SOME BACKGROUND ON A COMMENT

I just published a comment to today’s post on “Mitt’s Tax Plan” from tax professional Tom Kaminski (aka “Knobby”).  Here is what Tom said –

“All this talk about taxes makes my gut tell me that one, we probably will end up with having a VAT in America before 2017. And two, the tax code is going to end up being a complete mess, only because I don't see the mentality in Con-gress at the moment to fix it properly.

If they all really want a simple tax system they can go back some 25+ yrs. to when Hall-Rabushka first proposed their 19% flat tax system. They laid everything out including forms.”

Here is the word on the “Hall-Rabuska” flat tax proposal that Tom references (which was new to me) from the Tax Policy Center’s library, preceded by a description of “consumption tax”.

“Background

Consumption is income less savings. Thus, the only difference in principle between a consumption tax and an income tax is the treatment of the savings. An income tax taxes savings both when the money is earned and again when the savings earn interest. A consumption tax taxes saving only once: either when the funds are withdrawn and used for consumption or when the funds are first earned. Although this difference appears simple, consumption taxes come in many forms.

The Hall-Rabushka flat tax

In the early 1980s, Robert Hall and Alvin Rabushka of the Hoover Institution developed a consumption tax system that achieves some of the administrative advantages of a value-added tax (VAT) relative to a sales tax, while also partially addressing concerns that consumption taxes impose a relatively heavier tax burden on lower-income taxpayers.

The Hall-Rabushka system is often called the "flat tax": It assesses a 19 percent tax on all businesses (corporate or otherwise)—identical to the VAT, except that wages, pension contributions, materials costs, and capital investments are deducted from the tax base. Individuals (or households) are assessed a 19 percent flat-rate tax on wages and pension benefits above an exemption of $25,500 for a family of four. No other income is taxable, and no other deductions are allowed.”

Sounds like a plan worth investigating further.

BTW – I certainly agree with Tom when he says - “I don't see the mentality in Con-gress at the moment to fix it properly “.  As I continue to say - the current members of Congress are idiots.

MITT'S TAX PLAN

Last week all the BUZZ was about Herman Cain’s gimmicky 9-9-9 tax plan, allegedly based either on a video game or the fact that the price of a Godfather’s Pizza is $9.99.  But what do the other Republican candidates have to say about taxes?

Mitt Romney’s “plan” is outlined in “Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth”, a 150+ page campaign tome that I expect boils down to maybe 10 pages of substantive content, if that much.

According to the “plan” –

“Mitt Romney will push for a fundamental redesign of our tax system.  He recognizes that we need to simplify the system.  He also recognizes that we need both to lower rates and to broaden the tax base so that taxation becomes an instrument for promoting economic growth.  We also need to find a way to keep the tax structure stable so that investors and entrepreneurs are not confronted with a constantly shifting set of rules that makes it impossible for them to plan ahead.”

For individual federal income taxes Romney wants to

·         “Maintain Low Marginal Rates” by not letting the “Bush tax cuts” expire;

·         “Further Reduce Taxes on Savings and Investment” by maintaining the lower capital gain tax rates and “eliminat(ing) taxation on capital gains, dividends, and interest for any taxpayer with an adjusted gross income of under $200,000”;
 
·         “Eliminate the Death Tax”; and
 
·         As a long-term goal “Pursue a Fairer, Flatter, Simpler Tax Structure”, using the Bowles-Simpson Commission as a starting point.

The Bowles-Simpson Commission was BO’s National Commission on Fiscal Responsibility and Reform’s which issued a report titled “The Moment of Truth” last December.  This report was basically ignored, and has joined the earlier one from a tax reform panel established by Dubya gathering dust on a shelf in some government library – despite some good serious work by its writers.

As I described when writing about the report last December (see “The Moment of Truth”) –

“As discussed in the initial draft report, the Commission recommends we use ‘zero-base budgeting’ by ‘eliminating all income tax expenditures’. Basically we would begin with no exemptions, deductions or credits. Congress and the President would then ‘decide which tax expenditures to include in the tax code in smaller and more targeted form than under current law, recognizing that any add-backs will raise rates’.”

See my post for more details on the report’s “illustrative proposal”.

