Thursday, May 30, 2019
Everyone admits that there needs to be “technical corrections” made to the hastily written GOP Tax Act. In addition to those being discussed, here are some changes I believe should be enacted -
+ If Congress believes the deduction for state and local taxes should be limited to $10,000, the maximum amount allowed for a married couple filing a joint return, currently also $10,000, should be increased to $20,000. Two single individuals living together can claim $10,000 each for a total of $20,000. Why should a married couple be penalized by limiting the deduction to $10,000 on a joint return?
+ The Child Tax Credit of $2,000 per child, increased from the previous $1,000 to make up for the loss of the personal exemption, is only allowed for dependent children under age 17. A dependent child who turns age 17 during the year gets the lower $500 “Other Dependent Credit”. It is my assumption that the Child Tax Credit was intended to cover dependent children through high school. The age threshold for the higher Child Tax Credit should be changed from under age 17 to under age 18 or even under age 19.
+ The American Opportunity Credit was intended to provide tax relief for the 4 years of college leading to an undergraduate degree. Currently the credit is only available for 4 tax years. But since a college year begins in the fall of one year and ends in the spring of another year a 4-year degree program actually takes place within 5 calendar years. Qualified calendar-year taxpayers, which almost everyone is, should be allowed to claim the American Opportunity Credit for 5 tax years.
As an aside - I do not believe the American Opportunity Credit, or any credit or deduction that is in reality a distribution of social welfare or other government benefits, belongs in the US Tax Code. But as long as it is there it should be done properly to accomplish its intended purpose. And I oppose the $10,000 SALT limitation, but if it is there it should be applied fairly.
So, what do you think?
Wednesday, May 29, 2019
For those of you who may think I constantly and aggressively voice my opposition to and denouncement of Donald T Rump for partisan reasons, because I am a Democrat or a liberal or a socialist, let me share a little poem -
In 2012 I voted for Mitt.
But I wouldn’t vote for Trump,
‘cause he’s a worthless piece of shit!
Tuesday, May 28, 2019
The BUZZ is back in its “regular time slot” – Tuesday morning.
* Finally, a list on which New Jersey is not the last – or worst – state. US News and World Report’s “Best States Rankings” puts NJ as #2 overall. However, it is #49 in the category of “Fiscal Stability”. And there is no specific category for “Taxes”.
I am surprised that PA is #41.
Washington is the best state in the nation, while Louisiana and Alabama are the worst,
* The NSTP BLOG tells us about the online IRS Tax-Exempt Organization Search in “Tool Helps Donors Research Tax-Exempt Organizations “.
* Some advice for recent college graduates from my “Dear Graduate” post in 2017 (that was actually a reprint of advice first given even earlier).
The only thing I would change – most definitely claim Single-0, and forget about Single-1, considering how FU-ed the withholding tables are.
BTW – the book is still available.
* What is the true legacy of the Trump Presidency? Click here to find out.
* Over at ACCOUNTING TODAY Michael Cohn reports “House passes bill to help workers save forretirement”.
Michael is talking about the “Setting Every Community Up for Retirement Enhancement (SECURE) Actof 2019”.
Two important, and welcomed (by me and others), changes for individual taxpayers in the bill –
+ increasing the minimum age for annual Required Minimum Distributions (RMDs) from 70 ½ to 72, and
+ allowing individuals with earned income to continue to contribute to an IRA after age 70½.
This may be one of the multitude of bills passed by the House that McConnell will allow to be voted on in the Senate (he refuses to submit any other legislation passed by the House), and may be one of the truly few bills that will actually be passed by Congress this year.
* Sam Brunson provides a detailed two-part discussion of the new “kiddie tax” in “The Kiddie Tax Needs a Better Fix” Part 1 and Part 2 at the SURLEY SUBGROUP blog.
For those curious about the blog title - the writers are apparently not “bad-tempered and unfriendly”, nor do they work for the firm of Surley and Sons. Click here for a lengthy explanation of the title.
* The IRS is offering a free 100 minute webinar on the “Qualified Business Income Deduction (199A)” on Thursday, May 30, 2019.
THE LAST WORD
I didn’t think the 2-part season finale of NCIS LA could get better. It finally (I have been waiting for years) brought back Harm and Mac from JAG (the original NCIS was a “spin-off” of JAG).
