Friday, June 27, 2014


The IRS’ newly announced voluntary “Annual Filing Season Program” is one of the stupidest things I have ever come across.

The program does not provide those who meet the testing and CPE requirements with an identifiable designation, with accompanying initials, like “Registered Tax Return Preparer” (and “RTRP”) that the recipient can use in advertising and promotion to identify his/her competence and currency in 1040 preparation.  Those who pass the test and take the CPE are merely placed on a list of IRS recommended preparers and given a plaque to hang in his/her office.

If the really IRS wants to help the taxpayer public identify competent tax preparers, who have been tested and remain current, it must provide a method of publicly identifying them – such as an actual credential.

In announcing the program, IRS Commissioner John Koskinen says, “Our program will give unenrolled tax return preparers a way to stay up-to-date on tax laws and changes, which we believe will improve service to taxpayers”.

The program does no such thing. Tax preparers already have, and take advantage of, multiple ways to stay up-to-date on tax laws and changes – tax-related CPE offered by NATP, NSTP, NSA, NAEA, private providers like Gear-Up, and the existing IRS Nationwide Tax Forums.

Serious tax preparers are already taking CPE in federal and state tax topics each and every year, many more than the 18 hours required by the new program.  .  Not because of any requirements – but out of necessity.  Others are “self-educating” via the internet.  This program will do little to “encourage education and filing season readiness”.

The online database, if it is indeed used by taxpayers seeking professionals, could be confusing if it is merely an alphabetic listing of all “record of completion” preparers mixed in with others of “recognized credentials {some with nothing to do with 1040 preparation – rdf} and higher levels of qualification and practice rights

To be done right the online database should contain all PTIN-holders only, since all PTIN-holders are "approved preparers", listed alphabetically by category of designation.  Instead of one big list there should be separate lists for Enrolled Agents, participants in the new voluntary program (with an identifiable designation and initials), unenrolled preparers, CPAs, attorneys, ERPAs, and enrolled actuaries.  The database should be prefaced with a statement that only Enrolled Agents and those holding the new designation have demonstrated competence and currency in 1040 preparation via a test and mandatory CPE in taxation.



98% of the adults in this country are decent, hardworking, honest Americans.  It’s the other lousy 2% that get all the publicity.  But then, we elected them! 
Lily Tomlin

* JK LASSER takes us for a stroll down memory lane in “Tax Rules of Yore: Tax Breaks You Can’t Use Now But …”, discussing tax law that is no more.

While I do miss Income Averaging (it allowed tax preparers to literally pull a rabbit out of our hat), I am truly glad that the new home buyer credit and the deferral on home sales (replaced by Section 121 exclusion) are gone, and that there is no longer a need for a Maximum Tax.

* Miranda Marquit tackles the question “Should You Pay Off Your Student Loans Early?” at the MONEYSMARTLIFE blog.

She makes some good points, with which I agree.  For example, pay down higher-interest debts, such as credit cards, first.

* “Hobby vs. Business: Hobby or Real Business? What are the Tax Laws?” Jean Murray explains the difference at ABOUT.COM.

* Joe Cicchinelli and Jared Trexler from THE SLOTT REPORT provide a “Reminder: Qualified Charitable Distributions From IRAs Have NOT Been Reinstated”.  

Many advisors and the public have asked us about the status of Qualified Charitable Distributions (QCDs) for 2014. QCDs, also known as charitable IRA rollovers, expired after December 31, 2013. While it was widely expected that {the idiots in – rdf} Congress would reinstate them, as of today they have not yet been reinstated for 2014.”  
The word is that the “extenders” will not be extended until the end of the year, after the November elections.  So those who want to benefit from QCDs might want to put off taking their RMD until year-end.

* ACCOUNTING TODAY reports on a recent study that suggests “Tax Season Sign-up Could Boost ObamaCare Enrollment”.

What this seems to imply is that individuals should sign up for health insurance when they had their taxes prepared.

Thanks, but no thanks.  Tax preparers have enough to deal with during the “season”.  We are already expected to be social workers by verifying that taxpayers qualify for federal welfare (the Earned Income Credit).  We do not need any more unrelated work.  The administration of ObamaCare is not the job of the tax preparer, and should not be the job of the IRS.

