Thursday, January 31, 2019


Public Law 115-97 – officially “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” - also known as “The Tax Cuts and Jobs Act”, but best described as the GOP Tax Act - takes effect with the 2018 federal income tax returns that have begun to be filed. 

This new law has drastically changed the United State Tax Code.  For tax years 2018 through 2025, or until new tax legislation is enacted, the GOP Tax Act will affect every income tax return filed.

The GOP Tax Act is the Republican equivalent of the Democrat’s Obamacare.

Both Acts were based on a good concept that dealt with a legitimate issue – making adequate health care more affordable for and accessible and providing needed tax reform.  But the main purpose of passing both Acts was to get an early legislative victory for the Party’s newly elected President.  Both were written hastily and poorly, the GOP Tax Act practically overnight, without serious thought or discussion.  And were voted on hastily, without serious debate. 

In both cases, none of the members of Congress who voted on these Acts, from both Parties, actually read the legislation they were voting on.  They were told how to vote by the leaders of their respective Parties, and for the most part the members obeyed.

And both Acts contained some good and some bad, perhaps more bad than good.

Obamacare required insurance companies to provide coverage for pre-existing conditions, and provided taxpayers with a tax credit directly applied to monthly premium payments to reduce the out of pocket cost, but created an excessive financial penalty for not having health insurance coverage, added the NIIT surtax to investment income and created other nickel and dime taxes, fees and charges, and made health insurance premiums age-based.

The GOP Tax Act did contain some simplification via the elimination and limitation of tax deposits, some good and some bad, increased the Standard Deduction, reduced tax rates, and effectively did away with the dreaded Alternative Minimum Tax, but it also contained much new and unnecessary complexity.  It was neither tax reform nor tax simplification.  Thankfully the popular title properly identified it as “tax cuts” and not “tax reform”.   

The Act will make the preparation of some Form 1040s simpler, but also make many more involved and more costly.  Taxpayers in many situations should not be surprised when they discover the fee to prepare their returns is higher than in past years.  
Taxpayers should also not be surprised if their refunds are smaller than expected, or if they actually owe money with the filing of their 2018 Form 1040.  Many have been under-withheld, some seriously.  The Government Accountability Office recently reported that, based on simulations run by the Treasury Department, taxes for at least 30 million Americans — 21 percent of taxpayers — are being under-withheld.

The new withholding tables issued last February were a bit too “liberal”, so workers would think the GOP Tax Act was actually putting more money in their pockets.  And the loss of the personal exemption deduction and many itemized deductions makes previously submitted W-4 forms no longer appropriate.  The IRS has provided some token relief for this under-withholding by revising the calculation of the penalty for underpayment of estimated taxes.

As I have said in the past, the more I learn about the GOP Tax Act the more I find –

(1) There is still a lot we don’t know yet about how many of the provisions of the Act will be interpreted and implemented.

(2) Because the Act was basically written overnight, the wording of the law is often defective, confusing and unclear.  “Technical corrections” legislation is clearly needed.

(3) It is very obvious that those who actually write tax law and the members of Congress who vote on it have absolutely no concept of the practical implementation of the tax legislation they write and pass, or of the actual preparation of tax returns.

So, good luck with the preparation and filing of your 2018 Form 1040.  And be sure to return here after the end of the filing season to read my annual “That Was The Tax Season That Was” post.


Wednesday, January 30, 2019


While the 2018 New York state income tax instruction booklets have been available for weeks now, the actual 2018 IT-201 and IT-201 are finally up at the NYS Department of Taxation and Finance website.  Click here for IT-201 and here for IT-203.

I did a quick review of the 2018 tax returns and there does not seem to be any changes in the format or content of these forms.  They look exactly the same as the 2017 forms.

The big news for 2018 New York state returns is that New York has “decoupled” from most of the individual income tax changes enacted by the GOP Tax Act.

Like many states, New York bases the state individual income tax return on the federal return, starting with the federal AGI and making state adjustments, and allowing the same itemized deductions claimed on the federal Schedule A with some state adjustments.  The GOP Tax Act made multiple changes to the federal AGI and the federal Schedule A.  New York State will not allow most of these changes in calculating state income tax liability.   

