Tuesday, November 29, 2016


Here is another year-end tip for charitable giving, taken from my “2016 Year-End Tax Planning Guide”.
Instead of giving cash to charity at year-end you can donate stock, bonds or mutual fund shares that you have held for more than one year and which have increased in value, and save some money in the process.

You can claim a deduction for the full market price of the investment on the date you make the donation.  You don’t have to report the increase in value as a capital gain on Schedule D.

Art Center has pledged $5,000.00 to his church building fund.  He also has 100 shares of Online Profits, Inc. which he purchased in 1998 for $2,000.00 and is now worth $5,000.00.  He decides to give the stock to the church to satisfy his pledge.  Art can deduct $5,000.00 on his Schedule A.  He does not have to pay tax on the $3,000.00 appreciation in the value of the stock.

If Art were to sell the Online Profits, Inc. stock and give $5,000.00 cash to the church he would have to report the sale of the stock on Schedule D and pay $450.00 in federal tax, as well as state income tax, on the gain.  Plus, the $3,000.00 gain would increase his Adjusted Gross Income (AGI), which could reduce or altogether wipe out a multitude of deductions and credits that are affected by AGI.  As an added bonus, by donating the stock rather than selling it Art will save the broker’s commission and other expenses of sale.

Any investment you donate to charity must be long-term property - an investment you have held for more than one year.  If you donate stock that you held for one year or less your deduction is limited to the cost basis, which in the above example would be $2,000.00.

Also, do not donate an investment that has gone down in value.  It is better to sell the stock, claim the loss on Schedule D, and donate the cash to charity.


 It’s that time of the year again –
time for year-end tax planning!
Only $3.00 sent as pdf email attachment
or $4.00 in print form send via postal mail.
Click here for more information.



Monday, November 28, 2016


I trust everyone had a successful 4-day Thanksgiving holiday week-end.

* Jason Dinesen continued with his usual custom at DINESEN TAX TIMES last week – “It’s a holiday week, so I’m re-publishing popular posts from days gone by.”

The moral?  File your tax returns, no matter how old or young you are.”

This post concerns a true “urban tax myth” that I have seen many times over the past 45 years, with various ages used.  Some people have also told me that they do not have to pay Social Security tax on their wages if over age 65, 70, or 72.

One taxpayer, who thought he did not have to pay income taxes any more when he turned 65, 70 or 72 (I forget the age in his situation), was brought to consult my mentor by his daughter after the IRS filed a lien on his personal residence due to non-payment of taxes.  

I have always said that if you have taxable income you must pay tax whether you are 1 year old or 100 years old.  And you also have to pay Social Security tax if you earn wages subject to Social Security tax whether you are 1 year old or 100 years old.

* And I echo the sentiments in Jason’s post “From the Archives: Yes, Enrolled Agents Do Need More Respect”.

The initials EA (and ATA and ATP from ACAT) are the only initials that appear after one’s name that have anything to do with competence and currency in 1040 preparation.  Contrary to the popular but erroneous “urban tax myth”, and the attempts of the AICPA, having the initials CPA after one’s name does not automatically mean that the person with these initials knows his arse from a hole in the ground when it comes to 1040s.  There are many practicing CPAs who are competent and current in 1040 preparation – but it has absolutely nothing to do with the initials CPA!

Enrolled Agents do indeed deserve more respect!

* Please, please check out my new THE LIBERTY TIMES – and please share with family, friends, co-workers, and colleagues.  BTW – a new “issue” is coming on December 1st.

* The CULTURE CHEAT SHEET lists the “Top 10 States in America With the Lowest Taxes in 2016”.

Alaska tops the list.  You know damned well that New Jersey is not represented here – it probably tops the list of states with highest taxes.

* Staying on this theme, at the beginning of November Sandra Block of KIPLINGER listed the “10 Worst States for Taxes on Your Retirement Nest Egg”.

New Jersey is #8 on the list -

The Garden State's tax policies create a thicket of thorns for some retirees.
Its property taxes are the highest in the U.S.”  

Considering the recently passed NJ tax changes, which increase the “retirement income exclusion” and eventually do away with the Estate Tax, I expect NJ may not be on future “10 Worst” lists, although the property tax situation has not changed.