Government social programs, no matter how good they may be, or the distribution of the benefits thereof, should never be administered through the Tax Code!  

* THE CHICAGO FINANCIAL PLANNER, aka Roger Wohlner, takes us through “401(k) Loans by the Numbers”.


Thursday, June 26, 2014


The recent issue of MAIN STREET PRACTITIONER, published by the “other” NSA (National Society of Accountants), of which I am a member, includes an article titled “IRS Considering Voluntary Certification for Unenrolled Preparers”. 

The article discussed some of the broad outlines of the IRS proposal, “which are still preliminary and subject to change”.

It appears that participants would be required to pass a competency exam AND take a minimum of 15 hours in CPE every year.  Passing the test would be an annual and not a one-time only requirement.

The annual 15 hours of CPE would consist of at least 3 hours of tax law updates, which the IRS identifies as a “refresher course”, and the ridiculous 2 hours of ethics preaching, with 10 hours available for any other tax law related topic.

Accredited CPE providers would develop and administer the “refresher course”, based on an outline of required topics provided by the IRS, AND the annual competency test, which would consist of a minimum of 50 questions.

Tax preparers who passed the RTRP test (when the mandatory licensure program was in effect), the Accreditation Council for Accountancy and Taxation (ACAT) exam, or a state-sponsored tax preparation exam (in a state that requires licensure of tax professionals like Oregon or California) will be exempt from the annual exam, as will EAs, CPAs, and attorneys.

Those who meet the requirements would be included in a public IRS database of “approved preparers”, which would include Enrolled Agents, CPAs, and attorneys (who presumably have been issued a PTIN), and receive an official IRS certificate to hang in their office.

Tax preparers who do not chose to participate in the voluntary certification program would no longer have the right to represent clients before the IRS for returns they have prepared.

The IRS would launch a public awareness campaign to tell the public to go to only “approved preparers”.

There are a lot of things wrong with this proposal.

First, and foremost, is the idea of “approved preparers”.  Those who pass the test and become part of this voluntary certification program should NOT be referred to as “approved preparers”, the database should NOT be identified as being of “approved preparers, and the public awareness campaign should NOT instruct taxpayers to use only “approved preparers”.  The IRS should not be able to “approve” preparers.

Those who meet the requirements of the program should be issued a designation similar to “Registered Tax Return Preparer” (RTRP).  The database should be of Enrolled Agents and those designated under the new program ONLY.  It should NOT include all CPAs and attorneys with a PTIN. 

CPAs and attorneys should be permitted to apply for and be granted this new voluntary designation, and the additional initials that would accompany the credential.  This would identify their competence and currency in 1040 tax law.  Only CPAs and attorneys who received the new designation should be included in the public database.

Participants should NOT be required to pass a test each and every year.  There should be one initial competency test.  When all tax preparers were required to pass a competency test under the now dead mandatory RTRP licensure program the test needed to be relatively basic so as not to force too many preparers out of business.  However, the new voluntary program should have a much more detailed and comprehensive initial one-time only competency test.

The article said that EAs, CPAs, and attorneys would be exempt from the annual test.  EAs would not be volunteering for this new designation, because they already have a much better designation.  As I said, CPAs and attorneys should be allowed to apply for the new designation, and should have to meet the same competency test and annual CPE in taxation requirements as any other participant.

I do applaud the exemption of those who passed the RTRP test, ACAT certification holders, and state licensed preparers from the testing requirement.  One of my biggest problems with the original IRS required RTRP program was the fact that it did not provide a “grandfathering” exemption to the competency test.  As this is a voluntary program, I would not insist on a grandfathering exemption.

While I would support having currently accredited CPE providers develop and administer the “refresher course”, and would support having the competency test administered by the different CPE providers (anything would be better than the system that was in place for the previous RTRP test).  But the competency test should be a universal test written by the IRS.  A person taking the test in Atlanta GA should have to take and pass the exact same test as a person in Boondock KS, San Diego CA, or New York City.

