WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION

* The word from the Social Security Administration –

“Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 62 million Americans will increase 1.7 percent in 2013, the Social Security Administration announced today.

The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 56 million Social Security beneficiaries receive in January 2013.  Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2012.

Some other changes that take effect in January of each year are based on the increase in average wages.  Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $113,700 from $110,100.”

* Trish McIntire discusses “Debt Reporting” at OUR TAXING TIMES.

Specifically –

“Currently, if you owe the IRS money, it generally doesn’t show up on your credit report. The exception is when a tax lien is filed on the debt. Since a lien is a public filing, the credit bureaus can easily find them. The IRS is not allowed to release other tax debts because of federal privacy laws. This could be changing.”

Trish rightfully suggests -

“Because of the impact a credit report can have on credit, housing and even employment, Congress needs to move carefully.”

Move carefully?  Considering the fact that the members of Congress are idiots – good luck with that!

* Interesting information from Professor Michael A. Bailey at YOU.GOV – “Only 22% Of Americans Think They Are In The 47%”.

* Kay Bell echoes what I have been saying here at TWTP for years – “Report All Your Income, Even if You Didn't Get an Earnings Statement” at DON’T MESS WITH TAXES.

* With all the talk lately of the “Bowles-Simpson Report” you should check out a new website about the report and its recommendations titled “The Moment of Truth Project”.

* Speaking of Erskine and Alan, they have written an op-ed piece for USA TODAY titled “Debt Solution Must be Bipartisan” in which they state -

“If we can't get members of Congress to put aside their ultra-partisanship and pull together rather than apart, we face the most predictable economic crisis in history. Fortunately for everyone, it is also the most avoidable economic crisis in history.”

A tall order indeed – getting the idiots in Congress to “pull together”.  I thought of an obvious “off-color” comment – but I will avoid temptation.

THE FINAL WORD –

It seems that the first cancellation of the new television season is the CBS legal drama MADE IN JERSEY, which aired two episodes on Friday nights at 9:00 PM.  While nothing earth shattering, certainly no THE GOOD WIFE, I did see the two episodes and it was not bad.

Thanks to the steaming piles of excrement on cable stations that feature women supposedly from NJ the great unwashed masses apparently cannot accept that an intelligent female can come from the Garden State.  They flock to see brain-dead bimbos acting like skanks and sluts (not all are even from NJ – head JERSEY SHORE skank Spooky is certainly not), but won’t watch a relatively intelligent scripted drama. 

Perhaps if the star of the series had double D’s and gave head to all the male attorneys in the office it would have lasted longer.

TTFN

I GIVE UP!

I have given up.

Let’s face it.  As much as I, and I am sure a majority of Americans, would like to see true tax reform and true simplification come to pass, it ain’t going to happen in my lifetime.

There may be some token reform in 2013, more likely if the Republicans are victorious next month (although that may result in more problems in other areas), but nothing of any real substance.

The lately much referred to Simpson-Bowles Report suggested that we completely shred the current mucking fess that is the Tax Code and start from scratch, with “everything is taxable and nothing is deductible”, and add back only those very few “tax expenditures” (deductions, credits, exclusions) that are absolutely necessary and appropriate.  This is what should be done.  But this will not be done.

What will probably happen is that at least the majority of the “Bush” tax cuts, and many of the pesky “extenders”, will be made permanent, or “semi-permanent”.  There will be some tweaks depending on who is elected and who has control of Congress.  But the Tax Code will continue to be a convoluted mess and more likely than not get more complicated instead of less.

Why is this?

(1)  The members of Congress are idiots.  More so now than ever before in our history.  I do believe it began when hypocrite Newt Gingrich, whom we have hopefully seen and heard the last of, was in power.  And I doubt the election will substantially change this. 

They have proven time and again that their main concern is certainly not the proper administration of the government, but getting themselves re-elected and more members of their individual party elected.  They will continue to be totally partisan, quoting verbatim from the party “script” instead of thinking independently and accepting that compromise is the only way to get anything done.

(2)  I think it was fellow blogger Kay Bell who said something to the effect that the idiots in Congress are all for closing tax loopholes except for the ones that they have written.  The idiots in Congress will continue to pander to special interest groups who fill their pockets and their individual and party campaign chests.

(3)  And I think it was also Kay who suggested that, while most, if not all, taxpayers also want to simplify the Tax Code and close loopholes, they do not want to give up any tax expenditures that benefit them individually – even if in the process of simplifying the Code many of these benefits are continued more responsibly elsewhere within the government. 

“We should close the loopholes for him and her and them.  But, wait, that deduction or credit I claim is not a loophole, but an entitlement.  You can’t take that away!”