I was surprised to learn that Vermont topped the list –

The Green Mountain State doesn't coddle retirees. It has a steep top income tax rate, and most retirement income is taxed. Vermont treats Social Security benefits the same way the federal government does, which means as much as 85% of your benefits could be taxed.”

* Kay Bell, the yellow rose of taxes, expands on my post “A Year-End Tax Tip – Be Charitable” with “Careful documentation, including donation selfies, could convince the IRS of your charity deduction claim at DON’T MESS WITH TAXES -

A good way to do that is with digital documentation. Take a picture of the items you donate, clearly showing that they truly were in very good shape, worthy of the slightly greater amounts you've assigned them.

Even better, make them donation selfies.

Include yourself in the photos to prove that the topnotch items were yours, not just photos of well-kept articles that you downloaded from someone else's social media stream.”


Is Trump a bigot?

As an extreme narcissist Trump thinks that every single person – man, woman, white, black, brown, red, yellow, straight, or gay - is below him. 

Also as an extreme narcissist, if a “non-white” or “non-traditional” man or woman, or an “affirmative” action, will generate praise for him and feed his ego he will use that person or action to do so.

The true danger from the Trump Administration will be the appointed “ring (and other things) kissers” who have their own actual bigoted agendas.  Trump is certainly not “ideological” – he has absolutely no political philosophy, beliefs, or convictions other than “Trump is great and Trump is good”.  It is his appointments who are truly “ideological”, with personal bigoted, excessively religious right, xenophobic, chauvinistic, and hate-filled philosophies, beliefs, and agendas, that will cause the real damage to America, Americans, and the world.

Of course Trump’s inability to deal with criticism and challenge like a mature adult, another symptom of his excessive narcissism, will also do real damage to America, Americans, and the world.

This bears constant repeating. Please share and tweet -

Trump was a despicable human being and a dangerous narcissist before being elected. Being elected President does not automatically endow him with morals, ethics, or integrity where none existed before.

He has not changed, and we should not change our disgust, disrespect, denouncement, and opposition to him just because he was “elected” President.


 It’s that time of the year again –
time for year-end tax planning!
Only $3.00 sent as pdf email attachment
or $4.00 in print form send via postal mail.
Click here for more information.



Thursday, November 24, 2016


 It is a time to give thanks.

Despite the truly horrendous and dangerous result of the recent Presidential election (Electoral College result, not actual popular vote), there is still much to be thankful for.

Of course there is the love and support of family and friends.

For me this includes the support and help from fellow tax professionals and tax bloggers.  One way I stay up-to-date on tax developments during the year is by following the blogs of my colleagues – Joe, Jason, Russ, Jamaal, Bill, Bruce, Kay, Kelly, Jean, etc, etc, etc., and with information and resources shared by my fellow NJ-NATP members (I am now actually an “honorary” member as I live in PA) Marc, Lynn, John (Kelly and Sheeley), Jaimee, etc, etc, etc.

And, along those lines, I am thankful to the National Association of Tax Professionals – both on national and state levels – for providing excellent information, resources, and continuing education opportunities.

I am also thankful for the many local theatre companies throughout rural North East PA and nearby NY that provide me with a variety of good entertainment during the year.

And, as I eat out just about every night, I am thankful for the variety of great nearby restaurants and diners – actually more so than when I lived in Jersey City NJ – and their pleasant and helpful wait staffs.
I am thankful for my adopted "son" Turbo.

Finally, as my sister pointed out to me last year, I am truly thankful that my diabetes diagnosis happened while living in rural North East PA and not metropolitan NJ.

Thanksgiving dinner this year, like last year, is the buffet at Silver Birches on Lake Wallenpaupack with my sister, who once again came up from NJ.




