Saturday, September 30, 2017


Donald T Rump’s revealed “revolutionary” tax reform “plan” continues to be nothing more than scribblings on a cocktail napkin.  He just added a few more scribblings in his Wednesday address.
The devil is in the details.  But the devil has provided only minimal details for his “plan”.
Trump doesn’t care about “details”.  He will leave them to Congress.  He only cares about attention, praise, and the roar of the crowd.
Here, from Trump's address, supplemented by the hand-out "United Framework for Fixing Our Broken Tax Code", is the "plan". 
(1) The Tax Code will be simplified.
If true this is a good thing and something I wholeheartedly support, despite being a professional tax preparer who supposedly benefits from tax complexity.  The current US Tax Code is a convoluted “mucking fess” that needs to be totally rewritten from scratch.
(2) Individuals can earn up to $12,000 tax-free, and married couples up to $24,000.
These numbers refer to the new Standard Deduction.  There is no mention of the "Head of Household" filing status - I do not oppose doing away with this status.  The plan eliminates the personal exemption, for both taxpayers and all dependents, and the additional Standard Deduction for age and blindness.  I also do not oppose this.  However, considering the elimination of these current deductions this plan does not "roughly double" the Standard Deduction, as it says it does.
(3) The current 7 tax rates on “ordinary income”, from 10% to 39.6%, will be reduced to 3 rates – 12%, 25% and 35%.  And there could be a “surtax” on “high income households”.
No information is supplied regarding the income ranges of the 3 new rates, or what would be considered “high income”.  I support the idea, but would want to see the specific income ranges.
(4) The Child Tax Credit for dependents under age 17, currently $1,000 per qualifying child and phased-out based on level of income, will be “expanded”.
No information is supplied regarding exactly how it would be expanded.  The expansion beyond the current $1,000 is to replace the personal exemption for children.  I do not oppose replacing the deduction for personal exemptions for dependents with a credit.  The levels of income used in the phase-out of the credit will be increased, a good thing, although I personally oppose any AGI-based phase out of deductions or credits.  The first $1,000 of the credit remains "refundable".  I strongly oppose all refundable credits.
(5) A $500 credit for "non-child" dependents, such as elderly parents, will be created.  
As I said above, I do not oppose replacing the personal exemption deduction with a credit. 
(6) Itemized deductions that "primarily benefit the wealthiest families" will be eliminated.  
The specific itemized deductions have not been identified, although we are told the "tax incentives" for home mortgage interest and charitable contributions will remain.  Will the mortgage interest deduction be limited to "acquisition debt", as I believe it should?  
(7) The dreaded Alternative Minimum Tax (AMT) will be repealed.
This is definitely a good thing, which I totally support.  In reality the AMT hurts the upper middle class more than it hurts the “wealthy”.  The current AMT was used by the Tax Reform Act of 1986 as a back door way to offset the Act’s basic tax cuts.
(8) The federal Estate Tax will be repealed.
I do not oppose this as long as the step-up in basis for inherited assets remains intact.  I will say that, despite what Trump suggested, the federal Estate Tax, with its current $5+ Million exemption, does not regularly force those who inherit family run small businesses and farms to sell them off to pay the tax.  As USA Today points out (highlight is mine), “according to the non-partisan Tax Policy Center, only roughly 50 small business and small farm estates nationwide will face any estate tax in 2017, owing on average less than 6% of their value in tax”.
(9) The top corporate tax rate will be reduced from 35% to 20%.
I have no problem with this.
(10) The top tax rate on partnership and sub-S corporation “pass through” business income and,Schedule C self-employment income reported on the Form 1040 would be 25%.
This would cause W-2 salary and wage income to be taxed at a higher rate than “self-employment” income, and most definitely disproportionately benefit higher-income taxpayers.
(11) Businesses will be able to write-off in full the cost of all equipment purchases.
Under Internal Revenue Code Section 179 businesses can currently write-off up to $500,000 of equipment purchases.  Isn’t this enough?
Speaking of his tax reform “framework” arrogant serial liar Trump said, “It’s not good for me, believe me.”  First of all, I do not believe a single word that comes out of the mouth of Donald T Rump about anything, especially when he adds “believe me”.  And second, we really can’t tell if it is good for him because he has not released his tax returns.  We don’t know if Trump actually pays any federal income tax at all.
The elimination of the federal Estate Tax would certainly substantially benefit the Trump family.  And the lower rate on “pass through” business income would definitely benefit Trump personally, assuming he actually pays income tax.
Trump also said of tax reform, “I guess it is probably something I can say I’, very good at.”  Donald T Rump is not very good at anything, except consistently screwing investors, shareholders, contractors, vendors, employees, and customers while lining his pockets.
Overall I will admit there is much good in the "framework".  But, like the rest of America, I am eagerly waiting to see the specific details of this tax “plan”.