Just like the idiots in Congress the American people are basically short-sighted.

So I guess I will just have to grin and bear it.  Like blogger Monica Lawver said when she similarly gave up in her post "Youthful Optimism" last month –

“The monster of a tax code (Obama's words, not mine) is not going to get simple any time soon. And I can't change that. So where am I focusing my efforts now? On helping clients navigate the system as it is, mess that it is.”

It was a nice dream, though.

TTFN

TODAY IS "THE DAY"!

Today is the final deadline for filing your 2011 federal and state individual income tax return.

That is not to say that I, and my fellow tax professionals, will no longer be faced with any more GD extensions this year (I wish!).  It only means that today is the last day to mail in your properly extended 2011 Form 1040 or 1040A, and state tax return, and be considered to have filed on time.  I still have some GD extensions to do – and probably have not received them all “in hand” yet.

There is really only a problem if you owe your Uncle Sam (and/or whatever Uncle applies to your state).  Penalties are assessed on the unpaid balance due.  If you will be getting a refund you can file your 2011 return next year and you will not be penalized.

There is a big difference if you do owe money to an "Uncle".  On the federal level the monthly penalty rate for “filing late” with a balance due is ten times as much as that for “paying late” – 5% per month (.05) vs ½ of 1% per month (.005).  Penalties also increase on state returns not timely filed.

So the bottom line – if you have not already done so, get your 2011 tax returns in the mail today, even if you cannot pay all, or any, of the tax due.

And, of course, do not walk into a tax professional’s office at lunch time today and expect to have your return prepared in time to meet the deadline.

TTFN

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’

* CNBC gives us the Reuters item “IRS Names Acting Commissioner, Shulman Steps Down”.

“The Internal Revenue Service said on Wednesday that Steven Miller will become acting head of the tax agency after Doug Shulman, the present commissioner, steps down on November 9.

Miller, IRS deputy commissioner for services and enforcement since September 2009, is a 25-year veteran of the agency.”

As the item points out, “The commissioner's post is a presidential appointment subject to Senate confirmation”.  So the nomination of a new Commissioner “hinges on the outcome of the November 6 presidential election”.

* Trish McIntire answers the question “So what can you do if you’re not going to make the October15th deadline?” in “Return Still Not Done” at OUR TAXING TIMES.

Very important to remember (highlight is mine) –

“You need to get the return finished and filed as soon as you can. That depends on you. It’s not your tax pro’s job to chase you down and get the information from you. You need to take responsibility for your return. That means calls and emails to get missing info from the sources. It means looking through papers to find the documents you need. Once you have the missing info, take it to the tax pro and get the return finished.”

* As promised, Jason Dinesen continues his 3-part series on the question “Would a Name Change Help Enrolled Agents?” at DINESEN TAX TIMES with “Part 2”. 

Jason discusses the “Great Name Change Investigation” conducted by the National Association of Enrolled Agents.

A reminder – I had suggested “Enrolled Tax Return Preparer” to tie in with the new RTRP designation.

I look forward to Part 3.  

* The Tax Foundation’s TAX POLICY BLOG “Chart of the Day” on Wednesday concerned “Refundable Credits and Negative Income Tax Rates”.

“The majority of nonpayers receive ‘refundable’ credits even though they had no income tax liability.  The Congressional Budget Office now estimates that because of the large amount of refundable tax credits, the bottom 40% of households now have negative effective tax rates.  Remarkable, the effective tax rate for the middle fifth of households is nearing zero because of the recent expansion of tax credits.”

* And Thursday’s chart dealt with “Payroll Taxes and Refundable Credits”.

“Defenders of tax credits often say that while nonpayers may not pay income taxes, they do at least pay other taxes such as Social Security payroll taxes (FICA).  However, it turns out that refundable tax credits have become so generous that their value now exceeds the payroll taxes paid by millions of taxpayers and their employers.  Indeed, Congress’s Joint Committee on Taxation estimated that in 2010, 32.1 million filers would receive more in refundable credits than their share of FICA taxes, while 15.5 million filers would get more back in refundable tax credits than both the emplouee and employer share of FICA taxes.”  

* Oi vey!  TAX PRO TODAY reports that “Fire Destroys Mail Headed to Jersey Tax Division!"

“A delivery truck carrying mail addressed to the New Jersey Division of Taxation was involved in an accident on the New Jersey Turnpike and caught fire on September 11, according to the State of New Jersey Department of the Treasury and most of the truck’s contents burned.