The IRS public awareness campaign should educate the taxpayer public that only Enrolled Agents and RTRPs (or whatever the new designation is named) have proven competence by passing a detailed test and remain up-to-date on the tax law via required annual CPE in taxation.  It must not identify certain preparers as "approved" and imply that all others preparers are not competent or legally able to prepare returns.  CPAs and attorneys, who have not been also credentialed under the new voluntary program, have NOT, merely by virtue of possessing the initials CPA or JD, proven to anyone that they are competent or current on 1040 preparation, and the IRS should not mislead the public by so implying.

And the IRS should NOT deny tax preparers the right to defend or explain, or assist their clients in defending or explaining, the tax returns they have personally prepared during the audit process.  Those who do not volunteer to participate in the new credential should not be denied anything that they are currently able to do.

As an aside, and to be perfectly honest, a new voluntary tax preparation credential, even in its current proposed form, will have absolutely no effect on my own individual tax practice.  I am not looking for new clients – and am actually looking to “thin the herd”.  My current clients would continue to come to me regardless of whether or not I was “approved” by the IRS.  I would have absolutely no need to participate in the program – although I expect many other currently “unenrolled” preparers will welcome the opportunity (as I probably would have ten years ago).

I have consistently stated that the IRS is not the best organization to administer a 1040 preparation credential.  It should be maintained by an independent industry-based organization, like the ACAT.  But it should not be tied to one particular membership organization (as the current ACAT is to the “other” NSA).  It must be supported by, and it’s board must consist of representatives of, all the various legitimate tax preparation related membership organizations.


Wednesday, June 25, 2014


The Institute is running scared that a voluntary designation would shatter the “ownership” it believes CPAs have of the tax preparation – and put an end to the “urban tax myth” that a CPA is automatically a 1040 expert.

A few years back the AICPA sent the following response to an inquiry by a member (the highlight is mine) –

"We do not offer a credential in taxation. In general, our approach has been not to develop credential programs around areas for which the public already believes CPAs to 'own'. In addition, we do not endorse a particular tax credential."

Click here to see the source of this quote.

Michael Cohn, reporting for Accounting Today, tells us –

The American Institute of CPAs has sent a letter expressing strong concern with the Internal Revenue Service’s proposed voluntary certification program for tax return preparers, saying it ‘would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation’.”

The IRS has been offering a voluntary certification program for tax return preparers for decades now – the designation is known as the “Enrolled Agent”, or “EA”.  I cannot see how this designation has caused any “significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation”.

I will admit there has been confusion among the taxpayer public as to what an EA is - but this is because of the poor name given the designation (some taxpayers assume that an Enrolled Agent is an agent or employee of the IRS) and the fact that the IRS does not properly recognize or publicize the designation.

An IRS-sponsored voluntary RTRP-like designation would not be substantially different from its offering of the Enrolled Agent designation – it would be sought of like an EA-Light. 

The AICPA feels the new voluntary designation proposal - “is arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers, runs counter to evidence presented to the IRS, and will create market confusion.”

No designation will substantially address the problems presented by unethical tax return preparers.  Becoming a CPA has not stopped those so-designated from being unethical or from preparing fraudulent tax returns. 

There will be no market confusion.  A new tax-preparation credential will identify and clarify for the market those who have proven basic competence in 1040 preparation and keep up-to-date on the constant changes in the tax laws via mandatory annual CPE in taxation.  The market may think possession of the initials CPA does this – but in reality it does not.  The mere existence of the initials CPA after one’s name does not in any way, shape, or form indicate that the holder knows his arse from a hole in the ground when it comes to 1040 tax law. 

An individual CPA may well be a 1040 expert, and many are, but it has nothing to do with the initials CPA.  It is because of the specific knowledge, training, education, and experience of the individual.

Over the years I have found more errors on 1040s that have been prepared by CPAs than on any other source or preparation, including self-prepared returns.

If the IRS is going to offer a voluntary RTRP-like credential I have suggested that it be part of a two-tiered program that includes the current, but renamed, Enrolled Agent designation.  Click here.

But better yet, I believe a voluntary tax preparation credential should be offered and administered by an independent industry-based organization.  Click here.

So let’s be honest – the AICPA doesn’t care a lick about an IRS-sponsored voluntary RTRP-like credential causing confusion for the taxpayer public.  It could care less about the taxpayer public.  All it cares about is the fact that this credential will take business away from CPAs.