Wednesday, November 23, 2016


As you prepare your home for the holidays now is a good time to clean out your closets, attic, or garage and donate what you no longer want or need that is still in good condition to a church or charity and get a 2016 tax deduction.
You can claim a deduction for the “fair market value” of used appliances, books, clothing, computer hardware and software, electronics, furniture, household items, toys, videos, etc., etc. donated to a qualifying church or charity.  According to the IRS, fair market value is the price a “willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.”  
You are responsible for determining the fair market value of the items you are donating.  The charity to which you make the donation is not required to provide you with a value.
Make and keep a detailed listing of what you are donating with the condition and value of each set of items (i.e. 6 pairs of men’s pants, good condition, $60.00, 5 pairs of men’s shoes, good condition, $75.00).  You may want to attach a copy of the listing to your 2016 Form 1040.  
You cannot deduct the contribution of a used item of clothing or household item unless the item is in at least "good" condition.  Donations of clothing and household items with a minimal monetary value, such as used socks or underwear, are also not deductible.
What about new items of food, toys, clothing, etc. you may donate to a church or charity for Thanksgiving food drives or holiday campaigns like “Toys for Tots”?  You can deduct the actual cost of the items donated.  You should make a separate purchase of the items you will donate – don’t group together with the purchase of personal use items – and save the store receipt. 
If the total amount donated to a church or charity is more than $250.00 you must have a “contemporaneous” written acknowledgement from the organization with its name and address, the date of the contribution, and a brief description of the item(s) donated (used clothes, toys, used furniture, etc). 
To be able to claim a deduction for the full amount of your contribution the acknowledgement (any acknowledgement of any contribution more than $250.00, whether cash or non-cash) must also indicate the statement “no goods or services were provided in exchange for the donation”, and must be received before the earlier of the date the original tax return is filed or the extended due date of the tax return.
Obviously this is only a tax benefit if you are able to itemize on Schedule A.  Be aware that the Standard Deduction amounts for 2016 are –
·   Single and Married Filing Separate = $6,300
·   Married Filing Joint and Qualifying Widow(er) = $12,600
·   Head of Household = $9,300
So give this holiday season – but give wisely and keep good records of your giving.

 It’s that time of the year again –
time for year-end tax planning!
Only $3.00 sent as pdf email attachment
or $4.00 in print form send via postal mail.
Click here for more information.


Tuesday, November 22, 2016


Oi vey!  It now appears that the reciprocal agreement between New Jersey and Pennsylvania will remain in place.  New Jersey and Pennsylvania residents working in the opposite state will continue to pay state income taxes only in the state where they live.
According to the Governor’s website -
Governor Chris Christie announced today he is now able to save the income tax reciprocity agreement with Pennsylvania, thanks to health benefit reforms enacted since the FY17 budget passed.”
I wonder how many employers had already wasted money to change their software or internal payroll procedures.
I trust that this “saving” of the reciprocal agreement by CC will not be reversed again – although I did not oppose, and actually supported, the end of the agreement.


