Thursday, October 29, 2020


Tax Court Summary Opinion 2019-19 deals with a mistake I have seen taxpayers, including a couple of clients, make over the years.  And it emphasizes the importance of three points –

* A little knowledge is dangerous

* Always check with your tax professional before making a move that could affect your taxes.  And

* What I have continually said is the best advice I can give any taxpayer - do not accept tax advice from anyone other than a professional tax preparer.

Here are the facts of the case.

If you take a withdrawal from an IRA account or a qualified retirement plan, such as a 401(k), prior to turning age 59½, and the withdrawal is not rolled over to another retirement account within 60 days, you are subject to a 10% premature withdrawal penalty.

The taxpayer in the case, under age 55, closed out her 401(k) plan account to make the down payment for her and her husband’s first home.  She was told by her plan representative that she would not pay a premature withdrawal penalty on the full amount because they were first-time home buyers.  But she did not verify this with a tax professional.

The IRS correctly assessed a 10% penalty on the entire amount of the withdrawal, which was upheld in TC Summary Opinion 2019-19

The taxpayer and her 401(k) representative were correct that there is an exception to the 10% penalty – Exception 09 – for a distribution of up to $10,000 for first-time home purchases (the little knowledge).  However, this exception is ONLY for distributions from an IRA account and does NOT apply to withdrawals from a qualified employer retirement plan like a 401(k).

Of the various available exceptions to the premature withdrawal penalty some are for withdrawals from ANY qualified retirement account, some are only for withdrawals from an IRA account or IRA annuity, and one is only for withdrawals only from a qualified employer retirement plan like a 401(k).  The first-time home purchase exception is one of those that applies only to IRA withdrawals.

If the taxpayer had checked what she was told by her plan representative with her, or a, tax professional before closing out the account she would have been told that none of the withdrawal would qualify for the penalty exception.

The tax professional would probably have told her to rollover her 401(k) account directly into an IRA account and then withdraw the money from that IRA account to cover the down payment.  Then $10,000 would be exempt from the penalty and the taxpayers would have saved $1,000 plus the resulting penalty and interest assessment as well as the applicable court costs.

Don’t make the same mistake, or a similar one.  Always check with a qualified tax professional before taking any action, regardless of what anyone else has told you or what you have read somewhere.


Tuesday, October 27, 2020


This is NOT a normal election. This is NOT about Americans choosing between Republican and Democratic or conservative and liberal beliefs and policies.

This is a fight for the future of American democracy and American values. This is about what is right vs what is wrong.

Make no mistake – Trump is most definitely wrong.

Not because of any political philosophy or beliefs or policy – Trump has no political philosophy or beliefs. But because Trump is deplorable and despicable, corrupt and totally self-absorbed, without any care or concern for anyone or anything but himself, and without any redeeming positive human qualities, and because Trump is mentally unstable and totally unfit to hold any position of power at any level of government.

And because he is dangerous.

And the Republican Party is wrong – because of its support, defense and enabling of Trump.

The future safety and security of America and Americans depends on Trump being removed from the White House and his Republican enablers in Congress being removed from office.

Monday, October 26, 2020


* The IRS has released the draft of the 2020 Instructions for Form 1040 and Form 1040-SR.  Click here


* I know it may be a bit early for this, but William Perez identifies “Federal Income Tax Deadlines in 2021” at THE BALANCE.


* Check out my new blog post at FRIENDS OF THEATRE AND ART – “It’s A Musical!”.


* Kay Bell reports Californians dealing with latest round of wildfires get federal tax relief, new Jan. 15,2021 due date” at DON’T MESS WITH TAXES.


Californians in seven counties ravaged by wildfires now have until Jan. 15, 2021, to file various individual and business tax returns and make tax payments


New round of fires, new tax relief: The affected California counties, as designated by the Federal Emergency Management Agency (FEMA), are Fresno, Los Angeles, Madera, Mendocino, San Bernardino, San Diego and Siskiyou.”


* And Kay explains that, in anticipation of a second round of stimulus checks this year (perhaps wishful thinking), according to the IRS “Nov. 10 is national COVID economic relief registration day” for “non-filers”.


* In a previous BUZZ I referenced a post from Russ Fox on the FUBAR FBAR.  Russ tells us about a recent FU by FINCEN (the Financial Crimes Enforcement Agency) that changes the original filing deadline in “Forgot to File the FBAR? A Typo Gives You Two More Weeks”.  