U.S. Postal Service officials reported that the destroyed mail originated in North Jersey and had been picked up from street collection boxes located in Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Passaic, Somerset, Sussex, Union and Warren counties. The N.J. Division of Taxation could not determine which returns, payments, correspondence or other mail were destroyed.”

It looks like I moved out of NJ just in time.  I do not think I mailed anything to the NJDOT from my former Hudson County at that time.

I am used to the NJDOT totally ignoring correspondence in the past.  This time they actually have an excuse.

* FREE FROM BROKE deals with the question “Should I Use the Home Office Tax Deduction for My Home Business?”.

The post is absolutely correct when it says -

“Here’s the thing: if you have a dedicated space in your home that is used only for business you have every right to deduct a portion of your rent/mortgage, utilities, security, and other associated home costs.  Those deductions are part of the Internal Revenue Service code and not taking them is letting the government have more of your money that it deserves.”

It covers the “two keys to doing the home office tax deduction correctly” –

·   Make Sure Your Deductions are Legal

·   Make Sure You Document Your Deductions

However it lies, and perpetuates a common urban tax myth, when it advises, “The easiest way to avoid all of this hassle is to pay a Certified Public Accountant to do your taxes”.

This is simply not true.  An Enrolled Agent (EA) or current or potential Registered Tax Return Preparer (RTRP) is a better choice than a CPA.  To be honest, a specific CPA may be your best choice for the “easiest way to avoid all this hassle”, but it is because of the training and experience (and other factors) of that specific person and has nothing to do with the existence of the initials CPA after his/her name.

* Once again proving that bloggers love lists, TaxGirl Kelly Phillips Erb lists “9 Tax-Related Myths About Selling Your Home” at FORBES.COM.

Pay special attention to #8.  This ridiculous myth (a 3.8% sales tax on the sale of your home) may still be making the email rounds.  

* The IRS offers “Five Tips for Recently Married or Divorced Taxpayers with a Name Change”.

The first tip is an important one, as I have often seen problems in this area in the past –

“If you took your spouse’s last name -- or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number.”

Number 3 tells you what to do –

 

“Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.”

And, as #4 tells us –

“Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov, by calling 800-772-1213 or at local offices.”

 

* Jean Murray identifies "3 Steps to Saving on Business Taxes for Creative Types" at ABOUT.COM.

Jean always has good advice for small business taxpayers -

“Whatever type of creative activity you are involved in, you are creating expenses as well as products. If you set yourself up as a legitimate business, you can deduct those expenses from your tax return (usually on Schedule C). If your business expenses result in a loss, you can use that loss to offset other income. But this only works if you can prove your business expenses are legitimate.”

THE FINAL WORD –

While I more often than not find the editor’s commentary distasteful, I enjoy reading local “adzine” OUR TOWN for its jokes.

Here is one from the latest issue (slightly edited) –

Sam walks into a café with a shotgun in one hand and the other hand pulling a male buffalo.  He says to the waiter, “Coffee, please”.

The waiter gets Sam a tall mug of coffee.  He drinks it down, turns and blasts the buffalo with the shotgun, causing parts of the animal to splatter everywhere, and walks out of the café.

The next morning Sam returns, again with a shotgun in one hand and pulling a male buffalo with the other.  He walks up to the waiter and says, “Coffee, please”.

“Whoah, buddy!” the waiter says.  “We’re still cleaning up your mess from yesterday.  What was that all about anyway?”

Sam smiles and replies –

“I am training for the position of Senator in the US Congress.  I come in, drink coffee, shoot the bull, leave a mess for others to clean up, and disappear for the rest of the day.”

TTFN

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION

Sorry there have been no posts so far this week.  I am busy with GD extensions and other items – and I really do not have anything special to say at the moment.

* Bill Perez recently tweeted a 2011 post of his at ABOUT.COM TAX PLANNING:US titled “Deducting Health Insurance”.

While an old post, it does provides a timely reminder, considering that this is the time for open enrollment in most employer-sponsored medical expense Flexible Spending Accounts, as well as reminding us not to “double dip” and deduct pre-tax health insurance (or other medical FSA payments) on Schedule A (highlights are mine) -

“Be aware, however, that employees who paid health insurance using pre-tax dollars through payroll deductions won't be able to take a further deduction for these same expenses. Or to phrase this differently, paying for health insurance as a pre-tax salary deduction is more advantageous than the itemized deduction. That's because pre-tax health benefits reduce your taxable salary, so the deduction comes "off the top," so to speak, and isn't clawed back by the 7.5% threshold. Further, health insurance premiums are deducted pre-tax for income tax, Social Security tax and Medicare tax on an employee's paycheck, making this employee benefit triple-tax free. (Quadruple tax-free if your state allows for pre-tax health insurance benefits.)”