Every year at about this time for the past almost 30 years I have been attending the year-end tax update workshops offered by the National Association of Tax Professionals (NATP) – often, as I did this year, the Atlantic City offering (although one year I did attend the workshops in San Juan, Puerto Rico).
Last Tuesday was “The Essential 1040”, which discussed the annual COLA and inflation-adjusted numbers for tax deductions and credits (see my “What’s New In Taxes For 2016” for these numbers) and recent developments. 
While I paid for a full 8 hours of “continuing professional education” (CPE) on Tuesday, as happens every year ¼ of the fee was literally flushed down the toilet because of the 2 hours of redundant ethics preaching, required for Enrolled Agents and CPAs but not me.  Fortunately this year the ethics discussion was the last of the day – so I could leave 2 hours early.
As I have said for years now –
I have been preparing tax returns for 45 tax seasons.  If I ain’t honest and ethical by now, 2 hours of preaching ain’t going to perform any miracles!  Unfortunately just about every full-day CPE offering includes this redundant ethics preaching because providers feel they must include it in order to get maximum attendance.
When I do have to sit through the ethics preaching, usually daydreaming or reading the paper, some of what I do hear is, to me, complete nonsense.  I talk about this in “If You Ask Me”, a compilation of commentaries on issues of importance to the tax preparer community I have written.  Click here to download this.
Wednesday was “Beyond the 1040”, which this year was an in depth review of “Principal Residence Tax Issues” and the “Tax Impact of Having a Child”.  Luckily the full 8 hours was devoted to actual education.
There were no familiar, to me, faces this year at BALLY’S.  The instructor, Les Marti EA, was also new to me.  He did an excellent job, filling the two days with humorous and insightful anecdotes from his own tax practice.
At least for me much of the first day now is truly redundant – a reminder rather than an actual update.  Because of my tax blogging I was intimately aware of the adjusted numbers for the past year.  The true value and meat of this day, again for me, is in the new developments – court cases, IRS regulations, tax legislation.  As there was no new tax legislation to review in detail, here again it was somewhat redundant.
Also a factor in what I take away from this day, and any tax CPE offering, is the fact that I no longer accept any new clients and am actually trying to “thin the herd”.  While I firmly believe that you can indeed teach an old dog new tricks, there are some new tricks that this old dog has no interest in learning if they do not affect a substantial portion of my current clientele.  And if relatively obscure new tax law or regulations affect only a couple of clients I often prefer to send those clients elsewhere instead of having to learn difficult new “stuff”.   Here my client tax preparation needs “trumps” any writing opportunities.
My only negative comment on the workshops was the fact that the free continental breakfast and afternoon snack were not “diabetic-friendly” – something that is now important to me.  NATP, please take note.
Here are some important items I was reminded of, or did indeed learn, during the 2 days in Atlantic City –
+ Any 2016 Form 1099-MISC that has an entry for “Non-Employee Compensation” in Box 7 must be sent to recipients and filed with the Internal Revenue Service by January 31, 2017, which is also the due date for W-2s.
+ For purposes of deducting home mortgage interest, a home under construction is considered to be the taxpayer’s qualified residence for a 24-month period beginning on or after the date that construction begins if the home does indeed become a qualified residence when it is ready to be occupied.
+ If you borrow money secured by a residence to purchase the interest of a spouse in the home as part of a divorce or legal separation this is treated as “home equity debt” and not “acquisition debt”, even though you are “acquiring” an additional interest in the residence.
+ The $100,000 in debt limitation for determining deductible “home equity” interest is further limited by the “fair market value” of the residence less any “acquisition debt”.  So if a bank allows you to borrow more than the actual market value of your home you cannot deduct the interest paid on this excess debt even if it is within the $100,000 equity debt limit.
+ You can elect to treat debt secured by a personal residence as not being secured by the residence – so the interest on the debt is treated as investment interest or business interest instead of mortgage interest.  If a single mortgage loan involves multiple uses of the principal, both acquisition and home equity debt and some debt you elect to treat as “not secured”, the paydown of the mortgage principal is applied in the following order –
·         Personal use (not deductible)
·         Investment use (Form 4952)
·         Rental Property with Active Participation use (Schedule E) 
·         Trade or Business use (Schedule C or Schedule F) 
·         Home Equity Debt 
·         Acquisition Debt
+ If a taxpayer has Obamacare Marketplace insurance that covers a non-dependent child or children under age 27 and receives an advance premium credit (and gets a Form 1095-A), the information for the credit on Form 1095-A, which is reported on Form 8962, can be allocated between the parents and the non-dependent child(ren) on their individual returns in any way they agree from 0-100%.  If there are 3 people covered (the two spouses filing one return and a non-dependent child filing a separate return) the allocation can be 2/3 to parents and 1/3 to child – or any other allocation from 0-100%.  There is nothing in the directions for Form 8962 that prevents the non-dependent child(ren) from claiming 100% of the premium and the credit and the parents claiming 0%, or vice versa!
Much of what was discussed on Wednesday about “Principal Residence Tax Issues” is covered in my “Tax Guide for New Homeowners”.  Click here for more information on this e-book.
If you have any questions about the above items please consult your, or a, tax professional.  You can begin your search for a tax preparer at my FIND A TAX PROFESSIONAL website.
Any current tax professional who is not already a member of NATP should be.  If you would like to receive membership information email me at rdftaxpro@yahoo.com with NATP MEMBERSHIP in the “subject line”.







Monday, November 21, 2016


I was in Atlantic City for year-end tax update classes most of the week (see my review tomorrow) – so I did not keep on top of the tax BUZZ.  Actually I don’t think there was much BUZZ to keep on top of.  Hence this slim BUZZ installment.

* Paul Sullivan explains “How to Give an I.R.A. to Children Without Giving Up Control” at THE NEW YORK TIMES –

A trusteed I.R.A. is a relatively easy way for parents to control how, when and why their children receive he distributions from their retirement accounts.”