(1) New York continues to allow a deduction for all qualified job-related moving expenses and an exclusion from taxable wages of employer reimbursements for these expenses.  There is a new “subtraction modification” on the IT-201 and IT-203 to reduce federal AGI for qualified employee moving expense reimbursements included in federal taxable wages and out of pocket non-military employee moving expenses. 

(2) Withdrawals from a Section 529 Qualified Tuition Program account for kindergarten through 12th grade tuition payments are not considered qualified withdrawals for determining the taxability of distributions under the New York 529 college savings account program.

(3) While the New York Standard Deduction amounts have been slightly adjusted for inflation, they have not been as substantially increased as the federal Standard Deduction amounts have been.  And New York still allows a $1,000 deduction for each dependent claimed on the 2018 IT-201 or IT-203 (but not for the taxpayer or spouse).

(4) The 2018 New York Itemized Deductions are computed using the federal rules as they existed prior to the enactment of the GOP Tax Act.  The deduction for property taxes is not limited to $10,000, acquisition debt interest on principal of up to $1 Million is deductible regardless of when the home was purchased, and home equity interest on up to $100,000 in principal, all casualty and theft losses, and all previously allowed Miscellaneous expenses, still subject to the 2% of federal AGI limitation, are deductible on the 2018 NY state return.  And the old “Pease” limitation of itemized deductions will be used in calculating NY itemized deductions.   

(5) New York will allow you to itemize on your 2018 NY State IT-201 and IT-203 regardless of whether you itemized deductions or claimed the Standard Deduction on your 2018 federal Form 1040.  In the past If you took the Standard Deduction on your federal return, or if you did not have to file a federal return, you were required to take the New York Standard Deduction.  You could only choose to claim itemized deductions on your NY state return if you itemized on your federal return, and you would claim the same amount of itemized deductions on the NY return that you claimed on the federal return, with some state adjustments, additions and subtractions. There is a new Form IT-196 (New York Resident, Nonresident, and Part-Year Resident Itemized Deductions) that replaces Forms IT-201-D and IT-203-D.

Many tax preparers, myself included, told some clients last year that they would no longer be able to itemize and did not need to maintain and give them documentation for certain expenses for 2018 through 2025.  However, if the client lives or works in New York State they do need to maintain and provide their preparer with details of these expenses for 2018 and beyond.

There have been other changes to NY state taxes for 2018 -

(1) A special “Union dues additional adjustment” can be included in your New York Itemized Deductions for any portion of union dues paid that is not included in Form IT-196 Line 28 “Job expenses and certain miscellaneous deductions” due to the 2% of AGI exclusion.  So, in effect 100% of union dues are deductible.  The adjustment is Item K for the entry on Line 44 of Form IT-291) (see the Form IT-196 instructions).   

(2) The New York State Child and Dependent Care Credit has been increased and enhanced.  The credit amount allowed increased for taxpayers with New York AGI of at least $50,000 but less than $150,000, and, the qualified expense limit for taxpayers with more than two qualifying persons increased to $7,500 for three qualifying persons, $8,500 for four qualifying persons, and $9,000 for five or more qualifying persons.

(3) There have been some adjustments to old credits and some new credits that do not apply to any of my clients and probably most of you.

As an aside, just so you know, beginning with 2019 New York will not follow the changes to alimony enacted by the GOP Tax Act.  All alimony received is included in taxable income and all alimony paid is deducted from taxable income for calculating the NY state tax liability, regardless of when the divorce or separation decree or agreement was issued or amended.


Tuesday, January 29, 2019


Here is the last BUZZ installment before my annual tax season hiatus.

A reminder – don’t forget to return here on February 1st for the annual posting of THE TWELVE DAYS OF TAX SEASON.

* Trump’s government shutdown is over but the WASHINGTON EXAMINER reported “Government watchdog warns IRS could take a year to recover from shutdown”. -

The National Taxpayer Advocate, a government watchdog office that monitors the IRS, told House staffers that it would be 12 to 18 months before the agency resumes normal operations, sources told the Washington Post.