If I may add – any medical payment from a pre-tax FSA is more better than a deduction, as it reduces not only taxable income (and FICA taxable income) but AGI as well.

And all states do not allow for pre-tax health insurance (or other medical FSA) benefits.  NJ does not (state taxable wages will be higher than federal taxable wages on the W-2), so any such federal pre-tax payments are deductible as medical expenses on the NJ-1040.

* And Bill continues his series on year-end tax moves with “Consider Funding  an Education Savings Account”.

* He completes the trifecta by discussing the reactions of the “fringe” candidates to the topics discusses in the Presidential debate in “Tax Issues from the First Presidential Debate”.

* Kay Bell reminds us of  the coming of “Taxmagedden” and gives some predictions on what will happen after the election in “Fiscal Cliff’s Costly Prospects” at her “other blog” at BANKRATE.COM.

“If Mitt Romney wins and the Republicans control or at least have decent numbers in both the House and Senate, the GOP won't do anything in the lame duck session. They'll just wait until the new president takes the oath of office in January and then push through at least some of the tax and spending changes they've been wanting to enact for years.

If President Barack Obama keeps his job, don't be surprised to see the partisanship on Capitol Hill continue. This will be especially evident if Republicans make gains in both legislative chambers. With no election to worry about, the president can hold firm to his principles as he looks to shape his administration's legacy in its last four years. And the GOP lawmakers could see short-term voter pain, even if it threatens their electability, as an eventual longer-term win for the party and its fiscal goals.”

So, if Kay is correct, as she may well be, there will be no tax extenders passed until January of 2013.  What does that mean for taxpayers and the IRS?

The 2012 tax forms and instructions printed by the IRS, based on law in effect as they “go to press”, will be incorrect, and taxpayers will have to enter special codes on certain lines to identify retroactively extended provisions, as was the case a few years back (although much more special entries this time).

And there will no doubt be a delay in processing tax returns, and issuing refunds, as the IRS has to rewrite its software during the actual tax season.

Once again the idiots in Congress will have proven that they are indeed selfish, partisan idiots with no concern for the country or its people.  Bear that in mind as you are in the voting booth next month. 

And, in her weekly recap at DON’T MESS WITH TAXES, Kay observes that –

“That topic {the extenders and Taxmagedden}, however, didn't come up during the first presidential face-to-face between Barack Obama and Mitt Romney. In fact, there essentially was no new tax news in the debate.”

* At ACCOUNTING WEB Ken Berry (not, I expect, the actor of “Mayberry RFD”, “F-Troop” and “Mama’s Family” fame) gives us the news that “Attention, Shoppers: Tax Returns on Sale!”.

Ken tells us –

“Beginning next tax return season, Liberty Tax will set up shop in more than 300 Walmart stores around the country.”

And –

“Jackson Hewitt . . . will replace longstanding tenant H&R Block at Sears stores in 2013.”

Shoppers beware – these fast-food tax preparation chains ain’t necessarily cheap.

I wonder if Walmart’s low price guarantee will apply to the tax preparation services it will sell.  If clients can prove that a local independent tax professional will prepare the return for a lower price than Liberty (I expect this will be true in many instances) will they be charged the lower fee?

* Jason Dinesen admits that he “can find connections to taxes in strange places, such as baseball” and makes a great case for tax reform, in his post “Connecting Strange Baseball Rules to Taxes” at DINESEN TAX TIMES.

After a lengthy discussion of a recent baseball incident he explains -

“Five-thousand pages of tax code, 20,000 pages of regulations, and tens of thousands (or maybe even hundreds of thousands) of pages of IRS revenue rulings and procedures, IRS notices, court cases, etc. make some tax situations more complicated than the infield-fly rule could ever be.

Two competent, ethical tax pros can look at the same situation and reach two different conclusions. And if audited, different IRS auditors may have different viewpoints on the situation.”

* The TAX FOUNDATION has issued its “2013 State Business Tax Climate Index”.

The Foundation “collects data on over a hundred tax provisions for each state and synthesizes them into a single easy-to-use score. The states are then compared against each other, so that each state’s ranking is relative to actual policies in place in other states around the country. A state’s ranking can rise or fall significantly based not just on its own actions, but on the changes or reforms made by other states.”

Wyoming, South Dakota, and Nevada are the top three states, with the best “business tax climate”.  My former home state of New Jersey is #49 – not quite the worst – just ahead of New York and behind California.  No surprise there.  My new home state of PA is #19, so my move was a good one in another way.

