THE WANDERING TAX PRO
Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.
in the infant myRA program, created under President Obama, just received the
myRA Program will be phased out and your account will be affected.
writing to inform you that the U.S. Department of the Treasury has decided to
phase out the myRA retirement savings program and the program is no longer accepting
new enrollments. Please read the important information below to learn what this
means for your account.
account remains open and you can continue to manage your account until further
notice. The funds in your account remain in an investment issued by the U.S.
Department of the Treasury. We'll be in touch over the coming weeks with next
steps and relevant deadlines regarding the transfer or closure of your account.
In the meantime, we want you to know that any myRA with a zero ($0) balance as
of September 15, 2017 or later, will be subject to possible automatic closure
beginning on September 18, 2017.
you should take now:
your contact information
recommend you log in to your account to make sure your contact information is
complete and up to date. You can also update your information by contacting
your myRA to another Roth IRA
myRA is a Roth IRA. You have the option to transfer your myRA into another Roth
IRA that you select. To do so, you will first want to identify or open an
account at the new Roth IRA provider where you will continue to save and
invest. Then, by working with a new Roth IRA provider you select, you can
transfer your myRA balance to your new Roth IRA. This will allow you to
continue saving without paying current income taxes on earnings, maintain the
preferential tax treatment of a Roth IRA, avoid tax withholding that may apply
to a distribution, and avoid penalties.
you choose not to transfer your balance to another Roth IRA, you can make a
withdrawal for the amount of your myRA balance by calling customer service. You
can also withdraw funds online by signing into your account. To maintain all of
the benefits of a Roth IRA, you must deposit funds paid to you (as well as any
tax withholding) into another Roth IRA within 60 days of the distribution.
Failure to do so may result in tax liability and penalties related to withdrawn
earnings that would have been avoided by working with your new Roth IRA provider
to transfer your account balance.
irs.gov/rollovers for more information regarding Roth IRA transfers or
rollovers, or visit myRA.gov to learn more about withdrawing funds from myRA.
transfer of your myRA balance to another Roth IRA or distribution to you of
your myRA balance, Comerica1 will no longer be custodian to your myRA.
more information about this announcement or if you have additional questions,
is sad that this program is being killed.At this point I do not know if it is because of lack of sufficient participation
or idiot Donald T Rump’s continual policy of undoing any good done by his
predecessor out of spite.
will report on future developments with this issue here as they arise.
"Stupidity is a more dangerous enemy of the good than malice. One may protest against evil; it can be exposed and, if need be, prevented by use of force. Evil always carries within itself the germ of its own subversion in that it leaves behind in human beings at least a sense of unease.Against stupidity we are defenseless; reasons fall on deaf ears; facts that contradict one’s prejudgement simply need not be believed–in such moments the stupid person even becomes critical–and when facts are irrefutable they are just pushed aside as inconsequential, as incidental. Inall this the stupid person, in contrast to the malicious one, is utterly self-satisfied and, being easily irritated, becomes dangerous by going on the attack."
Dietrich Bonhoeffer, Letters & Papers from Prison, 43
the cover article of the Summer 2017 issue of the National Association of Tax
Professionals’ quarterly TAXPRO JOURNAL I discuss in detail “The Tax Aspects of
article includes the following statements –
“The U.S. Tax Code trumps the divorce
agreement when it comes to who is able to claim a child as a dependent on the
“A local judge cannot overturn federal tax
reader sent me the following email in response to the article -
“The Tax Aspects of Divorce was very
informative.I do have a question,
however.In NATP’s Taxpro Journal it’s
Page 13, first column, first paragraph.The US Tax Code will trump a divorce agreement has been the way I was
educated, but I’m a little confused about the last sentence in that paragraph
which says ‘A local judge cannot overturn federal tax law.’My understanding has been that the
noncustodial parent who has been awarded the dependency exemption of the child
can file a civil lawsuit against the now custodial parent to regain the
dependency exemption.That was verified
by NATP & attorneys in my office.
I’d appreciate it if you could just
clarify that for me.”
is my reply to my fellow tax pro –
“Glad you found my article informative.
In answer to your question –
A non-custodial parent cannot claim
a dependency deduction for a child unless the custodial parent provides a
signed Form 8332.The IRS will no longer
accept the appropriate pages of a signed divorce agreement or decree with the
exact same language as the Form 8332 as an alternative to a signed Form 8332.
It is my understanding that no
divorce agreement or decree, and no local court judge’s decision or instructions,
can force the IRS to allow the non-custodial parent to be able to claim a
dependency exemption without a signed Form 8332.A civil lawsuit award cannot in itself grant
a non-custodial parent the dependency exemption.Only a signed Form 8332 can grant a
non-custodial parent the dependency exemption.