The IRS will return from the shutdown behind schedule for training IRS employees and to 5 million letters from taxpayers that have so far gone unanswered, the Post reported. The tax agency also needs to hire thousands of employees for the tax filing season, House aides said.”

As you can see from the chart in the post requesting direct deposit of your federal refund will put the money in your pocket 4 days sooner.

And be advised, according to the IRS “the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or debit cards starting February 27, 2019, if these taxpayers chose direct deposit and there are no other issues with their tax return.”  So, if you mail out your Form 1040 claiming either the Earned Income Credit or an Additional Child Tax Credit (the refundable portion of the credit) today you probably won’t get your refund until the beginning of March.

Using a Donor Advised Fund to “bunch” charitable deductions is a good idea – and one of the tax planning techniques to use in response to the changes made by the Tax Cuts and Jobs Act that I discuss in my book THE GOP TAX ACT AND THE NEW 1040.

*  Did you buy your first home in 2018, or planning to do so in 2019.  Check out another of my books - TAX GUIDE FOR NEW HOMEOWNERS.

* William Perez tells you everything you need to know about LLCs in “Small Business LLC Taxes & LLC Tax Returns [+ Free Checklist]” at FIT SMALL BUSINESS.  


It is proven again and again every day that everyone involved in the Trump campaign, including Trump himself, has lied to everyone.  Many have been indicted – and I expect more indictments are coming.

And Trump continues to lie to everyone about everything every day as President, as do his “stooges”.

The fact that the Republican Party has totally ignored these proven facts, and refuses to denounce and disavow Trump, is a clear sign that the Grand Old Party has abandoned all of its former principles and has lost all integrity, credibility and legitimacy.

Patriotic Americans must vow to never again vote for a candidate of the Republican Party.

A new, truly conservative-based party, one that will oppose and denounce Trump and all he represents, must be created to take the place of the dead Republican Party.

Let us all pray that by the end of the tax filing season, when I return to posting here at TWTP, Trump has resigned, is removed from office, or proceedings have begun to remove him from office.


Monday, January 28, 2019


I often see blog posts and online articles that identify IRS “red flags”, more frequently during the tax filing season.  These posts tell you that if you claim a certain deduction or credit your tax return will have a greater likelihood of being chosen for audit by the IRS.

I don’t like these “red flag” posts and articles.

Read my lips –

Do not fail to claim a legitimate, documented tax deduction or credit on your federal or state income tax return just because you read somewhere that it is an IRS “red flag” and that claiming it will automatically result in an IRS audit.

(1) If your deduction is legitimate and you have sufficient documentation to prove its authenticity in an audit then what is the problem? An audit is not something that must be avoided at all costs – it is merely an inconvenience.

(2) Just because the IRS pays closer attention to tax returns that contain certain deductions or credits does not mean if you return contains this deduction of credit you will “automatically” be audited. The IRS only audits a small percentage of 1040s (less each year as Congress continues to underfund the IRS) – and several factors are involved in determining which returns are selected for audit.

(3) If you fail to claim a legitimate deduction or credit you have, in effect, audited your own return and disallowed the deduction – neither of which the IRS may actually do.

(4) Just because you read somewhere that an item is an IRS “red flag” does not mean that the item is really an IRS “red flag”.

I must add that if the alleged “red flag” deduction or credit is legitimate and documented, but another item on your return is not, an IRS audit might turn up the “questionable” item. The answer is obviously to claim only items that are legitimate on your tax return, and be sure to have sufficient documentation for all deductions and credits you claim. 

FYI - in my 45+ years in “the business” I expect I have prepared over 10,000 sets of tax returns.  I can count on the fingers of my two hands the number of traditional IRS office audits I have had to deal with over the years – none of which have been in the past 20+.  And many of the 10,000+ returns have included deductions and credits which are thought to be “red flag” items. 



The instructions for the 2018 NJ-1040 is now available to download at the NJDOT website.  Click here.

Both the NJ-1040 form and the instruction booklet have been totally rewritten. 