Why must a “fairer, flatter, simpler tax structure” be a “long-term goal”?  What about a major goal for 2013?  Romney’s plan does say, “the entire tax code is in dire need of a fundamental overhaul” – so why wait?

While I support a lower tax on capital gains, but not on dividends and interest (as for dividends I would do away with “double taxation” by allowing a “dividends paid deduction” for corporations), I do not support a “0” tax rate.  Romney wants the “0” tax rate on capital gains, dividends and interest for the “Middle Class” to help “Americans to prepare for retirement and enjoy the freedom that accompanies financial security”.  A better way to do this is to encourage retirement savings by providing more incentives for investing in a ROTH IRA or ROTH employer plan or creating some kind of Universal Savings Account.

And, although I am not a fan of the federal estate tax, I do not want to ever lose (or at leastfor the next 10 years while I am still preparing returns) the “stepped-up basis” for inherited property.

While Romney’s immediate tax plan for individuals is basically extend the “Bush tax cuts”, exclude tax capital gains, dividends and interest from taxation for those with AGIs of under $200,000, and eliminate the “death tax”, which is not much, I will give him credit for calling for a “fairer, flatter, simpler tax structure”.

But it seems that everyone agrees “the entire tax code is in dire need of a fundamental overhaul” – yet nobody is in a hurry to really do anything about it.

TTFN     

GOOD NEWS!

Good news for retirees -

“Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million Americans will increase 3.6 percent in 2012, the Social Security Administration announced today.”

The SSA has also announced that for 2012 –

“. . .the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $110,100 from $106,800.”

This is the first COLA increase in Social Security benefits since 2009.

There is no word yet on the increase in the Medicare Part B premium withheld from Social Security benefits.

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

+ Don’t forget to check out the OCTOBER issue of LOIS!

+ TAX PROF Paul Caron brings us some not really surprising news in "TIGTA: 41% Error Rate in $30 Billion First Time Homebuyer Tax Credit Program."

According to the report by the Treasury Inspector General for Tax Administration –

“The IRS issued incorrect notices or did not send notices to 61,427 households due to notice programming errors or incorrect information on tax account. ... [O]ur review of the third-party vendor’s research results for a statistically valid sample of 97 taxpayer accounts determined that for 40 (41%) of the taxpayer accounts, the information provided to the IRS had incomplete or inaccurate information.”

The report indicated that “a total of $29.7 billion in Homebuyer Credit claims were made by more than 4 million individuals as of May 7, 2011”.  You do the math.

Just another example of why credits like this do not belong in the Tax Code.

+ CCH reports that “2012 Per Diem Rates Issued for Travel Expense Reimbursements”.

You can click here to find the current (and past year) rates in the continental United States ("CONUS Rates") by city and state or ZIP code.

+ And the CCH daily headline email newsletter tells us “Senate Republicans Unveil GOP Jobs Plan”.  The highlight below is mine.

“The GOP bill, which is unlikely to pass the Democratic-controlled Senate, would require a balanced-budget amendment, 25-percent tax rates for businesses and consumers, repatriation of foreign earnings and a repeal of the 3-percent withholding tax on federal contractors. The measure would also repeal the Patient Protection and Affordable Care Act (P.L. 111-148), the health care reform law, which Republicans have dubbed “Obamacare,” and repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203).”

+ The Tax Foundation’s tax policy blog has a map of “Percentage of Itemizers by State”.

Maryland is home to the most itemizers.  Rounding out the top five are Connecticut, New Jersey, Virginia and Massachusetts.

43.9% of NJ taxpayers (and, I expect, some “non-taxpayers”) itemize on their Form 1040.  Why such a high percentage?  Is it because NJ tax preparers are more competent and dig for every deductible expense to which their clients are entitled?

Or is it because the Garden State’s real estate taxes, state income taxes, and sales taxes are among the highest in the country, and homes cost much more in NJ resulting in higher mortgage interest deductions, and health insurance is more costly than most other states?

FYI, West Virginia has the least amount of itemizers – only 18.4%.

+ NJ.COM gives NJ employees some good news – “Christie Lowers Payroll Tax”.

“Workers in New Jersey will have about $87 a year less deducted from their paychecks for the state’s disability insurance pool beginning in January, Gov. Chris Christie announced Monday.

