Friday, October 30, 2015
WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’
So how do you like the new look of THE WANDERING TAX PRO? Email me at firstname.lastname@example.org with “TWTP NEW LOOK” in the subject line.
* Kay Bell has completed her Tax Glossary at DON’T MESS WITH TAXES.
* Tax pros – check out the new THE TAX PROFESSIONAL site.
* Jason Dinesen, he of DINESEN TAX TIMES, asks, and answers, a very good question – “Why Make Estimated Tax Payments?”
The example that Jason provides to illustrate the answer he gives is an excellent one – and similar to a situation with one of my self-employed clients.
There are many reasons why you should make estimated tax payments – but the best answer is to avoid penalties.
And estimated tax payments are not just for the self-employed. They are for anyone whose income tax withholding at work does not cover the tax cost of other income – such as investment income.
Once you have begun your first year of making estimated tax payments it is easy to determine how much to send each subsequent year by using the “safe harbor” method. Perhaps I will write a post with more details on this topic.
Withholding, regardless of when the money is actually withheld, is always better than quarterly payments. So if you find you have underpaid estimated taxes you should make up the shortage via increased year-end withholding. There is another way to cover a shortage of tax payments that I discuss in my “2015 Year-End Tax Planning Guide” – yours for only $3.00.
* Last summer I wrote an article on “Maximizing Retirement Savings Through Smart Tax Planning” for MAINSTREET.COM that you may want to read if you did not see it when it first appeared.
* Professor Annette Nellen, who writes the 21st Century Taxation blog, has written “Poor Recordkeeping Hurts Taxpayers: Problems and Preventions” for the TAX INSIDER.
Annette tells us –
“Every year a few taxpayers go to court hoping for a better outcome than the one offered by the IRS. Usually, they lose due to poor records, not meeting all requirements for particular deductions, or inadequately separating business from personal expenditures.”
Her article discusses 2015 court cases where taxpayers lost because of poor records, etc.
And she offers some good advice for taxpayers at the end of the article–
“Taxpayers lacking records or with incomplete records or who treat personal expenses as business expenses will have those deductions disallowed. Invalid and unsubstantiated expenses, of course, should never be included in the information provided to the return preparer.”
“Keep separate bank accounts and credit cards for business and personal expenses.”
So keep good records, and keep your business and personal life separate and do not try to deduct obviously personal expense as business expenses.
* POLITICO comments on Wednesday night’s 3rd Republican debate in “GOP candidates air sharp differences on taxes”.
* And speaking of tax proposals from the debate, Ross Urken, my editor at MAINSTREET.COM, discusses the flat tax in “#GOPDebate Candidates Love a Flat Tax: Does It Actually Work?”
As Ross explains, “A national flat tax, as opposed to our current system of progressive taxation, would tax all income levels at the same rate.” Despite being a tax professional whose income usually spikes with the added complication of the Tax Code, I would support a flat tax.
A good point about this tax concept -
“A flat tax system would also remove incentives toward consumption by eliminating the various deductions that offset costs, and instead encourage savings. Advocates also argue that the possibility of reaching a higher tax bracket would no longer disincentivize people from earning more and crossing a tax bracket threshold, thus contributing to long-term economic growth.”
Ross quotes Nathan Daschle, president and COO of The Daschle Group, on the feasibility of a flat tax -
"Tax reform of this magnitude is up there with curing cancer. It's something a lot of people across the spectrum would like to see, but it will never happen, largely because there is no critical mass around how to do it. Everything that people call 'loopholes' are policies that Congress deliberately put into place. They have constituencies and they've already won. Undoing each and every one of them is a gargantuan task, as much as people agree that our tax code is a disaster."
Basically, as long as the lobbyists for the individual tax “expenditure” (aka “loopholes”) have money with which to line the pockets of the idiots in Congress true, substantive tax reform/simplification is, unfortunately, just a dream.
THE LAST WORD –
Some fact checking from the Associated Press –
“TRUMP: "I'm putting up 100 percent of my own money."
THE FACTS: No, he's not.
Of $3.9 million raised for his campaign in the latest fundraising quarter, only $100,000 came from his own pocket. That was one major revelation from the latest batch of presidential fundraising reports, filed Oct. 15 with the Federal Election Commission.
That's a drastic shift from his springtime fundraising report, when he loaned his campaign nearly all of the $1.9 million it had.”