issuing home-secured loans.

For example -

A “mortgage” loan would only be permitted for “acquisition debt”. Interest on a “mortgage” for a taxpayer’s primary personal residence would be fully deductible, up to the current acquisition debt limitations. “Home equity debt” would have to be a totally separate loan, and interest on this type of loan would not be deductible. A Form 1098 would only be issued for interest paid on a “mortgage” loan, and the bank or mortgage company would be required to report only interest paid on up to $1 Million of principal, and indicate if the mortgage was secured by a primary personal residence.

One would not be able to refinance a home-secured loan to include both types of debt in one loan. Therefore a homeowner could not refinance a “mortgage” to get additional money in hand unless he/she could substantiate to the lender that the money is used to “substantially improve” the secured residence. One would have to refinance the “mortgage” for the exact same principal, adding perhaps related closing costs, and take out a separate “home equity” loan to get any money in hand.

By instituting these requirements as part of federal law a taxpayer, or his/her preparer, would truly be able to just take the amount of mortgage interest reported on the Form 1098 for the primary personal residence and transfer it to Schedule A.

While this is what the idiots in Congress “should” do – remember that they are idiots, and lazy idiots at that, so don’t hold your breath.


Friday, August 16, 2013


The reason there are two senators for each state is to that one can be the designated driver.” – Jay Leno

* Check out my discussion of “How Social Security and Railroad Retirement is Taxed” at MAINSTREET.COM!

I like the first comment to the item –

You mean there IS a way to file taxes and NOT get screwed by the Tax Code?

* As I warned before the Supreme Court decision, ACCOUNTING TODAY explains “Married Same-Sex Couples with Kids May See Their Taxes Increase”.

Especially hard hit will be SSCs who previously filed separately as Single and Head of Household.

The federal retirement benefits agency announced on Aug. 10 that, in response to the Supreme Court ruling invalidating the Defense of Marriage Act (DOMA), it is now processing claims for those in same-sex marriages.

But, and it's a big but, Social Security is only issuing benefits for claims by residents of states where same-sex marriages are legal.”

* Russ Fox shows “Once Again, Registration of a Tax Preparer Doesn’t Stop Him from Bad Behavior” with a case in point at TAXABLE TALK.

His bottom line correctly point out -

. . . having a license cannot stop bad behavior. And second, the government has methods today of stopping tax preparers who are breaking bad. As the DOJ noted in their press release, ‘In the past decade the Justice Department Tax Division has obtained injunctions against hundreds of tax preparers’.”

* FORBES.COM TaxGirl Kelly Phillips Erb reports “IRS Proposes To Permanently Ease Restrictions For Innocent Spouse Relief”.

* Kelly has also issued Podcast 1.03 – “This Week In Tax News + More On The Home Office Deduction”.  

* Daisy Barton of ACCOUNTING-DEGREE.ORG sent me this “infographic” of “A Brief History of US Government’s Misadventures, Mishandling, and Misuse of YOUR Tax Dollars” that you might find interesting.

* THE SLOTT REPORT answers the question “How is My Annuity Going to Be Taxed?"

* The Washington Post’s WONKBLOG tells “The True-Life Story of a Baby Born Early to Dodge Taxes”.

For decades I have been telling clients to get married early in the year and have children late in the year.

* Professor Annette Nellen makes some good points about 1099-K reporting (3rd-party reporting of credit card deposits) in “Small Businesses, IRS Notices and the Tax Gap - repeal 6050W”.

* Let me share Trish McIntire’s not so shameless “Self-Promotion -”.

* And share “Some Shameless Self-Promotion” of my own. 


Did I tell you this one before?

A driver was stuck in a traffic jam on the highway outside Washington, DC.  Nothing was moving.  Suddenly, a man knocks on the window.

The driver rolls down the window and asks, "What's going on?"

"Terrorists have kidnapped the entire US Congress, and they're asking for a $100 million dollar ransom.  Otherwise, they are going to douse them all in gasoline and set them on fire.  We are going from car to car, collecting donations."

"How much is everyone giving, on average?" the driver asks.

The man replies, "Roughly a gallon."


Thursday, August 15, 2013


The Max and Dave “clean slate” approach to tax reform, which I wholeheartedly support, begins by eliminating all “tax expenditures”.  The new Tax Code begins “everything is taxable” and “nothing is deductible” and adds back only those “excepts” (exclusions, deductions, and credits) that are absolutely necessary.

A recent BUZZ installment referenced “Homeownership Tax Deductions, Credits and Exemptions” from REAL ESTATE METRO.  It listed the many “tax expenditures” related to home ownership.  Topping the list were the deductions for real estate taxes and mortgage interest.

The Office of Management and Budget reports that for 2012 the deduction for mortgage interest “cost” $87 Billion and the deduction for state and local taxes cost $33 Billion.

The TAX FOUNDATION’s “Case Studies” on eliminating tax expenditures said this about the “Property Tax Deduction for Owner-Occupied Housing” -

Two criticisms are that it is mostly claimed by upper-income taxpayers, and that it softens people's opposition to high taxes and wasteful spending by local governments, because some of those taxes can be written off at the federal level.”  

The chief criticisms are that it is mostly claimed by upper-income taxpayers, and that housing is given less punitive tax treatment than many other forms of saving or investment.”

Regarding the deduction for home mortgage interest, in a TWTP post from June of 2010 I noted –

Howard Gleckman posed the question “Should We Dump the Home Mortgage Interest Deduction?” at TAXVOX, the blog of the Tax Policy Center.

Kay Bell added her two cents to Howard’s commentary in “
Is It Time to Kill the Mortgage Interest tax Deduction” at DON'T MESS WITH TAXES.

A recent tweet led me to the article “
Mortgage Deduction: America's Costliest Tax Break” By Jeanne Sahadi at from April

I support keeping the deduction for state and local income taxes, and real estate taxes and “acquisition debt” mortgage interest on a principal personal residence (owner-occupied housing).  But my reason is not to encourage home ownership. 

The Internal Revenue Code taxes Americans based on income measured in pure dollars. However it is a fact that the “value” of one’s level of income differs, sometimes greatly, based on one’s geographical location. A family living in the northeast or California that has an income of $100,000-200,000 (apparently considered “upper-income taxpayers”) may be just getting by, while a similar family that resides in “middle America” lives like royalty on the same level of income. Many components of the Tax Code are indexed for inflation, but nothing is indexed for geography. To be honest I have no idea how one would even begin to index for geography.

It costs an awful lot to live in, for example, New York, certainly New Jersey, Connecticut, Massachusetts, and California. State and local income and property taxes are the highest in the country. The cost of real estate is also excessively high. As a result one must earn a lot more money to be able to live in these states – and salaries are arbitrarily increased to reflect the increased cost of living. Yet $150,000 in income is taxed by the federal government at the same rate in New York City as it is in Hope, Arkansas.

Real estate and state and local income taxes and the cost of a home, and therefore also the amount of “acquisition debt” mortgage interest paid on a residence, are higher in the Northeast, and California. Since we pay taxes on “net income” after deductions, allowing an itemized deduction for these items would help to somewhat geographically “equalize” the tax burden.

I do believe that the itemized deduction for real estate taxes and mortgage interest on secondary personal residences and the itemized deduction for “home equity” mortgage interest (not used for “substantial” home improvement) should be eliminated.

I have never seen the issue of “geographic equalization” discussed anywhere else, and would like to hear from others on this issue.  Please comment on this post!