For my "framework" for tax reform see "A Tax Professional for Tax Reform".

Monday, September 25, 2017


I am changing my weekly BUZZ installment from Tuesday to Monday.
* In this week's post at THE TAX PROFESSIONAL I ask "Who Speaks for the Tax Professional?"
* Professor Annette Nellen gives us a list of “Disaster Relief Tax Links” at 21st CENTURY TAXATION.
* Kay Bell reports “Georgia residents now get Hurricane Irma tax relief” at DON’T MESS WITH TAXES.
* Janet Novack provides links to all the offerings from its stable of bloggers for last week’s “Tax Reform Week” in “Forbes Special Report On Tax Reform”.
I gave my comments on some of Kelly Phillips Erb’s tax reform guest posts in last Tuesday’s BUZZ installment.
* Donald Marron lists “Eight Thoughts on Business Tax Reform” at TAX VOX, the blog of the Tax Policy Center.
* Did you see my suggestions for corporate tax reform?  Check out my post from last Friday “Something to Think About”.
* Over at MARKET WATCH Bill Bischoff explains “What the IRS does on its website that’s unfair to taxpayers” (highlight is mine) –
“{Taxpayer Advocate} Ms. Olson concludes that the IRS stance on its own ‘unofficial’ guidance is unfair to taxpayers. The prospect that the IRS can assess additional taxes and even penalties after you’ve filed a tax return that relied on unofficial guidance that the IRS put out there for you to follow before it changed its mind is unacceptable.”
And –
FAQs and answers should be released as official guidance that taxpayers can rely on (such as in IRS Notices and Announcements) as quickly as possible whenever an issue affects a significant number of taxpayers or will have ongoing relevance.”
Bill has an excellent “bottom line” –
If you hire a competent tax professional and follow his or her advice, you are protected from most IRS penalty assessments as long as you provide the professional with full information about the tax issue in question. So that’s a good reason for seeking professional assistance rather than making your taxes a risky DIY project.”
* Kelly Phillips Erb, FORBES.COM’s TaxGirl, tells us “Side Hustlers Skipping Out On An Estimated $215 Billion In Taxes” (highlight is mione) -
From driving a Lyft to dog-walking, Americans are increasingly looking to pick up some extra cash with a side gig. According to a survey conducted by, more than 1 in 4 of Americans are earning cash on the side but not declaring it on their tax returns. In terms of dollars, about 69.8 million Americans are failing to report an estimated $214.6 billion to the Internal Revenue Service (IRS) each year.”
Some good advice from KPE -
Side hustles can be a great way to pursue your dream job, save for a fun purchase, or pay off your credit card.
But skipping out on paying taxes? That's not a great idea. Undeclared income doesn't count for purposes of earning Social Security later - or making an impact on your credit score. And if you get caught skipping out on your taxes, not only do you have to pay it back, you can get socked with interest and penalties.”
* Jim Blankenship reviews “5 No-No’s for IRA Investing” at GETTING YOUR FINANCIAL DUCKS IN A ROW.

Friday, September 22, 2017


With all the talk about tax reform and reducing the corporate tax rate I have not heard anyone propose a “dividends paid” deduction for corporations.
Corporate profits are taxed twice – on the corporate return, and then again on the individual income tax return when dividends are paid to shareholders out of corporate profits.  On the individual level there is some relief via the reduced tax rates on “qualified” dividends – 0%, 15% and 20%.  But, except for the lowest level, there is still double taxation.
Instead of reducing the corporate tax rate to 15% why not just allow corporations to deduct from net taxable income dividends paid to shareholders.  And on the individual level tax all dividends as ordinary income, like interest income.  There would no longer be “double-taxation” of corporate income and basic investment income – interest and dividends - would be taxed the same as earned income.
On the corporate level I would also suggest removing all industry-specific tax “loopholes”, and tax corporations on net book income less dividends paid.  I would also do away with the deduction for depreciation on real property (buildings) and true capital improvements thereto – both on the corporate and individual tax return.  Generally, in reality, the value of investments in real estate do not “depreciate” over time.
Under my suggestion “C” corporate income and pass-through corporate income would be taxed in a similar method.  Dividends paid from a “C” corporation, not taxed on the corporation level, would now be taxed to the shareholder at ordinary income rates, and “S” corporation profits, an equivalent of dividends, would continue to be taxed at ordinary income rates.
My proposals would result in both corporations and individuals being taxed on the net “cash in pocket” economic result of their activities.
What do you think?