* The TAX FOUNDATION has published its "2021 State Business Tax Climate Index".  


Like Oliver Twist, New Jersey is last on the list!


* Here, from Kay Bell, is a chart of the IRS announced disaster victims' revised 2019 tax return filing deadlines - 

Iowa derecho — extended returns due by Dec. 15, 2020

California wildfires (August) — extended returns due by Dec. 15, 2020

Louisiana areas hit by Laura — extended returns due by Dec. 31, 2020

Oregon wildfires — extended returns due Jan. 15, 2021

Alabama areas hit by Sally — extended returns due Jan. 15, 2021

California wildfires (September) — extended returns due Jan. 15, 2021

Louisiana areas hit by Delta — extended returns due Feb. 16, 2021



Not to take away or minimize Trump’s deplorability and despicability – but Trump does what he does because of his narcissism, his delusions of superiority and entitlement, and his mental instability.


Perhaps those who explain, defend and enable Trump are more deplorable and despicable because they make a conscious decision to do it.


Trump or his enablers - who stinketh the most?



Friday, October 23, 2020


For New Jersey senior and disabled homeowners – this just in from the NJ Division of Taxation website (highlight is mine) –

2019 Senior Freeze (Property Tax Reimbursement) UPDATE*

The State budget that went into effect on October 1, 2020 fully funds the 2019 Senior Freeze program. Payments are expected to be made to eligible taxpayers beginning on October 15, 2020 and continuing on a rolling basis as applications are received.

* UPDATE: The application deadline for the 2019 Senior Freeze Program has been EXTENDED from November 2, 2020 to December 31, 2020.”

So, if, for some reason, you have not yet submitted your 2019 PTR-1 or PTR-2 application form yet you now have until the end of the year to do so.


Tuesday, October 20, 2020


 Once again, a day late, but hopefully not a dollar short.

* Have you checked out my new, non-tax and non-political, blog yet?  It is called “Friends of Theatre and Art”.


* A selection of the seminar offerings from the “virtual” 2020 IRS Nationwide Forum is now available online.  Chick here.


* A client recently asked me “How Does Social Security Recompute New Earnings”.  An answer is provided via the “Ask Bob” (I am not the “Bob”) series at THE STREET.


* Kay Bell explains "Trump, GOP claims about Biden's tax plan are wrong" at DON'T MESS WITH TAXES.


Wrong - just like everything else Trump and the no-longer Grand Old Party says and does.


Just as you should never believe a word Trump says about anything, do not believe a word in any Trump or Trump-supporting tv ad.   


* One more from Kay before I go – “7 tips for a safe and tax-smart benefits open enrollment during COVID-19 “.




The New York Times tells it like it is in its editorial “End Our National Crisis” -


Donald Trump’s re-election campaign poses the greatest threat to American democracy since World War II.


Mr. Trump’s ruinous tenure already has gravely damaged the United States at home and around the world. He has abused the power of his office and denied the legitimacy of his political opponents, shattering the norms that have bound the nation together for generations. He has subsumed the public interest to the profitability of his business and political interests. He has shown a breathtaking disregard for the lives and liberties of Americans. He is a man unworthy of the office he holds.”


And more truth from the Rolling Stone endorsement of Biden - Trump “is a narcissist and an egotist, a shameless liar and an open bigot, a man who simply cannot understand the notion of sacrifice for the greater good, even as he demands unthinking fealty from those in his service.



Friday, October 16, 2020



The Social Security Administration has announced the Cost-of-Living Adjustments (COLAs) for calendar year 2021.

Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 1.3 percent in 2021.

The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020. (Note: some people receive both Social Security and SSI benefits).”


The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800.

The  earnings limit for workers who are younger than "full" retirement age (see Full Retirement Age Chart) will increase to $18,960. (We deduct $1 from benefits for each $2 earned over $18,960.)

The earnings limit for people reaching their “full” retirement age in 2021 will increase to $50,520. (We deduct $1 from benefits for each $3 earned over $50,520 until the month the worker turns “full” retirement age.)

There is no limit on earnings for workers who are "full" retirement age or older for the entire year.”


Click here for the Fact Sheet of 2021 Social Security Changes.


The increase of the Social Security tax earnings threshold to $142,800 means the maximum amount of Social Security tax withholding for 2021 is $8,853.60.  And the maximum Social Security component of the self-employment tax for 2021 is $17,707.20.  