But Part 2 also gave us the absolute best line in a scripted drama since the new CHARMED pilot had the character of Harry tells the sisters –
“The Ancient Oracles predicted three signs of apocalypse. The first, ‘When the weakest of men reaches ill-gotten glory, and,’ oh, God, this goes on and on. The language is far too flowery for my taste. But suffice to say, it's your current president.”
In NCIS LA Hetty and Mac are talking to a Russian diplomat. The diplomat tells them -
“If your president has done nothing else, he has proven that lies don't have to be good.”
Thursday, May 23, 2019
Last November I turned 65. A milestone, and significant for many reasons. I can now get a senior discount at stores, movies theatres and restaurants.
Mark Twain told us, “Age is an issue of mind over matter. If you don't mind, it doesn't matter.” However, when it comes to taxes age does matter.
I ask for the date of birth of all my 1040 clients, as well as that of their spouses and dependent children. Why? Not because I am nosey. And I do not send out birthday cards to all my clients. There are several federal and state tax benefits and applications that take effect, or disappear, at specific ages.
+ Taxpayers age 65 or older receive an increased Standard Deduction
+ You can take a distribution from a retirement account - like an IRA, SEP, or 401(k) plan – without having to pay a 10% penalty once you reach age 59½. And some distributions from a qualified retirement plan (not an IRA) are penalty free once you reach age 55 or age 50. In these cases, the actual date of birth, and not just the year, are important.
I remember when a person turning age 65 would get an additional personal exemption, something that no longer exists under the GOP Tax Act. (FYI, some states, including NJ, still provide an additional personal exemption for a person age 65 or legally blind).
One day back in the late 1980's, when I was still working occasionally with my mentor James P Gill at his storefront office in Jersey City during the tax season, while in the course of preparing the return for a woman Jim happened to say-
“Now be sure to tell us when you reach age 65.”
The client blushed, giggled, and told Jim –
The very next morning we hung a sign in the waiting area of the office that read “PLEASE TELL US WHEN YOU ARE AGE 65”.
It is important to know the date of birth of dependent children because –
+ To be considered your “qualifying child”, and qualify as a dependent for several additional tax benefits, the “child” must be under age 19 at the end of the year, or under age 24 at the end of the year and a full-time student during any part of 5 months during the year.
+ The Credit for Child and Dependent Care Expenses, and the pre-tax treatment of Child Care FSA payments, apply only to a dependent under age 13. Here, too, the actual date of birth is important, as the credit or exemption can be claimed on expenses incurred prior to the child’s 13th birthday.
+ The Child Tax Credit applies to dependent children under age 17 at the end of the year, and the new Other Dependent Credit applies to dependent children age 17 and older.
+ The "Kiddie Tax" on "unearned income" applies if your child is under age 19, or under age 24 and a full-time student, the same rules for a "qualifying child".
States also have certain age-based tax benefits. A NJ taxpayer who was 62 or older on the last day of the tax year may be able to claim a Pension Exclusion or Other Retirement Income Exclusion on the state return. And NJ allows an additional personal exemption for a dependent child under age 22 at the end of the year who is a full-time student at “an accredited college or post-secondary institution”. NY has an age-based “Pension and annuity income exclusion”. NJ requires that you enter the year of birth for all dependents on the NJ-1040, and NY requires the actual date of birth for all dependents.
The date of birth is also necessary to access needed state information online. NJ asks for one’s date of birth to submit a return directly to the NJ Division of Taxation online, without using tax preparation software or a third-party, via the NJWebFile system, to download a Form 1099-G for state income tax refunds, to find out the amount of the NJ Homestead Benefit issued to a qualified homeowner, and to access a record of estimated tax payments.
So be sure that your tax professional knows your date of birth, the date of birth of your spouse, and the dates of birth of all of your dependents.
Tuesday, May 21, 2019
According to the Mayo Clinic –
“Narcissistic personality disorder is a mental disorder in which people have an inflated sense of their own importance, a deep need for admiration and a lack of empathy for others. But behind this mask of ultra confidence lies a fragile self-esteem that's vulnerable to the slightest criticism.
A narcissistic personality disorder causes problems in many areas of life, such as relationships, work, school or financial affairs. You may be generally unhappy and disappointed when you're not given the special favors or admiration you believe you deserve. Others may not enjoy being around you, and you may find your relationships unfulfilling.
Narcissistic personality disorder is one of several types of personality disorders. Personality disorders are conditions in which people have traits that cause them to feel and behave in socially distressing ways, limiting their ability to function in relationships and other areas of their life, such as work or school.