The cover of the instruction book is the same, but almost everything inside is different.  The revised instruction book is, in my opinion, far superior to the old one.

While as of this writing the actual 2018 NJ-1040 and supplemental schedules are still not available on the NJDOT website (although the instructions are – is a puzzlement), NJ taxpayers have begun to receive the 2018 NJ-1040 booklet in the mail, and a client scanned and emailed me a copy of the new 2018 forms.

The 2018 NJ-1040 is four pages – the old NJ-1040 was only three pages.  And the numbering of the entries has been revised.  The content of the NJ-1040 has not changed, other than a change in the way the deduction for exemptions is calculated on Page 1 and to add lines for the two new credits I identify below and some additional voluntary contribution options.  Taxpayers, and paid preparers, now sign on the bottom of Page 4 instead of Page 1. 

Above the signature on Page 4 is a new section where taxpayers must indicate whether or not the taxpayer and spouse, civil union partner or domestic partner have health insurance on the date you file the return.  Filling in, or not filling in, the ovals in this section will not affect in any way the 2018 NJ-1040 – I expect those who do not fill in the appropriate ovals will receive correspondence from the state later in the year discussing health coverage options.  As I explained in detail in my earlier post “The NJ Health Insurance Mandate”, beginning January 1, 2019, New Jersey will require its residents to maintain health insurance, and will penalize residents who do not, or who do not qualify for an exemption.

As with the new instructions, the revisions to the NJ-1040 are, in my opinion, an improvement.

The old one-page Schedule A and Schedule B, which had nothing to do with the federal Schedules A or B, has been replaced by Schedule NJ-COJ (Credit for Income or Wage Taxes Paid to Other Jurisdictions) and Schedule NJ-DOP (Net Gains or Income From Disposition of Property), now on separate pages.  As with the NJ-1040, the actual content of the schedules has not changed.  The NJ-COJ is just bigger in size, and the NJ-DOP listing of individual sales adds many, many more lines for entries.

I have not seen the 2018 NJ-BUS-1 and NJ-BUS-2, but I expect there is no change to these schedules.

The one-page NJ-1040-H, for NJ taxpayers who are not required to file a NJ-1040, is now a two-page NJ-1040-HW.  Part I on the front page is to claim the refundable Property Tax Credit and Part II on the back is to claim the new refundable Wounded Warrior Caregivers Credit discussed below.

Here is what is new for NJ state individual income taxes for 2018 -

(1) A new top tax rate of 10.75% is created for NJ taxpayers with income of more than $5,000,000, regardless of the taxpayer’s filing status.

(2) The Pension Exclusion and Retirement Income Exclusion combined for NJ taxpayers age 62 or older or disabled under Social Security with Total Income of less than $100,000 is –

Single or Head of Household = $45,000
Married Filing Joint = $60,000
Married Filing Separate = $30,000

(3) The maximum deduction for property taxes is increased from $10,000 to $15,000.

(4) There is now a non-refundable state Child and Dependent Care Credit for families with qualified dependents and New Jersey Taxable Income of less than $60,000 who are allowed to claim the federal Child and Dependent Care Credit.   

A qualifying individual can be a child under age 13 or a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.

The amount of the New Jersey credit is a percentage of the taxpayer’s federal Child and Dependent Care Credit and is based on New Jersey Taxable Income -

If NJ taxable income is:       The NJ-1040 credit is:

Not over $20,000                50% of federal credit
over $20,000 to $30,000    40% of federal credit
over $30,000 to $40,000    30% of federal credit
over $40,000 to $50,000    20% of federal credit
over $50,000 to $60,000    10% of federal credit

The maximum New Jersey credit cannot exceed $500 for one qualifying individual or $1,000 for two or more qualifying individuals.

(5) The NJ Earned Income Tax Credit is 37% of the federal tax credit.

(6) There is a new refundable Wounded Warrior Caregiver Credit for a taxpayer with NJ gross income of less than $100,000 who provided care for a relative who is a qualifying armed services member.