* Not necessarily a 1040 issue (except possibly Schedule C), but Joe Kristan gives some good advice in his Tuesday “Tax Roundup” at the ROTH AND COMPANY TAX UPDATE BLOG.

Joe talks about a recent IRS lien filed against a local outside payroll company that took client employers’ payroll tax withholdings and matches and ran. 

His advice -

“That’s why you should verify your employment tax payments even if you outsource your payroll compliance function.  You can do this by signing up for EFTPS, the Electronic Federal Tax Payment System.  Employers enrolled in EFTPS can go online to verify that their employment taxes are being remitted.  If your payroll outsourcing provider doesn’t remit in a way that lets you verify via EFTPS, that means you can’t verify, but only trust.  That can end badly.”

I use EFTPS for my few business payroll clients.

* And Joe’s Roundup “turned me on to” an item on a tax scam here in PA (though not my area of the state) - “Bogus Tax Returns Easy Money for Drug Dealers”.  I expect it is not limited to parts of PA.

I expect that the largest component of the fraud involves the refundable Earned Income Credit.  Need I say more?

THE FINAL WORD –

I am listening to the Stage and Screen music station on my cable tv while working on the BUZZ.  A song from MISS SAIGON (“The American Dream”) has a great lyric that made me think of so-called “reality tv”.

“You can sell shit and get thanks.  That’s what I learned from the yanks.”

 

I also like the line - "Perfume can cover a stench.  That's what I learned from the French."

As HL Mencken said –

“Nobody ever went broke underestimating the intelligence of the American public.”

TTFN

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’

* Jason Dinesen begins a 3-part series that deals with the question “Would a New Name Help Enrolled Agents?” at DINESEN TAX TIMES.

I had suggested that the designation EA be changed to ETRP (Enrolled Tax Return Preparer) to tie in to the new RTRP category.

Jason concludes –

“With the passage of time, I have come to believe that, while the EA designation is not necessarily consumer-friendly (because of the word “agent”), I’m not sure the name is really the problem.

The problem is, no one has heard of us!”

And promises to elaborate in Parts 2 and 3.

* Robert W Wood of FORBES.COM tells us the truth when he says “No Debate: You Can't Deduct Political Contributions!”.

I do recall that many, many years ago there was, for a short time, a limited deduction allowed for political contributions.  And I do believe one did not have to itemize to claim it.  Does anyone remember when?

* Speaking of FORBES.COM, TaxGirl Kelly Phillips Erb discovers that “Congress Takes Home Millions of Tax Dollars While on Recess”.

Kelly tells us that “most members of Congress make about $174,000 per year for serving their constituency. Assuming a 50 week work year – what most of us put in – that works out to $3,480 per week.”

And then she calculates what the idiots in Congress are pocketing for the 7 weeks that they will be “on recess”, campaigning and not working (highlights are mine) –

“At $3,480 per week for seven weeks, taxpayers are paying about $24,360 per Congressional official for, um, nothing. Assuming that there are 535 voting members of Congress, that works out to an astonishing $13,032,600 in tax dollars for just one recess. Not including staff and benefits. Yes, eight figures.”

What about the “summer recess” that they just returned from –

“The five week summer break? $9,390,000.”

When you think of it, even when they are in Washington allegedly “working” the idiots do not accomplish anything.  What a total waste of taxpayer’s money!

* Kelly also weighed in on the Presidential debate, giving some perspective to the fact that “Romney Promises To Cut Taxpayer Funding For PBS (But Says He Still Loves Big Bird)”.

“So will it kill Big Bird? He might need smaller digs but chances are, cuts to PBS won’t kill off Sesame Street and other major programming. What will happen, realistically, is that public television stations would have to find alternate sources of funding. Larger markets, like the one I live in now, would likely survive. But chances are that those smaller markets, like the one I used to live in, would have to shut off the lights.”

When will politicians realize that you do not have to cut funding to worthwhile and effective programs to reduce the budget?   You just have to cut out pork, waste, and entitlements!

* Trish McIntire echoes somewhat what I have been saying for years in “Location, Location, Location” at OUR TAXING TIMES.

As I say in my comment on her post, the deductions for state income taxes, real estate taxes, and mortgage interest, on the primary residence, are a kind of “geographical equalizer”.  

* CCH has produced a Tax Briefing on “2012 Year End Tax Planning”.  Click here to download.  

* Joe Kristan includes a Tax Foundation chart on “The Growth of Refundable Tax Credits, 1990-2010” in his Friday BUZZ-like “Tax Roundup” at the ROTH AND COMPANY TAX UPDATE BLOG.