Currently, the state withholds $148 from those earning $29,600 a year or more. Starting on Jan. 1, the state will withhold $61 for those who make more than $30,300.”

+ A “tweet” from fellow “twit” David Fazio E.A. provided some good advice –

“If you refinanced your home, business or rental prop mortgage - give your tax pro a copy of your HUD-1 Settlement for potential deductions.”

TTFN

AN AFTERTHOUGHT

After writing and publishing Monday’s post on amended returns I was reminded of a story from the early days of my career.

I have been preparing 1040s for 40 tax seasons now.  And I have been taking some form of CPE (continuing professional education) since almost the beginning – not because of any requirement or any college credit it provided, but because I wanted to learn.

Back in the 1970s, before there was a National Association of Tax Professionals or any other such organization, I took several evening tax courses at the New York University School of Continuing Education, all taught by practicing tax professionals.

In one course on 1040 issues, I forget the name and scope, the “professor” told the class that, because of some internal procedures at the IRS, an amended return filed very close to the statutory 3-year deadline would almost never be questioned by the Service.

This professor said that he would file his 1040 each year with minimal employee business expenses and 3 years later, weeks before the April 15^th deadline, he would amended the return to claim the rest of his ebe (I assumed at the time that he meant he claimed the legitimate expenses that he did not include on the original filing – and not that he claimed excessive expenses because he knew he would not be questioned).

I do not know if the same internal procedures still exist within the IRS, but I certainly would not recommend doing what the “professor” did.  You should claim all of the deductions to which you are legally entitled on the original filing of your return.  And if you discover an error soon after filing your original return you should certainly not wait three years to file an amended return to claim an additional refund.  File the 1040X ASAP, waiting only for the original refund to be received or the original return to be processed.

What I would do, just in case, is, if you discovered the error 2+ years after filing the original return, wait until a month before the April 15^th (or whatever) statutory deadline to submit the Form 1040X.

As a point of information, the longer you wait to file an amended return to get an additional refund the more interest you will be paid by the IRS.  And the IRS pays a higher interest than any bank.

MORE ON EA VS CPA

Fellow “twit” and tax blogger Stacie Clifford Kitts, CPA, of STACIE’S MORE TAX TIPS, has added her more than 2 cents to the online discussion of EA vs CPA that CPA Joe Arsenault dealt with in his post “CPA or EA? It’s Just a Designation” at CAFÉ TAX, which was brought to my attention in a “tweet”.  

Here is what she has said (the highlight is mine – I can resist it) -

 “I agree with Darren as the typical person thinks CPA = Tax Knowledge, which is not a correct assumption. The CPA title does not guarantee any tax knowledge and for those who practice in other areas such as audit, no continuing education in the tax field is required. And if you acquired your license many years ago, the CPA may not have seen any tax material since he/she studied for the exam.

With that said, the EA designation has some limitations as well. Although EA's are tax focused and from a pure compliance standpoint are quite qualified, to properly consult with a client regarding their tax needs, a broader knowledge of business in an overall sense is quite handy. CPA's generally acquire this knowledge through the normal course of growing up in a public accounting environment. The benefit of a CPA in a tax practice is not in the preparation of your tax return per se, it’s in our ability to help our clients make the choices that in a forward thinking environment will help them to retain the wealth they have worked hard to achieve.”

Let me respond to this portion of Stacie’s comments -

“Although EA's are tax focused and from a pure compliance standpoint are quite qualified, to properly consult with a client regarding their tax needs, a broader knowledge of business in an overall sense is quite handy. CPA's generally acquire this knowledge through the normal course of growing up in a public accounting environment.”

I agree somewhat with this statement, but only as it applies to business taxpayers.  And, of course, I would substitute the term “CPA” for “accountant”.  An EA is an excellent, and preferred, choice for 1040 return preparation and 1040 tax planning.

While many EAs, and previously unenrolled tax professionals who will soon be RTRPs (Registered Tax Return Preparer), also have general accounting training and experience (as I do), just as the initials CPA do not mean the person necessarily knows taxes (especially 1040 taxes), the initials EA, and RTRP, do not mean the person necessarily knows accounting. 