Tuesday, June 24, 2014


* Jim Blankenship talks about “The Designation Everybody Should Be Aware Of” at GETTING YOUR FINANCIAL DUCKS IN A ROW.

That designation is your beneficiary – both primary and contingent.  Jim reminds us -

It’s important to review and if necessary update your beneficiary designations ion your IRAs, 401(k), 403(b), life insurance and other savings and brokerage accounts.  This is especially important if you’ve recently had a divorce, or your primary beneficiary has passed away.”

* THE SLOTT REPORT explains “What is Compensation for Making an IRA Contribution”.

* Russ Fox reviews the recent testimony by the new IRS Commissioner before Congress regarding the IRS scandal and tells us about the proposed “The Dog Ate My Tax Receipts Act” in his post “I Don’t Think an Apology Is Owed” at TAXABLE TALK.

* A tweeted “Tip for Tax Cheats” from @SamAntar (of “Crazy Eddie” fame) -

If the IRS audits you and subpoenas your emails, explain that they were lost in a computer crash. They'll understand.”

* Kelly Phillips Erb, FORBES.COM’s TaxGirl, addresses “Raking It In At Summer Yard Sales” and answers the question “Does Uncle Sam Get A Cut?“.

In my opinion, more often than not yard or garage sales are really not worth the potential for agita inherent in the activity.  As I have said before, do you really want the great unwashed masses tramping through your yard or garage, and possibly your house as well? This activity usually wastes at least a full day and in the end you never get what your stuff is really worth. During the last hour of the sale you often end up almost giving away what is left just to get rid of it.

I believe a better idea, if you are able to itemize on Schedule A, is to donate your unwanted, but still usable, items to a church or charity. With this method you may ultimately end up with about 1/4 to 1/3 of the current market value of the stuff in your pocket (depending on your federal and state tax brackets) – which is probably not much less than you would end up in a yard sale anyway – you avoid the agita, and you get to help out a needy cause.

Earlier this year I discussed “Deducting Non-Cash Contributions” at MAINSTREET.COM.

* Kay Bell reminds us that “Taxes Matter in Retirement” at her BANKRATE.COM blog.


Monday, June 23, 2014


I recently received a tax question from a reader that was submitted as a comment to a totally unrelated TWTP post. 

Here is the comment -


My wife and I bought our current home as our primary home n Temecula, CA and closed escrow on 9/28/12. We sold a townhome which was our primary which we lived in for 7 years in Carlsbad, CA before buying our current home in Temecula, CA. I work for a company working remotely from home.

We are putting our house up for sale as of 6/20/14 and I received approval from my manager to relocate at my own expense back to Overland Park, KS, so we can be closer to my mother-in-law as she has multiple sclerosis and her son lives with her working full time and he needs help taking care of her.

If we sell our home before the 2 years is up what sort of paperwork would I need to have in case the IRS asks me about paying capital gains tax on our profit since we have lived less than 2 years in our home. I can always just have the potential buyer not close until after 9/28/14 so we have lived in our primary home for 2 years. We would make around 165K profit so we would meet the married filing joint proration criteria.

If we sell and close escrow before the 2 years is up then would I meet the over 50 miles job transfer criteria since I approached my company to relocate and/or would I need my mother-in-law to provide medical documentation show she has multiple sclerosis. I just don't want to have to pay capital gains tax which would amount to around a 40k tax bill if the IRS doesn't feel we have sufficient evidence for selling our home and moving without living in our home for 2 years.

Any info would be appreciate. Thanks.

David Allen

First let’s address the issue of not owning and living in the home for 24 months during the 5 year period prior to sale.

Here is what we are told in IRS Publication 523 “Selling Your Home” (highlight is mine)  -

If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. This applies to those who:

• Fail to meet the ownership and use tests, or

• Have used the exclusion within 2 years of selling their current home.

In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons.

• A change in place of employment.

• Health.

• Unforeseen circumstances.”


The sale of your main home is because of health if your primary reason for the sale is:

• To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or

To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury.

The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being.

For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals.

• Parent, grandparent, stepmother, stepfather.