Monday, October 12, 2020



I have finished the last of the GDEs – and I am done with 2019 tax returns for the year.  Thank God it’s over!


* A timely reminder from the NATP BLOG – “Don’t Miss the Oct. 15th Tax Extension Deadline”.


* And Kay Bell, the yellow rose of taxes, gives us “8 tax tips to meet the Oct. 15 filing extension deadline" at DON’T MESS WITH TAXES.


* October 15th is the deadline for filing another government form – the FBAR (not to be confused with FUBAR, which is the official acronym for the US Tax Code).  Russ Fox of TAXABLE TALK discusses the form in “Just File the FBAR”.


The taxpayer, or rather foreign investor, if responsible for filing this form.  It is NOT a part of the 1040 filing and NOT the responsibility of your tax preparer.  I personally do NOT prepare FBAR forms for my clients – I have enough to worry about with the actual 1040.


* After voting for Joe Biden and the Democratic candidates for Congress on November 3rd you may also have to vote on a state tas issue.  The TAX FOUNDATION identifies "State and Local Tax Ballot Measures to Watch on Election Day 2020".


* Returning to the NATP BLOG we find some good advice for those who have tied, or will tie, the knot in 2020 in “A tax checklist for newly married couples”.


* The FORBES.COM "TaxGirl" Kelly Phillips Erb reports "IRS Extends Stimulus Check Deadline To November 21" -


The Internal Revenue Service (IRS) has extended the deadline to register for your stimulus check to November 21, 2020. This new date gives you an additional five weeks past the previous October 15, 2020, deadline.”


* With all the natural disasters America is dealing with (besides the unnatural disaster of the Trump presidency) you should check the IRS “Tax Relief in Disaster Situations” page for updates if you are in an affected area.


* Ashlea Ebeling deals with an issue some taxpayers may be faced with in the pandemic at FORBES.COM - “Laid Off With Money Left In A Dependent Care FSA? Here’s Help”.



Saturday, October 10, 2020



Prior to 2017 I never judged a person’s character, integrity or intelligence based on their political affiliation.  I may have disagreed with individuals, including family and friends, about politics – but it was philosophical and ideology and policy related.  Traditional Republican and Democratic and true conservative and liberal beliefs, ideology and policies, while differing, were all legitimate beliefs and options to issues and problems. 

A person may have been, in my opinion, wrong in believing in something or supporting a specific policy or program, but it did not make them any less of a person or any less intelligent. 

My only real concerns up until 2017 was with the so-called “evangelicals” of the “religious right”. 

But it is different today.  

Trump has proven himself with every word, tweet and deed that he is a totally worthless piece of trash, completely devoid of humanity and integrity, and completely devoid of ethics and morality.  It is so obvious that he is totally self-absorbed, ignorant, incompetent, delusional, and unstable and he clearly does not care about anyone or anything but himself.  He has no political ideology or philosophy.  His only belief of any kind is “Trump is great and Trump is good” and his only agenda is feeding his ego and lining his pockets.  This has been proven again and again beyond the shadow of any doubt.

It is literally impossible for me to conceive how anyone with any intelligence could support and defend Trump – unless they were a racist and a bigot or they had no conscience.  It has nothing whatsoever to do with political ideology or philosophy.

Sadly, supporting and defending Trump’s Presidency does make you less of a person or less intelligent.

For the rest of my life I will judge a person’s character, integrity and intelligence based on whether or not they continually supported and defended Trump and voted for him in 2020. 

And it has nothing whatsoever to do with political ideology or philosophy.

Tuesday, October 6, 2020



New Jersey recently passed its 2020-2021 budget, several months late due to the pandemic.  Here is the updated word, from the NJ Division of Taxation website, on the property tax relief programs and state income tax.

2019 Senior Freeze (Property Tax Reimbursement)

The Governor's budget fully funds the 2019 Senior Freeze program. Payments are expected to be paid to eligible taxpayers beginning on October 15, 2020.

2017 Homestead Benefit

2017 Homestead Benefit payments will be paid to eligible taxpayers beginning in May 2021.  {The 2017 Benefit was applied for in 2019 and would normally have been distributed in May of 2020 - rdf.}

2020 Income Tax Rate and Withholding Instruction for Income Between $1 Million and $5 Million

New legislation enacted September 29, 2020, made several changes to the New Jersey Gross Income Tax Act as part of New Jersey's Fiscal Year 2021 budget. The new law increases the Gross Income Tax rate for income between $1 million and $5 million and provides a new withholding rate for the remainder of 2020.

