Monday, April 15, 2019





1040s NO MORE!


FYI, here is why I NEVER work on the last day of tax season -


Thursday, March 14, 2019


It appears that U.S. Representative Sean Casten (IL) and Rep. Lauren Underwood (IL) introduced the Taxpayer Extension Act to give taxpayers an additional five weeks, until May 20, to file their individual tax returns for 2018. The congressional representatives stated that the proposal was due to the five-week government shutdown that prevented taxpayer assistance.

No movement has been made on this proposal since it was introduced last week.

Regardless of whether this bill passes or not – I will stop work on 2018 Form 1040s on April 14th – April 13th if the filing season is not extended - and will not return to working on tax returns until April 23rd the earliest – at a much more relaxed pace.

Returns not in my hands with all the necessary information by Monday, March 18th will not be worked on until this April 23rd date.


Monday, February 11, 2019


An early entry to address an issue receiving a lot of press recently

Just like the rest of the country, some of my clients are getting smaller refunds this year.  But the number to compare on your 2018 and 2017 tax returns is NOT the refund, or balance due, amount but the TOTAL TAX amount.  This is the number on Line 15 of the 2018 Form 1040 and Line 63 of the 2017 Form 1040, or Line 39 of the 2017 Form 1040A.

Your refund is a factor of your withholding.  It not a reflection of any change in your tax liability – the actual income tax you are paying.  In February of 2018 the IRS revised the income tax withholding tables to reflect the changes made by the GOP Tax Act.  It appears the IRS was too “liberal” in its revisions – perhaps instructed to do so by the government to make it look like you were saving more from the tax changes.  The problem is compounded when you have several sources of income from which federal income tax is withheld. 

With my clients, I specifically noticed substantial decreases in withholding from NJ state pensions.

The IRS realized its FU and has slightly revised the way it calculates the penalty for underpayment of taxes as a token response.

Two important points -

(1) The additional amount received in each weekly paycheck as a result of the revised withholding is NOT a true indication of the savings from the GOP Tax Act. 

(2) The fact that this year’s refund is less than last year does not mean you are paying more tax under the GOP Tax Act.

If your 2018 income is basically the same as 2017 and your refund is $2,000 less than last year, or you actually owe Sam $1,000 when you got back $1,000 in 2017, but your federal income withholding was $3,000 less than last year YOU HAVE PAID $1,000 LESS IN FEDERAL INCOME TAX.  You got an extra $3,000 from Sam during the year and now have to give $2,000 of this “loan” back.

The trouble with getting an extra $50 or $60, perhaps more than you should be getting based on reality, in your paycheck each week is that you spend an extra $50 or $60 each week and end up with surprise when your refund is less than it was last year. 

The real issue here lies in the fact that the criteria for claiming federal withholding allowances has completely changed with the GOP Tax Act.  The current Form W-4 on file for most taxpayers is no longer relevant.  The IRS has attempted to revise the Form W-4, but has not been very successful.

Back to the 1040s!


Friday, February 1, 2019


And now what you have been waiting a year for – my annual posting of:


On the first day of tax season my client gave to me a Closing Statement for the purchase of a home.

On the second day of tax season my client gave to me 2 W-2 forms.

On the third day of tax season my client gave to me 3 mortgage statements.

On the fourth day of tax season my client gave to me 4 Salvation Army receipts.

On the fifth day of tax season my client gave to me 5 Form K-1s.

On the sixth day of tax season my client gave to me 6 1099s for dividends.

On the seventh day of tax season my client gave to me 7 cancelled checks.

On the eighth day of tax season my client gave to me 8 useless items.

On the ninth day of tax season my client gave to me 9 medical bills.

On the tenth day of tax season my client gave to me 10 stock sale confirms.

On the eleventh day of tax season my client gave to me 11 employee business expenses (despite being no longer deductible).

On the twelfth day of tax season my client got from me a finished tax return, 11 employee business expenses, 10 stock sale confirms, 9 medical bills, 8 useless items, 7 cancelled checks, 6 1099s for dividends, 5 Form K-1s, 4 Salvation Army receipts, 3 mortgage statements, 2 W-2 forms, and a Closing Statement for the purchase of a home.

And, of course, on the thirteenth day of tax season the client gave to me a corrected Consolidated 1099 from Wells Fargo Advisors!