• Child, grandchild, stepchild, adopted child, eligible foster child.

• Brother, sister, stepbrother, stepsister, half-brother, half-sister.

• Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law.

• Uncle, aunt, nephew, niece, or cousin.


In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Lauren's father has a chronic disease and is unable to care for himself. In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion.”

You can exclude a portion of your gain if you are selling your home and lived there less than 2 years and you meet one of the three exceptions.  The $500,000 maximum exclusion is pro-rated based on the period of residence.

The website of legal publisher NOLO has this to say in “Exceptions to the Home Sale Exclusion Two Year Rule” from Stephen Fishman, J.D -

Health problems are a valid excuse if a doctor recommends that you move for health reasons—for example, you have asthma and your doctor tells you that living in Arizona would be better for you than Maine. The health problems can belong to you, your spouse, any co-owner of the property, any other person who uses your home as his or her principal residence, or a close family member of any person in the prior categories—for example, a child or parent. Thus, for example, you can move if you need to be closer to an ill parent. If you want to use the health exception, be sure to get a letter from your doctor stating that the move is for health reasons and what they are. Keep the letter with your tax files.”

The safest way to secure the exception to the 2-year rule is to obtain an IRS Private Letter Ruling – but this is truly very expensive.  Before selling the home I would get a letter from the mother’s doctor stating her medical condition and her need for personal care.  I would also get a letter from the brother stating that he is unable to provide continual care because of his full-time employment.  These letters do not to be attached to the 2014 tax return, but should be available in case of an inquiry.

If the sale of the home closes prior to 9/28/2014, the couple can still report the sale on the 2014 Schedule D and claim the Section 121 exclusion.  A statement should to be attached to the return explaining why the period of ownership and residence is less than 2 years and including the calculation of the reduced maximum exclusion amount.

As for the question of deducting moving expenses (not specifically asked, but alluded to in the reference to the “over 50 miles job transfer criteria”) – since the move from California to Kansas is not at all job-related none of the moving expenses are deductible.

IRS Publication 521 “Moving Expenses” says -

You can deduct your moving expenses if you meet all three of the following requirements.

•Your move is closely related to the start of work.

•You meet the distance test.

•You meet the time test.”

While the distance and, I expect, the time tests will be met, the move is personally motivated and has nothing whatsoever to do with DA’s employment.  He works out of his home.  He is not moving to start a new job or because his company is relocating.  He is moving to be able to take care of a qualified family member.  .   

I hope this post satisfactorily answers the questions posed by Mr. Allen.  Does anyone out there have any additional comments or suggestions, or disagree with anything I have said?


Friday, June 20, 2014


* Jason Dinesen of DINESEN TAX TIMES answers my question in his follow-up post “Iowa Taxes: Filing Separately and Allocating Dependents”.

Thanks, Jason. 

* What is this?  Jason changes his mind and admits his error in “Solo Practitioner Blues: Value Pricing Revisted (I Was Wrong)”. 

I had joined Jason in his earlier disdain of “value pricing” – which he had originally described as determining a fee based on what a client thinks the work is worth – in an earlier BUZZ installment.  If this is what value pricing is then I stand by my original comments.

Like Jason, “I still have questions, such as how one determines that one client gets charged, say, $500 and another gets charged, say, $400 for seemingly the same work.”  Obviously if one client is not as organized, or generates more “agita”, the fee would be higher because more of my time was involved in doing the work.  But this has nothing to do with the client’s perceived value. 

I would be interested in hearing more from Jason on why the turnaround.

* Kelly Phillips Erb, FORBES.COM’s TaxGirl, teaches you how to become a NIIT Wit in “Outwitting The NIIT: 12 Ways To Avoid The New Net Investment Income Tax”.

FYI, NIIT is the new “net investment income tax” for those who BO considers “wealthy”.

* And Kelly tells it like it is in “Admit It: The Clintons Didn't Do Any Tax Planning You Wouldn't Do”.

She correctly points out that criticizing the wealthy for taking advantage of legal and legitimate tax deductions and strategies is hypocritical -

“. . . but let’s face it, when tax reduction strategies are available, most of us seize on them. You take the mortgage income deduction, right? You claim your dependents. You stash away tax deferred cash in retirement plans. You write off business expenses. You do it because you can. Just like the Clintons. And just like Apple.”