Obviously the best choice for a business taxpayer, especially an 1120 or 1065 filer, is a person with a combination of accounting and business and individual tax training, experience and currency.  This could be either an EA, or RTRP, or an accountant, depending on the individual qualifications of the person.

Or it could be an EA, or RTRP, and an accountant.  You may engage an accountant, experienced in your particular field or industry, to do the books and tax returns for your corporation or partnership, especially if the corporation has more than one stockholder, and an EA, or RTRP, to do your 1040.

I will always use the term “accountant” instead of CPA.  An accountant does not have to be a CPA to be knowledgeable or effective.  As I have said time and again, the only thing a CPA can do that a “plain” accountant cannot is certify an audit (and, I believe, in some states under the Uniform Accountancy Act, prepare uncertified financial statements for third parties such as banks).  The person you choose may well be a CPA, based on the individual qualifications of the professional.

I agree that a person with the initials CPA has proven knowledge and current in accounting and auditing via a very difficult initial proficiency test and annual required CPE (in accounting and audit topics and ethics), but, if initials are important to you as a verification of expertise, many states also have a PA (Public Accountant, not Certified) licensure designation.  It is my experience that, on average (and I will admit probably not always true), a CPA will charge a higher fee than a PA or “plain” accountant simply because of the existence of the initials.

Actual the question that started off the discussion was “EA vs. CPA? Which is the better designation and why?”.  I am not quite sure if the question comes from the point of view of a person choosing a career path or a potential client looking for a tax professional.

This is an unfair question, from both points of view.  They are apples and oranges.  As we have learned an EA is a tax expert, especially a 1040 expert, and a CPA is an accounting expert who can certify audits.  You become an EA because you want to represent taxpayers before the Internal Revenue Service, or because you want a designation that verifies your tax knowledge, experience and currency.  You become a CPA because you want to be a public accountant, audit financial statements, and certify these audits.  One has nothing to do with the other.  An EA can also do accounting work and a CPA can also prepare tax returns.

When choosing between the two as a career objective you must first identify your goals.  Do you want to prepare tax returns for a living and/or represent clients before the IRS, or do you want to be a public accountant and prepare and audit financial statements for businesses?  If you want to specialize in 1040 preparation there is absolutely no need to go through the process of becoming a CPA.  And, with the new RTRP designation, if you want to prepare tax returns for a living, but are not interested in representation (other than for clients whose 1040 you have prepared), you can become a RTRP.

And, in my personal opinion, if choosing between the two as a potential 1040 client pick the EA.  Whatever you do, don’t go to H+R.

TTFN

OOPS!

I inadvertently deleted a comment that had been posted to IT AIN’T NECESSARILY SO that, while it had absolutely nothing to do with my post, posed a good question.  I apologize for the deletion – and will herein respond to the question.  

The reader asked –

“If you have to amend several years of taxes, will this lead to an audit?”

In almost 40 years of preparing 1040s I have never seen a Form 1040X (an amended return) audited - or even questioned.

I think one of the reasons is that, in addition to providing a detailed explanation of the changes made on the 1040X, often actual documentation of the changes is attached to the amended return (which I recommend).  So any potential questions are already answered.

I think it is an “urban tax myth” that filing an amended return will substantially increase one’s chance of an audit.

What I do recommend to clients who are amending several years of taxes is that they mail the oldest 1040X first (i.e. if amending 2008, 2009, and 2010 mail the 2008 Form 1040X first).  When the refund for that return is received mail out the next (i.e. 2009) Form 1040X.  And when that refund is received mail out the next (i.e. 2010).  If you are not requesting a refund, allow at least 8 weeks between the mailing of each return. 

Generally you have three (3) years from the due date of the return being amended to file a Form 1040X – although there are situations when you can, and would want to, file amendments for earlier returns.  For example, you have up to seven (7) years to amend a return to claim a loss on worthless stock.

If you find an error on a previous return, and that error affects subsequent returns or the error was repeated on subsequent returns, you should submit amended returns.  Do not be afraid that you will be automatically audited.  If your amendment is legitimate, and you are one of the truly rare “amenders” who are actually questioned, you should have nothing to worry about if you have proper documentation for the change(s). 