* Please, please check out my new THE LIBERTY TIMES – and please share with family, friends, co-workers, and colleagues.

* Bruce McFarland of THE TAX PREPARERS GROUP wants to know “Are You Having Enough Taken out for Withholding?

* It will soon be that time of year again.  FORBES.COM’s TaxGirl Kelly Phillips Erb tells us “Feeling Charitable? 12 Days Of Charitable Giving 2016 Starts Soon” -

As I do every year, I’m asking readers to submit via email (charity@taxgirl.com) the name of a charity which deserves mention 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 charity’s full name, I’ll need the city where the charity is located, what the charity does, and why you support the charity (a personal story would be great). Please also link to the website if the organization has one (Facebook is okay, too): the more information that you can provide, the better.”

* Matthew Frankel, the MOLEY FOOL “Math Guy”, gives us “Property Tax by State: The Homebuyer List”.

No surprise here.  New Jersey is once again, like Oliver Twist, last on the list – or first depending on how you look at it - with the highest average percentage of real estate tax - 2.29%.  Hawaii has the lowest average tax rate - .28%.  The average rate for my home state of PA is 1.51%.

* And New Jersey is #8 on KIPLINGER’s list of the “10 Least Tax-Friendly States for Retirees 2016” -

The Garden State's tax policies create a thicket of thorns for some retirees.”

Here is the list –

1. Vermont
2. Connecticut
3. Rhode Island
4. Minnesota
5. Oregon
6. Montana
7. California
8. Nebraska
9. New Jersey
10. New York

* Want to know “Why Advisors Recommend Donor-Advised Funds during Year-End Planning”?  Check out this ACCOUNTING TODAY article by Ken Nopar.


 It’s that time of the year again –
time for year-end tax planning!
Only $3.00 sent as pdf email attachment
or $4.00 in print form send via postal mail.
Click here for more information.



Friday, November 18, 2016


It looks like the Form 1098-T – now required to claim an education tax benefit – will remain as useful as tits on a bull for another year!
The week-day daily "Checkpoint Newsstand November 18, 2016" brought this bad news on my 63-rd birthday (highlights are mine) -
No penalty for 2017 Forms 1098-T. IRS will extend the relief from penalties under Code Sec. 6721 and Code Sec. 6722, as described in Ann. 2016-17, to 2017 Forms 1098-T. Eligible educational institutions, therefore, will continue to have the option of reporting either the amount of payments of qualified tuition and related expenses received in Box 1 of Form 1098-T or the amount of qualified tuition and related expenses billed in Box 2 of Form 1098-T for the 2017 calendar year without being subject to penalties.
This relief is limited to 2017 Forms 1098-T required to be filed by eligible educational institutions by Feb. 28, 2018 (or Apr. 2, 2018, if filed electronically) and furnished to recipients by Jan. 31, 2018.”
The IRS had previously rendered most 2016 Form 1098-Ts totally worthless –
Earlier relief. Following the enactment of the PATH Act, numerous eligible educational institutions informed IRS that implementation of the law change will require computer software reprogramming and other changes that cannot be implemented in time to meet the applicable filing and furnishing due dates for Form 1098-T for calendar year 2016. Accordingly, in Ann. 2016-17, IRS provided that these penalties would not be imposed on eligible educational institutions with respect to Forms 1098-T required to be filed and furnished to individuals for the 2016 calendar year if the institution reports the aggregate amount billed for qualified tuition and related expenses on Form 1098-T instead of the aggregate amount of payments received. 
And now the bulk of 2017 Form 1098-Ts will also be totally worthless -
Continued difficulty. Representatives of eligible educational institutions have informed IRS that, despite diligent efforts, the changes to accounting systems, software, and business practices that eligible educational institutions must make to implement this law change cannot be accomplished in time to apply these changes for calendar year 2017.”
Hopefully more than the usual handful of 2016 and 2017 Form 1098-Ts will actually provide useful information - but there is no incentive to make this happen.
Bad move by the IRS. 
They want tax pros to become Social Workers and do their work for them, and at the same time make it more difficult for us to do our work.  They have added multiple hours to the preparation of returns for lower-income clients who can least afford the appropriate additional fees we should be charging for this extra work.
The tax preparation community needs a unified lobbying voice in Washington!