And she makes an excellent point when she says (highlight is mine) –

And it’s a fun message to say that the Clintons are using a tax strategy {to reduce federal estate tax – rdf} which benefits the top 1%… It’s also redundant: the top 1% are the only taxpayers subject to the federal estate tax anyway. Why would any of the 99% – who aren’t subject to the tax in the first place – even consider such a strategy? It’s pointless. But it makes a good talking point in the press, apparently. You know, for folks who aren’t quite sure what they’re talking about.”

If you are upset that the wealthy are taking advantage of tax benefits the blame is not with the wealthy.  The now famous 47% of Americans, who are anything but wealthy, are taking advantage of tax benefits to either pay absolutely no federal income tax or to make a profit from filing a Form 1040 (refundable credits).  The blame belongs to the idiots in Congress who write tax law.

* Speaking of the federal estate tax, Kelly’s FORBES.COM colleague Ryan Ellis says “U.S. House May Soon Kill the Death Tax” –

. . . the 218th (and beyond) co-sponsor signed onto H.R. 2429, the “Death Tax Repeal Act of 2013,” sponsored by Congressman Kevin Brady (R-Tex.) This means that a majority of the entire House of Representatives is now on record in favor of killing the death tax.”

I have never been a fan of the federal estate tax.  My only concern with doing away with the tax concerns the step-up in basis for inherited assets, which I am a big fan of.

* “401(k) Rollovers – Buyer Beware” warns Roger Wohlner, the CHICAGO FINANCIAL PLANNER.

Roger wants you to “be careful when choosing an advisor for your retirement nest egg”.  

Be careful when choosing a financial advisor or broker.  Period.  Remember, as I have said here before, a broker is a salesman who makes money based on what he sells you.  I have known many extremely competent and honest brokers over the years who have truly had their clients’ interests as their primary motive – but there are an equal number of bad brokers out there as well.

And don’t assume a financial advisor or broker, however competent or honest, knows tax law.  Run any advice from a financial advisor or a broker by your tax professional before making any substantial investment.

* THE SLOTT REPORT expands on an item referenced in a previous BUZZ installment in “Supreme Court: Inherited IRAs are NOT Retirement Accounts ... and What This Means For You”.  

* Over at CINCINATTI.COM Tom Cooney and Crystal Faulkner remind us that “Wise Ones Already Working on Taxes” and suggest some midyear tax planning moves.

* Oi vey!  According to Kay Bell “20,000 Kansans Still Waiting for Their State Tax Refunds”.


Tuesday, June 17, 2014


* Jeff Stimpson once again includes a TWTP post in his “In the Blogs” highlight of some of our favorite tax-related blogs from the past week titled "Easy as ACA”.

* In the course of “googling” I came across a 3-year old post by Stephen Fishman at the OFFICIAL BLOG of the Nolo legal publishing house on “40 Years of Tax Changes” that looked at the differences between tax-year 1971 (the first return I prepared as a paid tax preparer) and tax-year 2011.

Stephen’s bottom line correctly puts the blame for the “complete mess” our Tax Code has become on the idiots in Congress, and reminds us that “the power to tax is also the poser to obtain campaign contributions”.

* THE SHLOTT REPORT identifies and explains the “3 Retirement Plan Life Expectancy Tables” for determining RMDs.

* Kay Bell, the yellow rose of taxes, celebrated the recent Friday the 13th by telling us “Don't Fall for These 13 Tax Myths on Friday the 13th or Any Day".
Let me add a 14th tax myth – “A CPA is automatically a 1040 expert”.   

* Charles Rubin tells us “Inherited IRA Exposure To Creditors – Resolution At Last” at RUBIN ON TAX –

The U.S. Supreme Court has now weighed in, and has ruled that inherited IRAs are not exempt from bankruptcy creditor claims.

* Jim Blankenship gives, as usual, great advice when he tells us to “Take Dave’s Advice With a Grain of Salt” at GETTING YOUR FINANCIAL DUCKS IN A ROW.

The “Dave” to whom he refers is Dave Ramsey - financial author, radio host, television “personality”, and motivational speaker.