It is again my understanding that if
a divorce agreement or decree says the non-custodial parent is entitled to the
exemption, but the custodial parent does not provide a signed Form 8332, the “injured”
parent can turn to a local court for relief and the court can require the
custodial parent to provide a signed Form 8332 and penalize the custodial
parent financially or legally for not doing so, or require the custodial parent
to pay to the non-custodial parent the equivalent of the tax savings – but the
local court cannot instruct the IRS to allow the non-custodial parent to claim
the dependency exemption without a signed Form 8332.
In my article I state –
‘If the divorce decree clearly
states that the non-custodial parent is entitled to the deduction, but the
custodial parent refuses to sign the Form 8332, the non-custodial parent must
go back to the Court and get it to order the custodial parent to sign the
form.When negotiating a divorce
settlement that gives the dependency deduction to a non-custodial parent there
should be specific terms that require the signing of Form 8332 and outline what
will happen if the custodial parent refuses to do so- such as the withholding
of alimony payments or child support, or some other penalty.’
If you have any documentation or
reference that indicates a local court can force the IRS to allow a
non-custodial parent to claim a dependency exemption without a signed Form 8332
please let me know.”
an aside – FYI the original article I submitted to NATP included the following
paragraph in the beginning –
“Do you remember L.A. LAW?While you would want Arnie Becker as the
divorce attorney, the divorce agreement should be reviewed by Stuart Markowitz
before it is signed.For a more
contemporary cultural reference - you would want David Lee as the divorce attorney,
but have the final agreement reviewed by Will Gardner.”
despite my protest, this paragraph was deleted from the final published
fellow tax pros – am I right?Any
thoughts and comments?
wave of refund checks for the New Jersey Property Tax Reimbursement (aka “Senior
Freeze”) program have been sent out.
is consistently at the top of the list of highest real estate taxes in the
country, so this reimbursement is a very important and needed benefit for many
senior and disabled homeowners.
again, as we expected, the DFBs (clean version is “Damned Fool Bureaucrats”) in Trenton have screwed
NJ seniors and the disabled to balance the budget and continue to provide pork
and entitlements for politicians.
as happens every year, the income base for the PTR program has been reduced to
$70,000, causing many seniors and disabled residents to lose out on this
income can cost qualified NJ homeowners several thousands of dollars in
to the NJ State Tax News -
the Mail -
In mid-July, the Division of
Taxation began mailing checks for the 2016 Senior Freeze to qualified senior and
disabled homeowners who filed applications by the original filing deadline of
June 1, 2017. We will issue checks as quickly as possible to homeowners who
file their applications between the original June 1 deadline and the extended
deadline of October 18, 2017.
The State Budget has set the
following qualifications for Senior Freeze payments: Applicants are eligible if
their income did not exceed $87,007 for 2015 and $70,000 for 2016, as long as they meet all other requirements.
Residents whose income
was more than $70,000 but was $87,007 or less will not receive checks for 2016.
We will notify them that they are not eligible. However, those residents can
establish a “base year” for future reimbursements by filing an application by
the deadline. This also ensures that we will mail them applications next year.”
As the item
suggests, qualified homeowners whose 2016 income is between $70,000 and $87,007
should still submit a PTR-1 or PTR-2 application to create or maintain a “base
year” for potential future reimbursements.If you have not already submitted a PTR application you have until
October 18th to do so.
income used for the PTR program includes gross Social Security benefits (before
Medicare deductions) and otherwise tax-exempt municipal bond and US Government
Obligation income.However the amount of
pension income to claim is the same as the taxable pension income that was, or
would have been, reported on the NJ-1040.
While Kay says the
IRS and Department of Justice have not officially decided to appeal the
decision that shut down the collection of a fee to apply for or renew a tax
preparer’s “PTIN” (Preparer Tax Identification Number), IRS Commissioner Koskinen
“said his agency is likely to appeal the
Kay continues –
“The reason the IRS is so committed to PTINs,
noted the commissioner, is that the public, especially among the elderly and in
low-income and immigrant communities, can be vulnerable to abuse by tax
The Court affirmed
the IRS authority to require a PTIN for all individuals who prepare tax returns
for a fee and to maintain a PTIN registry.But there is no need to add an excessive fee, partially going to an
outside agency, for the PTIN.
to want Congress to allow the IRS to regulate paid preparers.The last thing I want is for Congress to
create a tax preparer regulation regime.The Commissioner said in his recent address "But there are enough [preparers] out there who either don't know a lot
about what they’re doing or consciously are trying to take advantage of
taxpayers."I say there are enough Congresspersons out there
who either don’t know a lot about what they’re doing or consciously are trying
to take advantage of voters.
I see the need for
a universally accepted tax return preparer credential to protect the public –
but not mandatory and not administered by the IRS or the
government.It should be administered by
an independent industry-based organization.
My reaction.The occupant of the White House should be
committed (to a mental institution).