As I have said in the past, while an audit is not something you would want, if your return is properly and correctly prepared, and you have documentation for your income, deductions and credits, there is no cause for fear and concern.  In such a case the audit is just an inconvenience.  You should not make tax decisions based solely on the possibility of being audited.    

TTFN

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

+ Oops!  I forgot to include Bruce McFarland’s post “Hobby or Business? It Matters to the IRS” from THE MISSOURI TAX GUY in Wednesday’s BUZZ!

As Bruce points out –

“The tax considerations are different for each activity so it’s important for taxpayers to determine whether an activity is engaged in for profit as a business or is just a hobby for personal enjoyment.”

+ CCH reports that “Senate Rejects $447-Billion Jobs Bill”.

“The Senate on October 11 rejected President Obama’s $447-billion jobs bill (Sen 1660) as two Democrats joined Republicans in opposing the measure.”

No real surprise –

“Concern over a 5.6-percent surtax on millionaires led all GOP members, with the exception of Sen. Tom Colburn, R-Okla,, who is recovering from surgery and not voting, to vote against the bill, and leaving Senate Democratic leaders little choice but to consider splitting the president’s signature jobs recovery bill into pieces.”

+ On Tuesday I posted about Herman Cain’s “9-9-9 Plan”.  Dan Shaviro gave us his more than 2 cents on the plan in the appropriately titled post “Herman Cain’s 9-9-9 Tax Plan” at START MAKING SENSE. 

Dan looked at the corporate end of the “9” as a VAT, which I did not see at first (not that familiar with VAT – except that I get a refund of it when returning from UK – have really not investigated it as a possible alternative here in US).  I looked at the corporate “9” as I would have it - a flat tax on net corporate income less dividends paid (which would need to be more than 9%).

Dan continued his commentary in "Follow Up On Cain's 9-9-9 Plan and Fiscal Sel-Delusion".  

+ And VAT Bastard adds a couple of more pennies to the debate in “Herman Cain's 999 Plan: Stepping Stone to a VAT?” at TAX.COM, as does TAX GIRL Kelly Phillips Erb in “Cain’s 9-9-9 Tax Plan Continues to Attract Interest” over at Forbes.com.  Eventually it appears that just about every tax blogger has weighed in on the plan. 

+ But, of course, Professor Paul Caron, the TAX PROF, provides a good summary of the reaction to 9-9-9 in “More on Herman Cain’s 9-9-9 Plan”.

+ It’s back!  Kay Bell (it wouldn’t be a BUZZ without Kay) gives us the word that a bogus email, which first showed up last year, is once again making the rounds of in-boxes, and goes on to set the record straight in “3.8% Health Care Tax Does Not Apply to All Home Sale Profits” at DON’T MESS WITH TAXES.

If you receive an email that begins “Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it?” you should delete it without reading further.

+ And Kay brings us a great Republican tax proposal in “Republicans Offer Their Own Buffett Rule to Help Pay Down the Federal Debt”.

“Sen. John Thune (R.-S.D.) has introduced S. 1676, The Buffett Rule Act of 2011, which would add a line on 1040s so that taxpayers could more easily donate money to Uncle Sam. An identical version of the bill, H.R. 3099, was introduced in the House by Steve Scalise (R-La.).”

+ Joe Kristan talks about a recent Tax Court decision in “Spending Money for Charity? Get the Charity to Sign Off” at the ROTH AND COMPANY TAX UPDATE BLOG.

His bottom line -

“If you are out of pocket for the cheerleaders, the cross country team, or the church, and you want a deduction, you need to get a letter from the organization if you spend more than $250. For that matter, you need their letter even if you give them cash.”

TTFN

EA OR CPA? THAT IS THE QUESTION

Joe Arsenault, a CPA, has a great post in “CPA or EA? It’s Just a Designation” at his blog CAFÉ TAX. 

Joe’s post is a response to “an interesting conversation (that) has been taking place for a while in one of the CPA forums I follow. The conversation compares the Certified Public Accountant (CPA) and Enrolled Agent (EA) designation. The question that started it all was ‘what is the better designation to get?’.”

The post does a good job of describing the scope and requirements of each of these designations.

