Wednesday, July 29, 2020
Tuesday, July 28, 2020
I have made a new addition to my DOLLAR STORE - “Everybody Ought To Have An IRA”.
In his classic Broadway musical, A FUNNY THING HAPPENED etc. Steve Sondheim tells us that “Everybody Ought to Have a Maid”. I don’t disagree. I also believe that everybody ought to have an IRA.
This report is basically almost everything you always wanted to know about contributing to an IRA account but didn’t know who to ask. It discusses the basics of an IRA, including the changes made by the SECURE Act, the traditional IRA and the ROTH IRA, the “backdoor” IRA, and opening a ROTH IRA for your child. And it includes a worksheet to keep track of your IRA contributions.
As with everything else in my DOLLAR store the cost is only $1.00, sent as a pdf email attachment. A print version sent via postal mail is also available for $2.00.
Send your check or money order for $1.00 or $2.00, payable to TAXES AND ACCOUNTING, INC, and your email or postal address to –
TAXES AND ACCOUNTING, INC
POST OFFICE BOX A
HAWLEY PA 18428
Monday, July 27, 2020
There has been much discussion in the "tax blogosphere" about what may or may not be in the next stimulus package. I will not post anything here until a package is actually passed by Congress.
* Did you see my post at AMERICANS FOR COMMON SENSE “It’s Not Politics, It’s Common Sense”?
* And did you see my post “That Was The Tax Season That Was 2020”?
* Ashlea Ebeling reports “Phishing, Fake Charities And IRS Impersonators Top 2020 Dirty Dozen Scam List” at FORBES.COM.
* Kay Bell, the yellow rose of taxes, explains “It's time for post-filing tax record keeping” at DON’T MESS WITH
I have been saying this for years (highlight is mine) –
“The main record everyone should have and keep forever — more on how long you need to keep tax material later — is your actual form 1040.”
You should also keep all your W-2s forever.
Saturday, July 25, 2020
I have said this before – but it appears that it needs repeating.
THERE IS ABSOLUTELY, POSITIVELY NOTHING YOUR TAX PREPARER CAN DO TO EXPEDITE THE PROCESSING OF YOUR 2019 FEDERAL INCOME TAX RETURN OR THE ISSUANCE OF YOUR 2019 FEDERAL REFUND.
END OF STORY.
Thursday, July 23, 2020
A post to an email tax preparer group asked -
“Do you guys think the Government will give all these work from home W2 workers a home office deduction this year?”
My answer is NO.
Assuming that the home office in question would qualify – taking into consideration the “exclusive use” rule – why should it be allowed? It does not cost an employee who temporarily works from home due to his "normal" office being closed anything to so do. He, or she, does not incur any “out of pocket” expense – other than perhaps a slight increase in the electric bill.
To be perfectly honest, an employee forced to work at home is actually saving money – i.e. no commuting costs, eating lunch at home every day, and perhaps reduced dry cleaning bills for work clothing.
The traditional home office deduction for a self-employed person – remember that the home office deduction for an employee is an employee business expense and employee business expenses are no longer deductible on Schedule A – applies a percentage of all home expenses, including property taxes, acquisition debt mortgage, homeowners insurance, utilities, security, and depreciation, based on the size of the office.
These costs for an employee forced to temporarily work at home, except perhaps utilities, do not change or increase because he or she is working at home. The mortgage payment, the insurance premium, and the home security bill are the same as they would be if the employee did not work at home.
An employee who works at home may incur additional costs for software or computer upgrades, but these expenses can, and should, be reimbursed by the employer under an “accountable plan”.
This is obviously just my opinion on the issue. It is possible that Congress will allow some kind of modified home office deduction in certain situations, regardless of how stupid and unnecessary it is. Congress has been known to do stupid and unnecessary things in the past.
So, what do you think?
Tuesday, July 21, 2020
My 49th tax filing season – I started as an apprentice tax preparer in February of 1972 preparing 1971 tax returns – was the only time I am aware that the initial filing deadline was extended, 6 months from April 15 to July 15 as a result of the COVID-19 pandemic. Taxpayers had until July 15 to file their 2019 returns and pay any tax due, and to make the first two quarterly 2020 estimated tax payments.
While the season officially ended July 15th, it ended July 14 for me. I never work the last day of the initial filing season (see here to learn why).
The big change in federal tax forms for 2019 returns was the return to sanity. The completely ridiculous “postcard” format of the 2018 return was gone! The 2019 Form 1040 was most definitely “more better” – and returned to a more logical flow of information.
There was a new Form 1040-SR for senior filers, created for no other reason than it was required by the Bipartisan Budget Act of 2018, which was word-for-word and line-for-line exactly the same as the “regular” 2019 Form 1040 except it had bigger print and included a Standard Deduction chart.
The previously 6 supplemental schedules to the 1040 were reduced to 3. Schedule 2 and 4 were combined in the 2019 Schedule 2, Schedule 3 and 5 were combined in Schedule 3 for 2019, and the information previously reported on Schedule 6 was returned to the 1040. The 2019 Schedule 1, like 2018, reported additional income and adjustments to income, the 2019 Schedule 2 reported all additional taxes, and the 2019 Schedule 3 reported nonrefundable credits and other payments and refundable credits.