A qualifying armed services member is a person who:

* was honorably discharged or released under honorable circumstances by the last day of the tax year, and

* has a disability arising from active U.S. military service in any war or conflict on or after September 11, 2001, and

* has either a 100% disability rating or receives individual unemployability benefits, and

* lived with you in New Jersey for at least six months of the tax year.

The credit is the lessor of 100% of the federal veteran disability compensation or $675.  It is calculated on a new Schedule NJ-WWC.

This credit, like the NJ Earned Income Tax Credit, is refundable.  As with the NJEITC, this credit is included in “Total Withholdings, Credits and Payments” on the NJ-1040.  If qualified caregivers have no NJ state income tax liability, or claiming the caregiver credit reduces their liability below 0, they will receive the full credit or the difference in their refund. 

(7) New Jersey will not allow the highly publicized and highly convoluted and complicated federal 20% Section 199A deduction for “pass-through” business entities, including federal Schedule C or C-EZ filers, on the NJ-1040.

2018 is the 2nd year that honorably-discharged veterans can claim a special additional $3,000 exemption on the NJ-1040.  If you provided the NJ Division of Taxation with documentation of your honorable discharge last year you do not have to include the documentation again with your 2018 return.

For those of you who file your NJ-1040 free online using NJWebFile, the NJDOT website tells us - “The NJ WebFile application will begin accepting 2018 NJ Tax Returns on or about Wednesday, January 30, 2019”.

Once again, the NJ Division of Taxation will be taking steps to protect New Jersey taxpayers from refund fraud and identity theft.  These efforts will, like last year, result in state tax refunds not being issued until March 1.

I will let you know when the actual 2018 forms and schedules are available online at the NJDOT website.


Saturday, January 26, 2019


It's back!  My TAX GUIDE FOR NEW HOMEOWNERS - a detailed review of all of the special tax benefits available to homeowners.  And it has been updated to include the changes in tax law enacted by the GOP Tax Act!

This guide is a great gift for new homeowners.  It discusses –

* itemized deductions for real estate taxes, mortgage interest, points, and mortgage insurance premiums,

* the home office deduction,

* rental income and deductions for a 2-family home, and

* the home sale exclusion.

It also includes a special section on Choosing a Tax Professional, information on other itemized deductions, what is new for taxes for 2018, and special worksheets for keeping track of the different types of mortgage debt and reporting rental expenses for a multi-family home.

The cost of this special tax guide, sent to you as a pdf email attachment, is only $9.95.  A print version is also available for $10.95.

Attention real estate professionals – reprint rights of this report is available for free distribution to current and potential clients.  The cost of reprint rights is $74.95.  The reprintable report will be sent as a word document email attachment so you can personalize it.  The signed reprint rights agreement will be sent via postal mail.  If a real estate professional purchases a copy of the report to review and subsequently purchases reprint rights the original cost of the report will be deducted from the $74.95.      

Send your check of money order for $8.95, $10.95 or $74.95 payable to TAXES AND ACCOUNTING, INC, and your email and/or postal address, to –



Friday, January 25, 2019


Here is what Trump just said in the garden of the White House -

"We are ending the shutdown. 

Blah blah blah. Wall. 

Nonsense nonsense nonsense. Wall. 

Bullshit bullshit bullshit. Wall. 

Garbage garbage garbage. Wall. 

Blah blah blah."

I expect everyone stopped listening after he announced the end of his government shutdown.  

After 5 minutes I changed the channel from CNN to Katie Brown's Workshop on CREATE.

Tuesday, January 22, 2019


* A LINKED IN item from Jamaal Solomon, EA, I believe quoting the Washington Post, gives us some bad news regarding the IRS and Trump’s shutdown -

The government shutdown is hampering the Internal Revenue Service’s ability to prepare for the first filing season under the new Republican tax law, complicating the work of the agency tasked with implementing the biggest overhaul of the tax code in three decades.

Training for IRS employees on the new law have been postponed. Hundreds of centers that help taxpayers navigate the tax code will be closed for the duration of the shutdown. New regulations clarifying the more complex parts of the law are coming out at a significantly slower pace, and tax attorneys and accountants report struggling to get IRS officials on the phone for help.”