I wholeheartedly agree with Joe’s comment on the chart -

“I bet the chart of tax refund fraud incidence would look about the same.”

* Speaking of the TAX FOUNDATION, author of the chart referenced by Joe, check out its “Weekly Tax Update”.

THE FINAL WORD –

Let’s face it.  At this point in the campaign Romney is not going to identify the specific tax deductions/expenditures that he would do away with to pay for tax rate decreases because he does not want to alienate any segment of voters.  No candidate would.

TTFN

TAX BLOGOSPHERE BUDDIES - JASON DINESEN

Today’s buddy is Jason Dinesen, EA, of Dinesen Tax, Inc. in Indianola, Iowa, author of the DINESEN TAX TIMES.

Jason is a vocal defender of the EA designation, as I am a vocal defender of the previously unenrolled.  We recently debated the issue of exempting CPAs and attorneys from the RTRP exam, which he touches on below, at his blog and my TAX PROFESSIONAL blog (click here and here).  As with Joe Kristan, when Jason and I disagree we do so respectfully (unlike at least one fellow blogger whom I will not name).

I especially like the “disclaimer” he includes on his blog page –

“Before contacting me with questions about how a blog post relates to your situation, please be aware that I cannot and do not give free tax advice to non-clients by e-mail or by phone.”

This statement, I expect, applies to all tax bloggers.  It certainly applies to me.

How did you become interested/involved in preparing tax returns?

This will be a really long answer!

I have always been a “numbers geek.” In 5th grade, my teacher told my parents that I would grow up to be a statistician. She was right (taxes are statistics of sorts) - but it took me awhile to figure it out for myself.

From 7th grade til about age 23 or 24, I wanted to be a sports play-by-play announcer. I went to college for communications (though I did minor in business management) and then went into radio as a news director. After a couple of years, I realized I should have taken the advice of my 5th grade teacher and gotten into numbers.

After reaching this realization, I still lingered in the radio world for a few more years before finally getting out at age 28. I went back to school for accounting, where I realized that taxes were my true love. For whatever reason, my mind “gets” the tax code and regulations.

I found employment at a third-party administrator of retirement plans, where I did all sorts of things relating to compliance issues of 401(k) and defined benefit plans. I eventually worked my way up to a position where I was in charge of all IRS filings related to plan terminations.

The TPA work was fascinating, but taxes were my true love. I prepared 3 tax returns, for family and friends, in 2009, and realized it was what I wanted to do with my life. I passed all 3 parts of the Special Enrollment Exam later in 2009 and got my enrolled agent designation.

By August 2011 I had built up enough clients to leave the TPA world and run my business full-time.

How were you educated/trained in preparing tax returns?

Various ways.

College coursework was where the light bulb switched on. Preparing for the EA exams helped a lot. Taking in-depth continuing education (not just settling for year-end updates). A lot of learning on the job -- but never at the expense of the client. Meaning, I have always been careful not to take on something I am not capable of handling. And I maintain an active list of contacts and professional friends that I can turn to when I have questions.

When and why did you decide to write a blog on tax issues? 

The Dinesen Tax Times started in 2009 as a printed newsletter for clients (all 3 of them!). Around that same time, I created a horrible, just awful, free Google website. In 2010, I started a blog, and last fall I got a “real” website and integrated the blog into the website.

I have always been a creative thinker, and the blog is a good outlet for me. Long-time readers of my blog know that my blog can be a strange place, where I often mix in baseball references, references to my family and pets, etc. in my posts about taxes. I use a lot of personal anecdotes, and I use a lot of parenthetical references and as you can tell from my responses to this questionnaire, I tend to take a lot of side roads on the way to reaching my ultimate point.

How has blogging helped your business?

I’ve gotten a few clients from having a web presence, but the biggest way blogging has helped my business is with the connections I have made with other professionals. It’s impossible to place a value on those connections.

What do you consider the “best tax advice” you can give anyone?

Contrary to what H&R Block and TurboTax want you to believe, it’s not all about getting a massive refund. Contrary to what H&R Block and TurboTax want you to believe, there are no tax miracles. Your preparer can’t magically conjure up extra deductions or credits to get you a bigger refund. (Well, I guess they CAN, but good luck to you and the preparer when the scheme blows up, which it inevitably will.)

Do you think the regulation of tax return preparers is a good thing?

Yes and no. As you know, I am highly skeptical of the whole RTRP thing. I do think there needs to be oversight, though. The Jason Dinesen proposal is: monitor people’s PTINs. Because we all have to have PTINs now, the IRS has a mechanism to track who is preparing tax returns. If a preparer is incompetent or prepares fraudulent tax returns, the IRS can revoke the preparer’s PTIN. That’s how I would handle preparer regulation.