Jim’s bottom line is “to understand the nature of the recommendations given {by all purveyors of financial advice to the masses}, and that your circumstances are most likely very different from the seeker of wisdom from the mount”.

I want to take Jim’s advice a bit further – do not act on the advice of any television or radio “personality”, print or broadcast journalist, tax or financial blogger, etc. without first running it by a proven trusted financial advisor and/or your tax professional.

To be honest – I would totally ignore any advice from broadcast alleged “financial gurus” like Dave Ramsey, Suze Orman, and others of their ilk.  FYI a speaker at an NATP or NSTP (I forget which) sponsored CPE event years ago told the class that Suze Orman didn’t know her arse from a hole in the ground when it came to personal finance.  And didn’t Orman take a page from H+R Block a while back and market a prepaid debit card with overly excessive service charges and fees?

* Dr Jean Murray from ABOUT.COM discusses the “Legal Forms of Business Organization”, providing good information and resources. 

* A timely "tweet" from Dan Alban of the Institute for Justice (aka @Frimp13) -  
"If a tax preparer lost 2 yrs of tax returns, he/she could face up to $25,000 in fines under 26 USC 6695(d). Just sayin'."

* Manasa Nadig provides a primer on “Gifts From Non-Citizens to US Citizens”, answering questions recently asked me by a client, at THE BUZZ ABOUT TAXES.


Monday, June 16, 2014


Something must be done about late arriving corrected, sometimes twice, brokerage house Consolidated 1099 Tax Reporting Statements!

Clients who historically had their tax returns prepared in mid-February, when my time was not so tight, are now forced to wait until often the end of March, and risk GD extension, before getting me their “stuff”.

This serious tax-season disrupting problem has been around since 2004 – when the concept of “qualified” dividends was first introduced.  I do not recall corrected 1099 reports being issued to my clients prior to this - and if there were any they were truly few and far between so as not to be memorable.
What is corrected is the mix of ordinary dividends, qualified dividends, and, occasionally, capital gain distributions and “nondividend distributions”.  The gross proceeds number is never changed, nor is the cost basis (on both “covered” and “non-covered” transactions).  It seems to me that in most cases the dividends that are corrected are those issued by mutual funds.

I am surprised that the reporting software of the various mutual fund and brokerage houses has not been revised by now so that late annual multiple corrected information returns are no longer necessary.  They have had almost ten years!  Why does it take an extra month or more for the software to properly identify the correct status of dividends?  What information is not completely available by the third week of January - or, for that matter, when the dividends are actually issued?

Do you think if the IRS went back to requiring 1099-DIV forms, whether issued separately or in a consolidated report, to be delivered to taxpayers by January 31st, and strictly enforced this deadline by penalizing firms for issuing late or corrected returns, that they would make sure the software was fixed so that correct information was available on a timely basis?

I would appreciate some guidance from anyone "in the know" why corrected 1099-DIVs must be a necessity of the tax-filing season.


Friday, June 13, 2014


* Did you see my article “Maximizing Retirement Savings Through Smart Tax Planning” at MAINSTREET.COM? 

* On June 10th the word came down that “IRS Adopts ‘Taxpayer Bill of Rights’”.

The Internal Revenue Service today announced the adoption of a ‘Taxpayer Bill of Rights’ that will become a cornerstone document to provide the nation's taxpayers with a better understanding of their rights.

The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on

We are told –

The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. Since 2007, adopting a Taxpayer Bill of Rights has been a goal of National Taxpayer Advocate Nina E. Olson, and it was listed as the Advocate’s top priority in her most recent Annual Report to Congress.”

Click here to see what is in the new “Taxpayer Bill of Rights”.

* Ever wonder “When Did Your State Adopt Its Income Tax?  The TAX FOUNDATION has a map of “the adoption years of state individual income taxes”.

NJ and PA are relatively new to state income taxes, beginning in 1976 and 1971.  NY has had a state income tax since 1919.  

* The go-to tax pro for same-sex marriage tax issues, Jason Dinesen, addresses one aspect of “Same-Sex Marriage and Amending Prior-Year Returns” at DINESEN TAX TIMES.    