Everyone knows what a CPA is (Constant Pain in the Arse – just joking), but not everyone is familiar with the initials EA. As Joe points out above they stand for “Enrolled Agent”.  Many of those who have heard of the initials EA are confused about what they mean.

An Enrolled Agent is not an agent or employee of the Internal Revenue Service.  He/she is “enrolled” to act as a taxpayer’s “agent” when dealing with the IRS. Prior to the creation of the RTRP designation, EA was the only set of initials that indicated that its holder was knowledgeable, experienced, and current in federal individual income taxes.

For years it has been suggested that a better designation be found for the EA to avoid the confusion.  I do believe that in the course of the IRS institution of its preparer regulation regime EAs were given the chance to pick a new name for their designation, but they chose to keep it as Enrolled Agent.

I have been an accountant and tax preparer for about 40 years, yet I am neither a CPA nor an EA (although at one point early in my career I did work for one of the then “big eight” CPA firms).  Over the years I have investigated the various proposed non-EA tax preparer designations (i.e. several attempts at a CTP – Certified Tax Preparer) but none of these carried the same weight or credibility as EA, or actually lasted very long. 

The basic thing a CPA can do that a “just plain” accountant cannot is certify an audit.  And the thing an EA can do that I cannot is represent taxpayers before the IRS (without a Power of Attorney).  I have never had any desire to audit financial statements or to represent taxpayers, other than in audits of clients whose 1040s I have prepared, before the IRS.

In the course of his discussion Joe makes an excellent point -

“I want potential candidates to realize that their work and character will determine their level of success, not their designation.”

While I have said for years that having the initials CPA after one’s name does not mean the person knows his/her arse from a hole in the ground about taxes, I have also said – “While it may actually be possible that the best tax preparer, at the best price, for your particular situation is either a CPA or an H+R Block, or other fast-food chain, employee, this is only because of the education, experience, ability, temperament, and other factors that are specific to that individual preparer.”

I wholeheartedly agree with Joe’s final assessment (the highlights are mine) -

“EAs focus on completely on taxes and CPAs may or may not focus on taxes. If you are someone who only wants to do tax work an EA may be the smart choice. CPAs are more involved in financial accounting, industry and other areas such as financial planning. I know many people who are CPAs but they can’t prepare their own tax return. Not all CPAs are tax professionals. There is nothing wrong with that.”

I would add that if a person wants to concentrate on taxes but also do accounting work, but not certify audits, for clients he/she does not need to become a CPA.  You can be a designated Public Accountant (PA), which may require registration and/or licensure in some states, or, like me, a “just plain” accountant.

As an aside, I like that Joe supports my position on exempting CPAs from the IRS competency test for tax preparers (again the highlight is mine) -

“I will also raise the point about designations and PTIN requirements and would suggest only exempting EAs from the testing requirements.”

FYI Joe used to publish a BUZZ-like weekly CAFÉ BEANS post, highlighting posts he felt would be of interest to his readers from other tax and personal finance bloggers.  He no longer publishes a separate BEANS post, but does reference such items at the end of each of his posts.  Thanks to Joe for frequently including TWTP posts, and for plugging my TWTP posts in his “tweets”.

TTFN

IT AIN'T NECESSARILY SO

The news media, and other tax blogs, have been reminding us lately that extended 2010 Form 1040s (and 1040As) must be postmarked by next Monday – October 17, 2011 – in order to be considered to be timely filed.

While this is basically true, NJ taxpayers (thankfully for my late filers) get until October 31, 2011 to file extended 2010 Form 1040s and 1040As and 2010 Form NJ-1040s – because of Hurricane Irene.

All highlights in the below quotes are mine.

The IRS says in IR-2011-87 –

“The Internal Revenue Service is providing tax relief to individual and business taxpayers impacted by Hurricane Irene.

The tax relief postpones certain tax filing and payment deadlines to Oct. 31, 2011. It includes corporations and businesses that previously obtained an extension until Sept. 15, 2011, to file their 2010 returns and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter of 2011, which would normally be due Sept. 15.”

The relief is available to “certain taxpayers in Connecticut, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Puerto Rico and Vermont”.