I won’t be holding my breath for Congress
to pass substantive tax reform this year.The Republicans can’t seem to get anything done, thanks mostly to the
idiot in the White House.
* My editor at the
NJ TAXING TIMES told me, and other NJ tax preparers, about a great resource for
tax pros and taxpayers – a “Glossary of Tax Terms” from the NJ Division of
Taxation.It is indeed comprehensive and
the individual definitions include links to appropriate pages on the NJDOT
“Event moderator, billionaire David
Rubenstein, asked the two at the scholastic leadership event in Dallas about
what they viewed as the most important quality for someone who wants to be
President. Both stressed the virtue of humility.
‘I think it's really important to know what you don't
know and listen to people who do know what you don't know,’ Bush said.
Clinton -- who, like Bush, didn't mention President
Donald Trump -- agreed that officeholders need to be humble, and warned that
those ‘who are real arrogant in office’ have forgotten that history will be
‘If you want to be President, realize it's about the people,
not about you,’ Clinton said. ‘You want to be able to say, 'People were better
off when I quit.' ... You don't want to say 'God, look at all the people I
Humility is an
impossible quality for Trump to understand, let alone express.And, in Trump’s deluded and unstable mind,
everything is always about Trump, and never anyone else.
of the most important pieces of advice I have seen, and have given, over the
years is “Don’t let the tax tail wag the
not make investment or financial decisions based solely on tax considerations.
For years now I have been saying that the
first criteria for evaluating any transaction, strategy, or technique you are
considering should always be financial.Taxes are second.
you should be aware of, and take into consideration, the tax consequences of
any planned transaction, and try to structure the transaction so that it
results in the minimum federal and state tax cost.
remember - taxes are only pennies on the dollar.
discussing this issue I always tell the following story –
decades ago, when I was still an "apprentice" tax preparer, one of my
mentor’s clients came in and proudly announced that his employer had offered to
reimburse him for job-related mileage, but he turned it down because then he
would not be able to deduct business travel on his Form 1040 (back then employee
business expenses were deductible in full "above-the-line" as an
Adjustment to Income).
mentor avoided the temptation to tell the client that he was a complete idiot,
and attempted to explain, with great patience and tact, that it is much
"more better" for someone to give you $1.00 tax free than it is to be
able to save 30 cents by claiming a tax deduction.
there is no benefit in spending $1.00 needlessly to save 30 cents in
taxes.You have not saved 30 cents – you
have actually lost 70 cents!It doesn’t
make sense to incur an expense solely because it is deductible.
When shopping for a tax pro totally
disregard advertising claims about refunds like ““The Largest
on the experience, quality and competence of the preparer. An experienced and competent, and honest,
tax preparer will work to make sure you pay the absolute least amount of
federal and state tax possible – but will do it legally.
I do not oppose
this move.While I do not support the
current Republican healthcare legislation, the mandate – i.e. the “shared
responsibility penalty” - is one of the “bad” things about Obamacare (see my THE TAX PROFESSIONAL post referenced above).
What needs to be
done is not Republican “repeal and replace” but Republicans and Democrats
working together to fix what is wrong with Obamacare while keeping what is
right.But the words “working together”
and “Congress” have not gone together for decades now.
Perhaps what we
need to “repeal and replace” are the idiots in Congress.
“Five states do not have statewide sales
taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of these, Alaska
and Montana allow localities to charge local sales taxes.
The five states with the highest average combined state
and local sales tax rates are Louisiana (10.02 percent), Tennessee (9.45
percent), Arkansas (9.34 percent), Washington (9.20 percent), and Alabama (9.03
The five states with the lowest average combined rates
are Alaska (1.76 percent), Hawaii (4.35 percent), Wyoming (5.26 percent),
Wisconsin (5.42 percent), and Maine (5.5 percent).”
New Jersey is #26
and Pennsylvania is #33.New York is #9
and California is #10.
* The CHECKPOINT NEWSTAND
week-day daily email newsletter from July 10th discussed the National Taxpayer
Advocate’s legitimate concerns about the IRS use of private collection agencies
“Finally, the NTA said that she believes IRS
is misinterpreting Code Sec. 6306 by not requiring PCAs to solicit financial
information from taxpayers, as they are supposed to do under Code Sec.
6306(b)(1)(C). That means PCAs will not collect financial information that
could be shared with IRS to determine whether a taxpayer can pay the debt and
still pay for basic living expenses. The NTA described the calling scripts for
one of the PCAs as instructing the employee to give the taxpayer suggestions on
how to come up with funds to pay their debt, such as borrowing from a
retirement plan or taking out a second mortgage on a home. While IRS might make
similar suggestions, IRS employees first gather financial information which
reveals when a taxpayer is in economic hardship, and unlike PCAs, IRS has no
financial incentive to ignore indications of financial hardship. PCAs do not
gather this information, and their incentive structure doesn't encourage them
to look for economic hardship.”
