Tuesday, November 22, 2016


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”.







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