There were no auto, computer, equipment, or weather issues of consequence this season. And there were no real changes to tax law – except for the last-minute retroactive extension of the infamous “extenders”, which affected very few of my clients.
The excessive federal under-withholding FU from last season was not evident this year. In most cases the federal income tax withholding of my clients was fixed, I expect by clients requesting additional withholding. At the beginning of the year the IRS issued a totally new W-4 for 2020, doing away completely with the concept of “withholding allowances”. I will have to wait until next tax season to see if this new W-4 format caused any problems.
I have been working at home for more than a dozen years now – so the pandemic “stay at home” order issued at the end of March did not adversely affect my practice. To be perfectly honest, I was glad that I had a reason not to go anywhere – at least from late March through mid-April. I was also not financially impacted by the pandemic. Money continued, and continues, to come in, but much less was going out. My business and personal expenses were reduced.
I did miss my annual recuperative trip to the Jersey shore in April, and found that by June it was difficult to get motivated to continue to deal with 1040s and I had to battle a severe case of “manana disease
The biggest issue of this tax filing season for taxpayers was, and continues to be, the excessive IRS delay in issuing refunds on manually-filed federal income tax returns – which all my federal returns are. This was a federal issue only, as NJ refunds were issued to my clients relatively promptly. The IRS offices were closed from the end of March until the end of June. Nobody was opening the mail and processing manual returns, amended returns or correspondence during this period. When the offices re-opened there was a ton of unopened mail to deal with, including a substantial backlog of manual returns to process. The office closures also affected the IRS “Where’s My Refund” tool – the Service had no idea if a manual return was received, so clients could not check on their refund status here.
There was nothing I could do, or can do, to expediate the processing of a return or the issuance of a refund. And I had, and have, absolutely no idea when refunds would or will be issued, or any way of finding out.
To compensate for the delays the IRS announced that it will pay interest on refunds from April 15, 2020 to the date the check is issued.
There was a major processing change for my NJ returns this year. I was initially concerned when I learned that NJ did away with its NJWebFile system, which I had used to electronically submit many NJ state returns and request direct deposit of refunds in the past. I discovered that this was replaced with a new “New Jersey Online Income Tax Filing” system, which allowed me to electronically submit all 2019 NJ-1040s free of charge at the NJ Division of Taxation website without the need for separate email addresses and passwords for each return. The limitations of the old NJWebFile system no longer existed. And I could request direct deposit for all state refunds. I used this new system for almost every NJ return I submitted, except for some that had a balance due. Because I used this filing method my clients received their NJ refunds promptly.
I continued to use, and truly appreciate, the New York state “enhanced” fill-in forms, which did the math and calculated the tax for the IT-201 and IT-203. There were no issues with NY returns and no delays, that I was made aware of, for NY state refunds.
Despite the extended deadline I still ended the season with 7 GDEs (the “E” is for “extension”). I prepared about 16 less sets of tax returns this season. Some clients chose to move on to a new preparer in anticipation of my retirement after next year’s tax filing season. Some told me they were moving on and some did not. There were a handful of deaths, not unusual considering the age of many of my clients. (I was especially saddened by the 2020 passing of two long-time clients, originally of Jim Gill, one apparently related to COVID-19.) And, as announced this January, I no longer prepare the returns of the grown children of clients who do not live at home.
So that was the 2020 tax filing season. One more season to go before I officially “retire” – after having completed 50 tax filing seasons!
Monday, July 20, 2020
* Jason Dinesen looks back on “Tax Season 2020: The Lament of the Solo Tax Practitioner” at DINESEN TAX TIMES.
I agree with Jason when he says –
“. . . for all I know about taxes . . . I still learn new things about taxes every day; literally every single day.”
* It is interesting that the IRS chose July 15th to issue this – “IRS announces 2021 PTIN fees for tax return preparers”.
The fee is $21.00 plus “a $14.95 fee payable to a contractor”.
The PTIN Fee that had been charged by the IRS was shot down by the courts a few years back, so we haven’t been paying this for a while now.
I don’t mind a token fee to the IRS, and$21.00 is not excessive, but why do we have to pay a processing fee to an outside contractor that is more than 2/3 of the actual fee? If Congress funded the IRS properly this would not be needed.
* Also from the IRS – “IRS extends July 15, other upcoming deadlines for tornado victims in parts of the South; provides other relief”.
* The NATP BLOG provides a brief compilation of “2020 tax season recap and highlights”.
* Kally Phillips Erb, the FORBES.COM TaxGirl, gave us “30+ Tax Tips From The Tax Pros”.
Want to know my best advice? Click here.
* Staying with FORBES.COM, Howard Gleckman reports “Millions Of Taxpayers Are Asking: Where Is My Refund?”.
I know I have received so many emails from clients asking that question that I have a created an automatic response to explain the IRS delay.
BTW – Howard is one of the millions who are asking.
THE LAST WORD
The statement “Black Lives Matter” is a true statement.
The movement is NOT saying “Only Black Lives Matter” or “Black Lives Matter More Than White Lives”, or “White Lives Don’t Matter”. Simply “Black Lives Matter”.
It is the White Supremacy movement - emboldened, empowered and “legitimized” by Trump - that is saying “Only White Lives Matter”.
Black lives matter. White lives matter. Brown lives matter. Red lives matter. Yellow lives matter.
The only lives that DON’T matter are those of Trump and Pence.