Do you think CPAs and attorneys should be exempt from testing and required CPEs in taxation?

Yes, from testing. CPAs and attorneys already have to pass difficult and comprehensive exams. Granted, those exams aren’t tax-related. But it’s insulting to tell them they need to take a basic, open-book exam RTRP exam just so they can prepare tax returns.

However, I do think CPAs and attorneys should be required to demonstrate taxation CPE if they want to prepare tax returns.

Do you think experienced tax preparers should be exempt from the initial RTRP competency test under “grandfathering”?

Yes, I am open to that as long as there can be clear and consistent standards put in place.

How would you reform/rewrite the Tax Code?

Good question. I don’t think we’ll ever see true tax simplification, like a flat tax or a nationwide sales tax. But we could have a tax system that includes a huge standard deduction and/or personal exemption amount that would make it so lower-income people wouldn’t even have to mess with filing a tax return. That’s how it was back in 1913 when the income tax first came about. The personal exemption amount was equal to nearly $68,000 in modern-day dollars, so the vast majority of Americans weren’t even impacted by taxes. Of course, this would mean eliminating things like the earned income credit and such, which probably wouldn’t go over well.

What is your favorite Broadway musical – and why?

I’ve never seen a Broadway musical. I did see a performance of “On Golden Pond” at the somewhat-famous Flat Rock Playhouse in Flat Rock, North Carolina one time, if that counts for anything!

 

On GOLDEN POND really doesn’t count.  As an accountant Jason should at least try to catch a production of THE PRODUCERS (re: Leo Bloom).

TTFN

LIMITING ITEMIZED DEDUCTIONS?

Ezra Klein’s WONKBLOG at the Washington Post website has reported that we now have “Tax Plan Specifics! From Mitt Romney!”.

Well, one possible specific.

“ABC News reports that Mitt Romney told Denver’s Fox affiliate that ‘one option’ he was considering to pay for his tax plan was to give everyone up to $17,000 in deductions, but no more than that.” 

Romney explained -

”You could use your charitable deduction, your home mortgage deduction, or others – your health-care deduction.  And you can fill that bucket, if you will, that $17,000 bucket that way. And higher income people might have a lower number.”

This specific is not specific enough, and raises questions.

Would a married couple be limited to $17,000, but 2 single individuals living together be allowed a total of $34,000?  Or would the limit be $17,000 for Single, Married Filing Separate, and Head of Household and $34,000 for Married Filing Joint?

Would the choices of what you can use to “fill your bucket” be reduced, or would all current deductions, under current law, be available?  Would other deductions and benefits currently allowed elsewhere now be available only as itemized deductions subject to the limitation?

I don’t like this idea.  If we are going to continue to allow itemized deductions under a simpler Tax Code, then the deductions that remain will do so for a purpose.  And if a deduction is worth keeping it should not be limited.

Obviously some currently allowed itemized deductions would not be continued in the new simpler Tax Code – perhaps those for taxes and mortgage interest on properties other than one’s primary principal residence.  

Besides, the problem with inappropriate “tax expenditures” that create “tax non-payers” lie more in adjustments to income and tax credits then they do with itemized deductions.

This idea just adds more complexity to the Tax Code, especially as Romney has hinted that "higher income people might have a lower number”, suggesting additional AGI-based limitations.  We don't need more complexity - we need simplicity.

At least it shows that Mitt is thinking about tax reform.

TTFN

WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ – WEDNESDAY EDITION

* Kay Bell has posted “Tax Carnival #107: TaxtoberFest 2012” at DON’T MESS WITH TAXES.

It includes my post “What To Do”.

* And Kay suggests some “Tax Moves to Make in October 2012” to “ensure our 2012 tax bills are less scary than the ghouls roaming our streets on Oct. 31”.

* A recent “tweet” provided the following warning –

“Kiplinger Tax Letter today noted that head of IRS says slower refunds expected next tax season due to identity theft.”

I can also predict that there will be a delay in processing returns due to the fact that the idiots in Congress will not be addressing the “tax extenders” issue until after the election.

As for the delay due to identity theft – I expect this will only apply to returns filed electronically.  Since I cannot do so, as I will not use flawed and expense tax software to prepare returns, none of my clients’ refunds should be delayed.

* Check out the TAX FOUNDATION’s “Chart of the Day: Effective Tax Rates by Income Category”.