In New Jersey the relief applies to the following counties - Atlantic, Bergen, Burlington, Camden, Cape May, Cumberland, Essex, Gloucester, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Salem, Somerset, Sussex, Union and Warren.  That is all 21 counties of New Jersey – so all of New Jersey gets the extension.

The NJ Division of Taxation tells us -

“New Jersey’s tax relief . . . extends to taxpayers who reside or have a business in all 21 counties of New Jersey impacted by Hurricane Irene and New Jersey considers an affected taxpayer qualifying for tax relief to include businesses, individuals, those with tax records, and relief workers in areas disrupted by Hurricane Irene.

Taxpayers now have until October 31, 2011 to file their New Jersey tax returns such as individual income tax, corporation business tax, sales tax, inheritance tax, estate tax, partnership and other business taxes administered by the Division of Taxation and to submit payments for any return and/or payment, including estimated payments which have either an original or extended due date occurring on or after August 27, 2011 and on or before October 31, 2011.

The extended due date permits individuals and businesses that received a filing extension until October 17, 2011 to have until October 31, 2011 to file their returns. Businesses that previously obtained a filing extension to September 15, 2011 are also covered by this relief and have until October 31, 2011 to file their returns. Estimated tax payments for the third quarter of 2011 are now due October 31, 2011 instead of September 15, 2011.”

Of course this additional time does not mean you should continue to procrastinate.  If you have not already gotten your 2010 tax “stuff” to your preparer – get off your arse and do it!

TTFN

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

+ It’s here!  Check out the October 2011 issue of LOIS.

+ And another one bites the dust.  First it was Ronnie Deutch.  And now the POST AND COURIER of Charleston SC reports that "JK Harris to File for Bankruptcy”.

David Slades tells us –

“The JK Harris company once advertised that it could resolve people's tax debts for ‘pennies on the dollar’, but now it could be the company's creditors and disgruntled former clients who will get less than they are owed.”

Unfortunately - “The bankruptcy filing is aimed at selling the business quickly while writing off debt. The company would continue operations in the meantime.”  So it appears we haven’t seen the last of JK and his fraudulent claims yet.

As I, and my fellow tax bloggers, have said many times before – nobody can guarantee to get you off the hook with Uncle Sam for “pennies on the dollar”.  If you are in trouble with the IRS you should avoid firms that so advertise like the plague.

+ Kay Bell, writing at her BANKRATE.COM blog, reminds us “1099 or No, Report Your Income”.

Kay echoes my comments to clients and readers (the highlight is mine) –

“But like all self-employed workers, I also get some payments for which I don't get a 1099. The law requires that a 1099 be issued only if the amount earned is $600 or more. Less than that, and the paying company doesn't have to mess with creating and sending out the form.

That money, however, whether it's reported on an official tax statement or not, is still taxable income.”

+ And, also at BANKRATE.COM, Key answers the question “Why We Procrastinate Filing Taxes.”

You will note that on the 2^nd page of the article Kay quotes extensively a well-known authority on GDEs (guess who?). 

+ Another trifecta for Kay, who examines “The Connection Between Filing Status and Tax Dependents” at DON’T MESS WITH TAXES.

+ A “tweet” from a fellow twit who works for the IRS brought me to the IRS page on identity theft.  At the very top of the page is an official reminder from the IRS that bears repeating (the highlight is by the IRS and not me) -

“The IRS does not initiate communication with taxpayers through e-mail.”

So if you receive an unsolicited email allegedly from the IRS it is a scam – delete it immediately, and, whatever you do, do not open any attachment or click on any link.

+Jonnelle Marte reminds us that “Time  for Roth Do-Over” at Smart Money’s THE TAX BLOG.

“Regretting your Roth IRA conversion? You have just a few days left to undo that move: The deadline to reverse — or to “recharacterize” in tax parlance — the conversion is Oct. 17.”

+ Over at the ROTH AND COMPANY TAX UPDATE BLOG Joe Kristan tells us in “Warren Buffet’s Exclusive Club” that –

“Only eight of the Forbes 400 were willing to say they want to pay higher taxes.”

+ EA Devin Martin talks about the new IRS Voluntary Worker Classification Settlement Program in "IRS Offers Relief for Certain Employers” at his CLASS 5 TAX BLOG.

TTFN