This actually doesn’t directly affect the tax season operations of my practice.  I NEVER call the IRS for anything – to be honest, based on past experience, I don’t trust the person on the phone to tell me the truth.  But it does affect taxpayers who are trying to get help from the IRS.

* Staying with Trump's shutdown, Kelly Phillips Erb, the FORBES.COM “Taxgirl”, reports “Yes To Refunds, No To Audits: What To Expect From IRS During The Shutdown”.

For the official word check out “IRS Operations During the Appropriations Lapse”.

*  Over at CNBC.COM a different Kelly – actually a Kelli - Kelli B. Grant tells us “What to know before you take an advance on your tax refund”.

Want to know what I think you should know before you take an RAL?  Think it is a terrible idea – and NEVER take a Refund Anticipation Loan or advance from a tax preparer.  Especially from Henry and Richard or other fast food (with regards to service but not cost) commercial tax preparation chains. 

As Kelli suggests, if you need money that badly “consider other options”.

* Before you begin to work on your 2018 Form 1040 you may want to read my book THE GOP TAX ACT AND THE NEW 1040.

* Trish McIntire asks “Are You Sure You're Ready?” at OUR TAXING TIMES.

* Over at DINESEN TAX TIMES Jason Dinesen takes a look at “Rental Owners, 1099s, And the New QBI Guidance in light of the recently released IRS Revenue Procedure.

* Speaking of the stupid, unnecessary and convoluted “Section 199a” deduction (20% of “QBI”), Tony Nitti provides an extensive and detailed (12,000 plus-or-minus words long) tutorial on the subject in “IRS Publishes Final Guidance On The 20% Pass-Through Deduction: Putting It All Together” at FORBES.COM.

* If you just want a basic lesson in the thing you can read “The 20% Qualified Business Income Deduction: Section 199A” by Manasa Nadig at TAX CONNECTIONS.


Let's face it. Trump should NOT be, and NEVER should have been allowed to become, President of the United States.  There is absolutely nothing about him ever to make anyone think he should be President.  This is proven every single day he remains in office.  

What unpresidential, unconstitutional, unethical, illegal, wrong, or just plain stupid act by Trump will it take for the Republican Party to say "enough is enough" and denounce and disavow the arrogant moron?

Is there nothing they won't overlook?


Monday, January 21, 2019


It is vitally important that we remember and honor the words and deeds of Dr. Martin Luther King, who devoted his life to promoting acceptance, equality and civil rights, not just today but every day - especially in the context of the hate, racism and bigotry that is promoted, emboldened and empowered by the presidency of Donald Trump.

The progress that had been made toward the realization of Dr. King’s dream is eroded every single day Trump remains in office.

We must fight to keep the dream alive.

Friday, January 18, 2019


What are the options for explaining Trump’s attitude and actions toward Russia?

1. Trump is the biggest moron ever to hold public office in America.

2. Trump hero-worships and envies Putin, and authoritarian leaders like Putin, and wants to be accepted and liked by Putin.

3. Trump, being the ultimate narcissist, is being easily “played” by Putin who praises Trump and appeals to his narcissism.

4. Trump is delusional and, obviously incorrectly, believes that he can do anything better than anyone, including running the country, and that anyone with intelligence would want him in the White House; he accepts Russian help as being nothing wrong, and ultimately assisting Americans to do the right thing by putting him in the White House.

5. Trump wanted to, and probably still wants to, build a "Trump Tower" in Moscow, and needed/needs the support of the Russian government.

6. Putin has documentation of illegal or “perverted” acts by Trump and is blackmailing him.

7. Trump is an active, affirmative and intelligent agent of the Russian government.

There are really no other options.

I do not believe #7 is true. I will never give Trump any credit for intelligent thought or intelligent action.

The real explanation is a combination of the first 4 options, and, obviously, most definitely option #5.  And, also obviously, in any context #1 and #2 are true statements.

While #6 is possible, it is less likely than the first 5.

Regardless of which option or options explains the situation TRUMP MUST GO!

What do you think?