And so, the 2019 Tax Filing Season – my 48th - officially begins.  Open the floodgates and bring on the 1040s!

As is my custom, due to the demands of the filing season I will be taking my annual “tax season hiatus” from posting to THE WANDERING TAX. 

Between now and April 15th I will barely have time to relieve myself let alone blog!  Nor will I have time to respond to comments. If a comment requires a response I will do so after April 15th.


I am NOT accepting any new 1040 clients (or any other kind of tax preparation clients). So, don’t email me asking if I can prepare your 2018 tax returns.  THE ANSWER IS A MOST DEFINITE "NO". 

I will be publishing a WHERE THE FAKAWI post occasionally here at TWTP to keep my clients up-to-date on my progress during the season and to report changes or additions to my tax season policies and procedures. Clients can also keep track of my tax season progress by following me at TWITTER (@rdftaxpro).

I realize that I am abandoning you at a time when you may need me the most – but I need to make a living!

I find it a bit amusing that the period of time when TWTP gets the most “hits” is during the tax filing season when I am not posting.

“Talk” to you when it is all over!


Thursday, January 31, 2019


Public Law 115-97 – officially “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” - also known as “The Tax Cuts and Jobs Act”, but best described as the GOP Tax Act - takes effect with the 2018 federal income tax returns that have begun to be filed. 

This new law has drastically changed the United State Tax Code.  For tax years 2018 through 2025, or until new tax legislation is enacted, the GOP Tax Act will affect every income tax return filed.

The GOP Tax Act is the Republican equivalent of the Democrat’s Obamacare.

Both Acts were based on a good concept that dealt with a legitimate issue – making adequate health care more affordable for and accessible and providing needed tax reform.  But the main purpose of passing both Acts was to get an early legislative victory for the Party’s newly elected President.  Both were written hastily and poorly, the GOP Tax Act practically overnight, without serious thought or discussion.  And were voted on hastily, without serious debate. 

In both cases, none of the members of Congress who voted on these Acts, from both Parties, actually read the legislation they were voting on.  They were told how to vote by the leaders of their respective Parties, and for the most part the members obeyed.

And both Acts contained some good and some bad, perhaps more bad than good.

Obamacare required insurance companies to provide coverage for pre-existing conditions, and provided taxpayers with a tax credit directly applied to monthly premium payments to reduce the out of pocket cost, but created an excessive financial penalty for not having health insurance coverage, added the NIIT surtax to investment income and created other nickel and dime taxes, fees and charges, and made health insurance premiums age-based.

The GOP Tax Act did contain some simplification via the elimination and limitation of tax deposits, some good and some bad, increased the Standard Deduction, reduced tax rates, and effectively did away with the dreaded Alternative Minimum Tax, but it also contained much new and unnecessary complexity.  It was neither tax reform nor tax simplification.  Thankfully the popular title properly identified it as “tax cuts” and not “tax reform”.   

The Act will make the preparation of some Form 1040s simpler, but also make many more involved and more costly.  Taxpayers in many situations should not be surprised when they discover the fee to prepare their returns is higher than in past years.  
Taxpayers should also not be surprised if their refunds are smaller than expected, or if they actually owe money with the filing of their 2018 Form 1040.  Many have been under-withheld, some seriously.  The Government Accountability Office recently reported that, based on simulations run by the Treasury Department, taxes for at least 30 million Americans — 21 percent of taxpayers — are being under-withheld.

The new withholding tables issued last February were a bit too “liberal”, so workers would think the GOP Tax Act was actually putting more money in their pockets.  And the loss of the personal exemption deduction and many itemized deductions makes previously submitted W-4 forms no longer appropriate.  The IRS has provided some token relief for this under-withholding by revising the calculation of the penalty for underpayment of estimated taxes.

As I have said in the past, the more I learn about the GOP Tax Act the more I find –

(1) There is still a lot we don’t know yet about how many of the provisions of the Act will be interpreted and implemented.

(2) Because the Act was basically written overnight, the wording of the law is often defective, confusing and unclear.  “Technical corrections” legislation is clearly needed.

(3) It is very obvious that those who actually write tax law and the members of Congress who vote on it have absolutely no concept of the practical implementation of the tax legislation they write and pass, or of the actual preparation of tax returns.