“People mistakenly think that because the rich benefit from many popular tax credits and deductions they pay a lower average (or “effective”) tax rate than other taxpayers.  That is not the case.  The average tax rate for all Americans is 10.1%.  However, taxpayers earning over $250,000 pay 1 23% effective rate, more than twice the national average.  Meanwhile, the effective tax rate for Americans making less than $30,000 is actually negative due to refundable credits.”

* Jason Dinesen, who will be the subject of this coming Friday’s “Tax Blogosphere Buddy” post, provides a real life small business example of the “The Difficulties of Tax Planning with an Inept Congress” at the DINESEN TAX TIMES.

He is being kind calling Congress “inept”.

Jason’s main concern in this particular situation is planning estimated taxes for the client.  Since estimated taxes are generally based on the prior year return, and, as Jason indicates, the 2012 income has “spiked”, the client should not be hit with a penalty for underpayment of estimated taxes if the estimations were based on the extender in question being extended.  But he could have a substantial balance due when he files his 1040.

Let’s call a spade a shovel.  They are idiots!

* Peter J Reilly scores an exclusive for the Tax Blogoshphere with a live “Interview With Green Party Candidate Jill Stein - Part One” at FORBES.COM.

As one would expect, Peter discusses tax policy among other issues.

I do think there is too much emphasis placed on the release of candidates’ tax returns.  As long as they have been filed, and filed properly, what does it really matter?  And do 12 years of returns tell more than 2?  I suppose it could say something if a candidate had tons of dividend income from oil company stocks and as a politician he/she publically advocated for special tax breaks and other benefits for oil companies. 

One item of note, which does not bear well for demonstrating Ms Stein’s ability to govern - the Steins use Turbo Tax to “self-prepare” their, I expect, joint tax returns.  Not a smart move.  As I have said multiple times in the past, a “box” is no substitute for a competent tax professional.    

* Professor Jim Maule wonders “So what’s going wrong” in “Federal Agency Tax Withholding: Making the Simple Complicated” at MAULED AGAIN.

If the idiots in Congress, and perhaps government in general, have one actual talent it is “Making the Simple Complicated”.

* Roger McEowen of the Iowa State University Center for Agricultural Law and Taxation gives us a good listing of tax provisions that either have already expired or will expire on 12/31/12 in “Tax Provisions Up in the Air”.

The conclusion (highlights are mine) –

“Unless action is taken, beginning in 2013, income tax rates across all brackets go up dramatically, particularly for individuals in the lower income tax brackets, the child tax credit is halved, the marriage penalty returns, capital gain rates go up significantly, the divided tax rate increases and the payroll tax goes back up. Lower‐income persons will be hit most significantly by these provisions. Also, the estate tax will reach more estates and will do so at a higher rate, and the AMT will impact significantly more taxpayers. Needless to say, there is a lot riding on the fall election.”

Thanks to Joe Kristan for “turning me on to” this item.

* The Tax Foundation’s TAX POLICY BLOG quotes a new FoxNews poll in “What do Americans Think of Nonpayers: Part II”.

The question asked was – “Do you believe all Americans should be required to pay some amount of federal income taxes, even if it is as little as one percent of their income?”

It appears that many agree with me that there should be a true “Minimum Tax” for all Americans.

* In her post “Chicken or Egg Tax Cut” at OUR TAXING TIMES Trish McIntire talks specifically about a Kansas state tax reduction, using her own business as an example. 

However, the point she makes also applies on the federal level -

“I’ve said before we shouldn’t be making tax decisions on assumption (hopes) on how businesses and individuals will behave.”

* Bill Perez continues his series on year-end tax planning for 2012 with “Consider Accelerating Salary Income into 2012” at ABOUT.COM TAX PLANNING:US.

I agree that this may be a good idea, because –

“The employee-portion Social security taxes are scheduled to revert back to the normal 6.2% rate from the 4.2% rate that has been in effect for 2011 and 2012. This two percentage point reduction in the Social Security tax rate probably will not be renewed for 2013, reports the New York Times.”

Bill also suggests that “tax rates for 2013 are scheduled to revert to their pre-2001 levels, up from the tax rates in effect for 2012”.  However, while they will wait until the last minute to do so, I believe that the idiots in Congress will extend the current tax rates for 2013.

* And Bill tells you “What to Do if You Cannot Afford to Pay Your Taxes All at Once” after “finishing up your 2011 tax return for the deadline on October 15, 2012”.

Bill’s bottom line echoes what I tell my clients and readers -

“My best advice is to be sure to file your tax return no later than October 15, 2012 {even if you cannot pay all, or any, of the tax due – rdf}. If you previously requested an extension, filing by October 15th will avoid a 5% per month penalty, based on your balance due, for filing your return late past the extended deadline.”

TTFN