If you have narcissistic personality disorder, you may come across as conceited, boastful or pretentious. You often monopolize conversations. You may belittle or look down on people you perceive as inferior. You may feel a sense of entitlement — and when you don't receive special treatment, you may become impatient or angry. You may insist on having "the best" of everything — for instance, the best car, athletic club or medical care.
At the same time, you have trouble handling anything that may be perceived as criticism. You may have secret feelings of insecurity, shame, vulnerability and humiliation. To feel better, you may react with rage or contempt and try to belittle the other person to make yourself appear superior. Or you may feel depressed and moody because you fall short of perfection.
Many experts use the criteria in the Diagnostic and Statistical Manual of Mental Disorders (DSM-5), published by the American Psychiatric Association, to diagnose mental conditions. This manual is also used by insurance companies to reimburse for treatment.
DSM-5 criteria for narcissistic personality disorder include these features:
•Having an exaggerated sense of self-importance
•Expecting to be recognized as superior even without achievements that warrant it
•Exaggerating your achievements and talents
•Being preoccupied with fantasies about success, power, brilliance, beauty or the perfect mate
•Believing that you are superior and can only be understood by or associate with equally special people
•Requiring constant admiration
•Having a sense of entitlement
•Expecting special favors and unquestioning compliance with your expectations
•Taking advantage of others to get what you want
•Having an inability or unwillingness to recognize the needs and feelings of others
•Being envious of others and believing others envy you
•Behaving in an arrogant or haughty manner
Although some features of narcissistic personality disorder may seem like having confidence, it's not the same. Narcissistic personality disorder crosses the border of healthy confidence into thinking so highly of yourself that you put yourself on a pedestal and value yourself more than you value others.”
This mental disorder makes Trump incapable of intelligent and rational action, and incapable of dealing with criticism and challenges like a mature adult.
And also according to the Mayo Clinic -
“Antisocial personality disorder, sometimes called sociopathy, is a mental condition in which a person consistently shows no regard for right and wrong and ignores the rights and feelings of others. People with antisocial personality disorder tend to antagonize, manipulate or treat others harshly or with callous indifference. They show no guilt or remorse for their behavior.”
Among the symptoms of this disorder include -
• Persistent lying or deceit to exploit others.
• Being callous, cynical and disrespectful of others.
• Arrogance, a sense of superiority and being extremely opinionated.
• Lack of empathy for others and lack of remorse about harming others.
• Failure to consider the negative consequences of behavior or learn from them.
Trump is clearly a narcissist and a sociopath.
Trump is clearly the worst President in the history of the United States.
Trump is clearly the most ignorant and the most incompetent President in the history of the United States.
Trump is the only President in the history of the United States who has absolutely no interest in learning anything about anything. He thinks he knows everything about everything when the truth is he knows nothing about anything.
Trump is clearly totally devoid of humanity and integrity.
Trump clearly doesn’t care about anyone or anything but himself and the "roar of the crowd" from his cult of ignorant racists at his rallies.
There is no issue more important to the future of America, American democracy, the American people, and the world than removing Trump from the White House.
TRUMP MUST GO – THE SOONER THE BETTER!
Monday, May 20, 2019
* In an item from last December that was recently referenced on Twitter the TAX FOUNDATION explains “The Economic and Distributional Impact of the Trump Administration’sTariff Actions”.
Key findings –
“The Trump administration has imposed $42 billion worth of new taxes on Americans by levying tariffs on thousands of products.”
“For taxpayers in the middle quintile, this represents a decrease of $146 in after-tax income.”
So much for moron Trump saying "China has been paying tariffs to the USA". It is American companies and ultimately the consumer who actually pays the tariffs. Clearly Trump doesn’t know his ass from a hole in the ground about anything.
* In response to the news of the arrival of the royal baby Kay Bell identifies “5 tax breaks to help offset child-rearing costs” at DON’T MESS WITH TAXES.
* Congratulations to Prof Annette Nellen on the 12th Anniversary of 21st CENTURY TAXATION!
* Michael Cohn tells us “IRS fixes worksheet that miscalculated capital gains taxes” at ACCOUNTING TODAY.
“The Internal Revenue Service has posted a revised 2018 Schedule D Tax Worksheet in the instructions for Schedule D (Form 1040) after finding out that it contained an error that ended up calculating higher taxes for many investors.”