Tuesday, September 19, 2017


As you are reading this I am attending the National Association of Tax Professionals’ Tax Forum in Atlantic City NJ.  I will post on this event when I return home.   
* Fellow tax pros – check out the premiere issue of my new free monthly e-newsletter ROBERT D FLACH’S THE TAX PRO.
It includes a “Meet and Greet” with NATP President Gerard Cannito CPA, CFP, and lots of other stuff of interest to tax professionals.     
* Kelly Phillips Erb, FORBES.COM’s TaxGirl, explains “How Helping Out With Donations After Irma Is The Same - And Different - From Harvey” and reports “IRS Announces Tax Relief For Taxpayers Affected By Hurricane Irma”.
* And Kelly continues her series of guest posts during the FORBES.COM “Tax Reform Week” with –
ü  Tax Reform: 3 Myths & 4 Realities” by Edward Mendlowitz
ü  Will Tax Reform Simplify The Tax Code?” by Bob Meyers
ü  2017 Is Our Year To Make History On Tax Reform” by Congressman Kevin Brady
ü  Lifting The Middle Class Through Tax Reform” by Senate Finance Committee Chairman Orrin Hatch
ü  The Implications Of Revenue-Neutral Tax Reform” by Laurence M. Vance.
In his guest post Bob Meyers, “an Accounting Department lecturer and runs the University of Wisconsin - Whitewater Volunteer Income Tax Assistance (VITA) clinic”, suggests the Tax Code needs to be complicated because –
We ask the U.S. income tax code to do a lot of heavy lifting. We want it to raise revenue, control the economy, create jobs, encourage and discourage certain activities, redistribute wealth, even participate in the country’s health care system.”
But the US Tax Code SHOULD NOT be used to “control the economy, create jobs, encourage and discourage certain activities, redistribute wealth, even participate in the country’s health care system”!  It’s one and only purpose is to “raise revenue”.
Prof Meyer does say –
Maybe we could live with a tax code that does not do so much controlling of the economy, changing social behavior, or encouraging certain activities. This would allow us to get rid of many of those confusing tax code provisions. I could get behind that proposal.”
I talk more about this in “Tax Reform: What the Tax Code Should Not Be Used For”. 
And I like Russ Fox’s bottom line –
The reality is that Congress benefits from the complexity. Lobbyists spend their largesse on Congress, and our Congressional representatives are the beneficiaries. Maybe Congress will surprise me. Being cynical, I doubt this will change.
I’d love to be surprised out of what emerges from Congress (if anything). I suspect, however, that my cynicism is well placed.”
Yes, Russ, it is truly well placed!
* Kay Bell explains that “Timing is among unanswered tax rewrite questions” at DON’T MESS WITH TAXES.
KB is correct when she says -
From a tax planning standpoint, however, retroactive tax changes tend to be a royal pain in the ass.”
* Before we leave the topic of tax reform - have you seen my editorial on “What Tax Reform Should Look Like” at TAXPRO TODAY yet?  Why not?
* Getting back to Harvey and Irma, Russ Fox gives us the word that “Harvey and Irma Relief Includes the FBAR” (not to be confused with FUBAR) at TAXABLE TALK.
* At the TURBO TAX BLOG (I don’t recommend using a box to prepare your tax returns, but it is ok to get advice from the blog) Ginita Wall answers the question “Can I Write Off My Grandparent as a Dependent?” -
There’s no requirement that your grandparents live with you to be claimed as your dependent, as long as you meet the other five qualifications.”
* Monday’s post at THE TAX PROFESSIONAL provided a listing of “Online Resources for Tax Preparers”.
* Before I go a request to check out my “Author Page” at AMAZON.COM.   
The most frustrating thing about the ignorant is how hard they work to remain ignorant.” - Will Spencer
An excellent description of Donald T Rump’s cult of ignorant supporters.