How many times do
we need to say this – using private collection agencies is truly a stupid and
inappropriate idea.Just further proof
that the members of Congress are idiots.This program must be stopped!
Post opinion piece by David Rothkopf tells it like it is (highlights are mine)
“That is where we are now. The president’s
tweeting hysterically at the media is just an element of this. So too is his malignant and ever-visible narcissism.
The president has demonstrated himself to have zero impulse control and a tendency
to damage vital international relationships with ill-considered outbursts,
to trust very few of the people in his own government, and to reportedly rant
and shout at staff and even at the television sets he obsessively watches.
Whether he is actually clinically ill is a matter for
psychiatric professionals to consider. But when you take the above behaviors
and combine them with his resistance to doing the work needed to be president,
to sitting down for briefings, to reading background materials, to
familiarizing himself with details enough to manage his staff, there is clearly
a problem. Compound it with his deliberate reluctance to fill key positions in
government and his wild flip-flopping on critical issues from relations with
China to trade, and you come to a conclusion that it may be that Trump’s fitness to serve as president is
our nation’s core national security issue.
Not only does the president diminish the office with his pettiness; he also shows disregard for constitutional principles
including free speech, freedom of religion and separation of powers, and he
operates as though he were above ethics laws. Daily he shows he lacks the character, discipline,
intellect, judgment or respect for the office to be president of the United
My book THE
JOY OF AVOIDING NEW JERSEY TAXES has gone to press!
paying too much New Jersey state income tax – and it’s nobody’s fault but your
taxpayers concentrate on their federal tax return and spend minimal time on
their NJ return, simply taking numbers from the 1040 and putting them on the
NJ-1040.As a result they are paying
more NJ state tax than necessary, often paying tax on income that is not even
taxed by NJ.By becoming informed on NJ
state tax law and using proper tax planning you can make sure that you pay the
absolute least amount of NJ Gross Income Tax possible for your particular situation.
not you use a professional tax preparer, the more you know about NJ taxes the
more you will be able to properly structure your financial transactions during
the year to minimize taxes and the better prepared you will be when giving your
“stuff” to your preparer at tax time.
I have been
preparing NJ-1040s for as long as there has been a NJ-1040, and federal income
tax returns for even longer.I share my
knowledge and experience from over 40 years as a professional tax preparer in
my new book THE JOY OF AVOIDING NEW JERSEY TAXES to help you to learn how to
pay the absolute least amount of NJ Gross Income Tax possible.
In THE JOY
OF AVOIDING NEW JERSEY TAXES I discuss -
INTRODUCING THE NEW JERSEY GROSS INCOME TAX
THE NJ MARRIAGE PENALTY BY FILING SEPARATE RETURNS
DEPENDENT COLLEGE STUDENTS ON THE NJ RETURN
FEDERAL AND STATE WAGES
INTEREST AND DIVIDEND INCOME
NET PROFITS FROM A SCHEDULE C BUSINESS
• NJ STATE
TAX PLANNING FOR CAPITAL GAINS
ADVANTAGE OF THE 3-YEAR RULE FOR PENSION DISTRIBUTIONS
TAXABLE IRA DISTRIBUTIONS
INCOME FROM PARTNERSHIPS AND SUB-S CORPORATIONS
PARTNERSHIPS AND THE OTHER RETIREMENT INCOME EXCLUSION
MAXIMIZING THE DEDUCTION FOR MEDICAL EXPENSES
CALCULATING THE NJ PROPERTY TAX DEDUCTION
CALCULATING TAXABLE NEW YORK NON-RESIDENT INCOME
contains several valuable worksheets and schedules.
As far as I
am aware, this is the only book in existence that deals exclusively with tax
planning for and preparation of NJ state income taxes.
The cost of
this valuable resource for NJ taxpayers will be only $9.95 delivered as a pdf email attachment. A print version sent via postal mail is
available for only $15.45.If you take away just one tax saving idea
from this book it will pay for itself many times over.
send your check or money order payable to TAXES AND ACCOUNTING, INC, and your
email or postal address, to –
THE JOY OF
AVOIDING NJ TAXES
BTW - I have also just "gone to press" with the July issue of ROBERT D FLACH'S 1040 INSIGHTS. In it I discuss in detail medical deductions and talk about keeping track of investment cost basis, forming an LLC and some tax-related "nevers". Click here to learn more about this newsletter.
Despite the fact that the most ignorant and mentally unstable President in
our history is currently in the White House - let us remember on this day of
celebration that America is still the greatest county in the world.
We must celebrate what is good about America – not what is bad.And remember and honor the heroes of America –
putting out of our minds for a moment its greatest villain.
Tomorrow we must join together and work
to remove this dangerous and
despicable idiot from the White House so American can remain the greatest
country in the world.