The item quotes the IRS as saying –
“Affected taxpayers need not file an amended return with the IRS or call the IRS. The IRS is reviewing returns submitted prior to May 16; more information will be provided about this review later.”
It also suggests –
“Those taxpayers who might be potentially affected can always try to recalculate their regular tax using the new worksheet to see if it changes.”
The majority of my clients, and I expect the majority of taxpayers in general, used the “Qualified Dividends and Capital Gain Tax Worksheet” if applicable and not the Schedule D Tax Worksheet. The Schedule D worksheet would only be used if a taxpayer had an entry on lines 18 and/or 19 on Page 2 of the 2018 Schedule D.
* FORBES.COM’s “TaxGirl” Kelly Phillips Erb reports “IRS Offers Filing Relief For Taxpayers Affected BySoftware Outage”.
None of my clients were affected by software outage. The tax preparation software I use is my brain. In 48 tax seasons I have never personally used flawed and expensive tax preparation software to prepare a federal income tax return.
* Once again, like Oliver Twist the state of New Jersey is last on the list.
The list in question is the TAX FOUNDATION’s “2019 State Business Tax Climate Index”.
“New Jersey, for example, is hampered by some of the highest property tax burdens in the country, recently implemented the second highest-rate corporate income tax in the country, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.”
The 10 best states in this year’s Index are:
3. South Dakota
6. New Hampshire
The 10 lowest-ranked, or worst, states in this year’s Index are:
48. New York
50. New Jersey
My current home state of PA is #34.
Tuesday, May 14, 2019
A tax preparer is a person who assists an individual (who I will refer to going forward as “taxpayer” – whether or not he or she actually pays any tax) in preparing a government form – the 1040 and NJ-1040, IT-201, PA-40 or whatever.
In most cases the preparer is trained in the “instructions” for the government form – the US Tax Code is in effect the “instructions” for the 1040 – and has experience in preparing the form. The information required to properly complete the form is given to the preparer by the taxpayer, and the preparer uses his or her knowledge and experience to enter the information provided by the taxpayer properly on the form.
The taxpayer signs the completed form to attest that the information on the form, which he or she has given to the preparer, is true, correct and complete. The preparer signs the form to identify himself or herself and to verify that the form was completed using information provided by the taxpayer.
The preparer does not have to personally verify and attest to the veracity of each and every entry on the form – just that all the information on the form was provided by the taxpayer. It is the responsibility of the government to verify the veracity of the information on the form, with a 1040 via matching and the audit process.
Obviously, the preparer must not willfully, with the intent to defraud, enter false, incorrect or incomplete information on the return. If the preparer knows, via independent personal knowledge, that information provided by the taxpayer is false he or she must refuse to enter the false information on the form or refuse to complete the form altogether. If the preparer has questions about the truthfulness, correctness or completeness of any information provided he or she must seek clarification from the taxpayer.
While the government does, and should, have the authority to regulate persons who officially represent the taxpayer in the various levels of the audit process – to “practice” before the IRS – it does not, and should not, have the authority to regulate the preparer.
Of course, the government does have the authority to fine or otherwise penalize a preparer who willfully conspires with a taxpayer to defraud the government by entering knowingly false information on the form.
The above all apply to a person who assists an individual in preparing any government form – a census form, a student financial aid form, etc. The Form 1040 is just another government form.
The purpose of an income tax is to generate the revenue needed to pay the cost of administering a government and the cost of the services provided by the government. Period.
An income tax system, and the form used to calculate a tax assessment, should NOT be used to enable “social engineering”, i.e. the redistribution of income, or to distribute or deliver social welfare or other government benefits.
The excessive additional “due diligence” currently forced on tax preparers began as a reaction to the extensive fraud that was a direct result of the erroneous practice by Congress of using the tax system and the 1040 to redistribute wealth and to distribute and deliver government benefits, specifically in the form of “refundable credits”. Unfortunately, as I said in a previous post, this had gotten way out of hand and now applies to every tax form where a taxpayer claims a dependent.
Since it is the responsibility of the government to verify the veracity of information on the form known as the 1040, the excessive additional due diligence requirements force the preparer to do the job of the government without the compensation given to a government employee.
The bottom line –
(1) The government should NOT have the authority to regulate tax preparers.
(2) The Tax Code should NOT be used to redistribute wealth or to distribute and deliver government benefits.
(3) A tax preparer should NOT be required to personally verify individual items on the 1040 via excessive additional due diligence.