Friday, September 15, 2017


There is a lot of talk about tax reform – but not much detail.  As I have constantly repeated, not much more than scribblings on a cocktail napkin.
As I said in my previous post “Trump and Tax Reform” –
But he {Donald T Rump – rdf} really doesn’t give a rodent’s hind quarters, or an airborne sex act, about the actual details of this ‘reform’ – other than how it will save him and his business activities taxes, if he actually pays any taxes at all.
The Dumpster wants Congress to pass tax reform legislation – any tax reform legislation – only so he can claim a victory and say, ‘Look what I have done,’ regardless of what, if anything, he actually does.
Hopefully Ryan and McConnell will actually provide real and substantive tax reform legislation and not just a token bill aimed solely at giving the Party, and the idiot in the White House, a victory.”
Tax reform is turning out to be like health care “repeal and replace”.  The Republicans have opposed Obamacare and have been calling for its “repeal and replacement” since its introduction, perhaps more because it was a Democratic proposal than anything else.  They have had 7 years to come up with a “more better” option – but when it came time to actually introduce legislation they really had nothing.  There is much wrong with Obamacare, and also stuff right, and it truly needs to be fixed (see “The Good, The Bad, and The Ugly”) – but don’t hold your breath.
Republicans have had the same 7 years to come up with substantive tax reform plans and proposals – and I thought they had done so at various times in the past – but now they seem merely to have nothing more than a list of “concepts”.
I seem to recall reading that the tax reform proposal put forth by the Reagan Administration in the mid 1980’s was 300 pages (please correct me if I am wrong) – anyway that it was truly detailed and specific.
The more we do not hear actual specific plans and proposals the more I expect that there will not be any real tax reform legislation passed this year.  If anything there will be some token tax cuts merely to provide idiot Trump and the apparently incompetent Republican Party with the appearance of a win on something.
I really do not think anything of substance will be accomplished on anything with arrogant demagogue Donald T Rump in the White House. 

Thursday, September 14, 2017


Here is the latest word on the 2015 New Jersey Homestead Benefit, to be distributed in 2018 -
The Division of Taxation will mail 2015 Homestead Benefit packets over a three-week period in September 2017 -
Cape May, Mercer, Ocean counties = Saturday, September 16
Monmouth, Somerset, Union counties = Tuesday, September 19
Hunterdon, Middlesex, Passaic, Sussex counties = Thursday, September 21
Camden, Hudson, Morris counties = Saturday, September 23
Burlington, Essex, Gloucester, Salem counties =Tuesday, September 26
Atlantic, Bergen, Cumberland, Warren counties =Thursday, September 28
Using the same delivery schedule, NJDOT will send an email with instructions for downloading the packet to those filers who requested electronic delivery.
If you did not receive your application or an email message, wait at least one week after the expected delivery date for your county before contacting the Division. Call the Homestead Benefit Hotline at 1-888-238-1233, 8:30 a.m. to 5:30 p.m., Monday through Friday, except State holidays, or visit a Regional Information Center for help.
The filing deadline is November 30, 2017.
You may be eligible for a Homestead Benefit if you met these requirements:
·        You were a New Jersey resident; and
·        You owned and occupied a home in New Jersey that was your principal     residence on October 1, 2015; and
·        Property Taxes for 2015 were paid on that home; and
·        You met the 2015 income requirements
To meet the income requirements your 2015 New Jersey Gross Income – from Line 28 of your 2015 NJ-1040 - cannot be more than –
·        $150,000 for homeowners 65 or older or blind or disabled on December 31, 2015; or
·        $75,000 for homeowners under 65 and not blind or disabled on December 31, 2015.
If you were not a homeowner on October 1, 2015, you are not eligible for a Homestead Benefit, even if you owned a home for part of the year.
You are not eligible unless you are required to pay Property Taxes on your home. For example, you are not eligible if -
·        You are completely exempt from paying Property Taxes on your principal residence (such as certain totally and permanently disabled war veterans).
·        You made P.I.L.O.T. (Payments-in-Lieu-of-Tax) payments to your municipality. These payments are not considered Property Taxes for purposes of the Homestead Benefit.
If you sold your home, or plan to close on the sale on or before November 30, 2017 - if you no longer own the home that was your principal residence on October 1, 2015, or you plan to close on or before November 30, 2017, you must answer “No” to the question asking whether you still own the property when filing the Homestead Benefit application or you risk losing your benefit.
If you sell your home after filing your application - the Homestead Benefit will reduce the tax bill of the person who owns the property on the date the benefit is paid. This means that if you indicated you still own the home when filing your application, and later sell it, the only way to receive your 2015 Homestead Benefit is to take credit for the benefit at the closing of your property sale. If you plan to sell your home, discuss these instructions with your attorney or closing agent so they can negotiate on your behalf.
Your 2015 Homestead Benefit is based on your –
·        2015 New Jersey Gross Income,
·        2015 filing status (single; married, filing jointly; head of household; etc.),
·        Age/disability status (whether you were 65 or older and/or disabled on December 31, 2015),
·         Property Taxes paid in 2006 on your principal residence.
In most cases your 2015 Homestead Benefit as a credit on an installment of your quarterly property tax bill.  Your tax collector issues you a property pax bill or advice copy reflecting the amount of your benefit.
You will receive a check or direct deposit only if –
·        Your home was a unit in a co-op or a continuing care retirement community; or
·        You indicated that you no longer owned your home. (See Homeowners Who Sold or Plan to Sell Their Homes for more information.)