Effective January 1, 2020, the tax rate on that income bracket increases from 8.97% to 10.75%, regardless of filing status. Income over $5 million is already subject to this rate.

Effective immediately, employers must withhold Income Tax at the rate of 21.3% from salaries, wages and other remuneration in excess of $1 million, but not in excess of $5 million, during the taxable year. This higher withholding rate allows taxpayers affected by the rate increase to "catch up" on their withholdings for the year since the new tax rate is retroactive to January 1.

The Division of Taxation will not impose interest or penalties for insufficient payment of estimated tax and/or withholdings that may be due before September 29, 2020, if the underpayment is a result of the new tax rate.”

BTW – did you know I have written the only book available (that I know of) on tax planning for and preparation of the NJ-1040 state income tax return – THE JOY OF AVOIDING NJ TAXES?  The cost of this valuable resource for NJ taxpayers is only $10.95 delivered as a pdf email attachment.  A print version, sent via postal mail, is also available for $15.45.  An e-book version is also available for Kindle from  Click here for details on this book.

FYI, the pdf or print version includes several valuable schedules and worksheets but the e-book version does not.  Email me proof of purchase of the e-book version from and I will send you the forms and schedules as a pdf email attachment free of charge. 

And members of NATP get a 25% discount on the pdf or print version (not the e-book version)!  Just include your NATP membership number with your order.


Monday, October 5, 2020


* Did you make a political contribution this year?  The TURBO TAX BLOG answers the question "Are Your Political Campaign Contributions Tax Deductible?" (highlight is mine) -

Though giving money to your candidate of choice is a great way to get involved in civic discourse, donations to political candidates are not tax-deductible. According to the IRS: ‘You can’t deduct contributions to organizations that aren’t qualified to receive tax-deductible contributions, including political organizations and candidates.’ This includes Political Action Committees (PACs) as well.”


If you donated to Biden/Harris or a Democratic candidate for Congress – thank you!  If you donated to Trump or a Trump enabler, I expect by now you know what I think of you.


* Tony Nitti explains in detail the rules for deducting real estate losses in “President Trump Used Rental Losses To Reduce His Taxable Income: But Can You?” at FORBES.COM.


Before getting into the meat of the post Tony makes a sad but true observation (highlight is mine) -


And likewise, if the returns show —as they do — a terrifying cocktail of debt, tax avoidance, and conflict of interest — not a soul who has supported President Trump is suddenly going to say, ‘this is where I draw the line’.”


*  Jason Dinesen tells you “What to Do When YourEx Wrongly Claims the Kids” at DINESEN TAX TIMES.


The bottom line of Jason’s post (this time the highlight is Jason’s, not mine) – “Drill this into your head: THE IRS DOESN’T CARE ABOUT YOUR DIVORCE DECREE!


* From THE TAX FOUNDATION – “10 Common Tax Myths, Debunked”.


One myth they missed – all CPAs are Form 1040 experts.


* Another list, this one from Kay Bell at DON’T MESS WITH TAXES – “6 tax moves to make this October”.


* One more from Kay before I go – “Garage sale proceeds typically aren't taxable”.


You wouldn’t think people are having garage sales during the pandemic, but apparently some people and organizations are.  At the end of her post Kay provides links to 5 articles that discuss “how to hold COVID-safe yard sales”.




NO sympathy.


NO care or concern.


NO thoughts and prayers.


I DO NOT wish Trump a speedy recovery. 


To be honest, I am actually pleased that Trump has been infected.  I would be a hypocrite, like the Republicans in Congress, if I did not acknowledge this pleasure.  If there is anyone who deserves to be infected with COVID-19 it is Trump.


Trump’s infection, and the infection of those in his circle of enablers and explainers, is a direct result of Trump’s, and his Administration’s, incompetent handling of the virus and Trump’s, and his Administration’s, total disregard for necessary health and safety precautions and total disregard for how their actions affect others. 


You get what you give.  Trump has never shown any genuine sympathy or concern for anyone in any situation, especially the victims of this virus.  He does not deserve to get any sympathy or concern from anyone.