* Be sure not to make one of the “7 Most Common Tax Mistakes” listed by CNN MONEY.

Point of information – this item offers a piece of advice that I most definitely do NOT agree with -  

Tax filing programs, like TurboTax or H&R Block, will help you figure out the right status to choose.”

* Here is a “Fun Fact” tweeted by @JoshuaWilsonCPA -

1987 was the first year Social Security numbers were required for dependents being claimed on tax returns. That filing season, seven million children — children who had existed only as phantom exemptions on the previous year's 1040 forms — vanished, representing about one in ten of all dependent children in the United States.”

I had originally heard it was five million.

* Michael Kitces, who provides us with a NERD’S EYE VIEW, deals talks about “Splitting A Roth Conversion Into Multiple Accounts To Isolate Investments For StrategicRecharacterization”.

* A reminder recently tweeted by the IRS (highlight is mine) –

The IRS has been alerted to a new email phishing scam. The emails appear to be from the IRS and include a link to a bogus web site intended to mirror the official IRS web site. These emails contain the direction “you are to update your IRS e-file immediately.”  The emails mention and IRSgov, though notably, not (IRS-dot-gov). Don’t get scammed. These emails are not coming from the IRS.

Taxpayers who get these messages should not respond to the email or click on the links. Instead, they should forward the scam emails to the IRS at For more information, visit the IRS's Report Phishing web page.

The IRS does not initiate contact with taxpayers by email, texting or any social media.”


I know nothing about Donald Sterling, basketball, or the NBA.  I certainly would not invite Sterling to dinner, or go out with him for drinks.  I am not condoning, explaining, or defending his infamous rant - but.

It is my understanding that his statement, however offensive, was made in the heat of a private argument with an "intimate" person.  It was made in private.  No one else was present.  He did not know of, or agree to, having the argument taped.  The statement was not made in a public forum, either as owner of the team or as a private citizen.  He did not "tweet" the rant, or post it on Spacebook.

I am not aware that he, as owner of the team, has instituted any discriminatory policies or engaged in any discriminatory practices in the running of the team.

It appears to me that the actions by the NBA, and the universal support thereof, is the, unfortunately, usual excessive over-reaction in the name of "political correctness".


Tuesday, June 10, 2014


* Jeff Stimpson references one of my TWTP posts in his weekly BUZZ-like “In the Blogs” at ACCOUNTING TODAY.  This installment is titled “Tag the Toe Already”.

The Fairleigh Dickinson PublicMind poll found that 52 percent of the state’s non-retirees said they plan to spend their golden years in another state, while just 32 percent said they want to stay in New Jersey.

Of those who want to leave, 57 percent said it’s the state’s high cost of living, including taxes.”

I didn’t wait until retiring to move to PA – where retirement income is not taxed.

* The BUFFALO NEWS adds its voice to the multitude that oppose “A Bad Idea for Collecting Unpaid Taxes”.  

It appears that the only ones who think using private collection agencies for outstanding tax debts are the idiots in Congress who proposed it.

* Jim Blankenship explains the “Roth 401(k) Rules” over at GETTING YOUR FINANCIAL DUCKS IN A ROW.

I first addressed the ROTH 401(K) back in December of 2006 and followed up a month later in THE ROTH 401(K) DILEMMA.

* Want another example of the fact that regulation will not eliminate tax fraud?

Here is one from FORBES.COM’S Peter Reilly – “CPA Faces Prison For Letting Client Deduct Personal Expenses”.

Peter quotes a Department of Justice press release –

According to documents filed with the court, Couchot admitted that for tax years 2006 through 2010, he assisted in the preparation of false individual income tax returns for a group of individuals associated with the Cadillac Ranch restaurants, which caused a tax loss of over $191,000 to the IRS.”


According to documents filed with the court, during the period 2006 through 2010, Couchot was aware that these individuals used a substantial amount of company funds to pay for personal expenses, including payments for their personal cars, car insurance, country club dues, personal credit card charges and their individual income tax liabilities. Couchot also admitted that he was aware that one individual used company funds to pay for other personal expenses, including lawn services, repairs and maintenance to personal residences, granite counter tops and TV and audio systems.”

Couchot was a CPA.