So, good luck with the preparation and filing of your 2018 Form 1040.  And be sure to return here after the end of the filing season to read my annual “That Was The Tax Season That Was” post.


Wednesday, January 30, 2019


While the 2018 New York state income tax instruction booklets have been available for weeks now, the actual 2018 IT-201 and IT-201 are finally up at the NYS Department of Taxation and Finance website.  Click here for IT-201 and here for IT-203.

I did a quick review of the 2018 tax returns and there does not seem to be any changes in the format or content of these forms.  They look exactly the same as the 2017 forms.

The big news for 2018 New York state returns is that New York has “decoupled” from most of the individual income tax changes enacted by the GOP Tax Act.

Like many states, New York bases the state individual income tax return on the federal return, starting with the federal AGI and making state adjustments, and allowing the same itemized deductions claimed on the federal Schedule A with some state adjustments.  The GOP Tax Act made multiple changes to the federal AGI and the federal Schedule A.  New York State will not allow most of these changes in calculating state income tax liability.   

(1) New York continues to allow a deduction for all qualified job-related moving expenses and an exclusion from taxable wages of employer reimbursements for these expenses.  There is a new “subtraction modification” on the IT-201 and IT-203 to reduce federal AGI for qualified employee moving expense reimbursements included in federal taxable wages and out of pocket non-military employee moving expenses. 

(2) Withdrawals from a Section 529 Qualified Tuition Program account for kindergarten through 12th grade tuition payments are not considered qualified withdrawals for determining the taxability of distributions under the New York 529 college savings account program.

(3) While the New York Standard Deduction amounts have been slightly adjusted for inflation, they have not been as substantially increased as the federal Standard Deduction amounts have been.  And New York still allows a $1,000 deduction for each dependent claimed on the 2018 IT-201 or IT-203 (but not for the taxpayer or spouse).

(4) The 2018 New York Itemized Deductions are computed using the federal rules as they existed prior to the enactment of the GOP Tax Act.  The deduction for property taxes is not limited to $10,000, acquisition debt interest on principal of up to $1 Million is deductible regardless of when the home was purchased, and home equity interest on up to $100,000 in principal, all casualty and theft losses, and all previously allowed Miscellaneous expenses, still subject to the 2% of federal AGI limitation, are deductible on the 2018 NY state return.  And the old “Pease” limitation of itemized deductions will be used in calculating NY itemized deductions.   

(5) New York will allow you to itemize on your 2018 NY State IT-201 and IT-203 regardless of whether you itemized deductions or claimed the Standard Deduction on your 2018 federal Form 1040.  In the past If you took the Standard Deduction on your federal return, or if you did not have to file a federal return, you were required to take the New York Standard Deduction.  You could only choose to claim itemized deductions on your NY state return if you itemized on your federal return, and you would claim the same amount of itemized deductions on the NY return that you claimed on the federal return, with some state adjustments, additions and subtractions. There is a new Form IT-196 (New York Resident, Nonresident, and Part-Year Resident Itemized Deductions) that replaces Forms IT-201-D and IT-203-D.

Many tax preparers, myself included, told some clients last year that they would no longer be able to itemize and did not need to maintain and give them documentation for certain expenses for 2018 through 2025.  However, if the client lives or works in New York State they do need to maintain and provide their preparer with details of these expenses for 2018 and beyond.

There have been other changes to NY state taxes for 2018 -

(1) A special “Union dues additional adjustment” can be included in your New York Itemized Deductions for any portion of union dues paid that is not included in Form IT-196 Line 28 “Job expenses and certain miscellaneous deductions” due to the 2% of AGI exclusion.  So, in effect 100% of union dues are deductible.  The adjustment is Item K for the entry on Line 44 of Form IT-291) (see the Form IT-196 instructions).   

(2) The New York State Child and Dependent Care Credit has been increased and enhanced.  The credit amount allowed increased for taxpayers with New York AGI of at least $50,000 but less than $150,000, and, the qualified expense limit for taxpayers with more than two qualifying persons increased to $7,500 for three qualifying persons, $8,500 for four qualifying persons, and $9,000 for five or more qualifying persons.

(3) There have been some adjustments to old credits and some new credits that do not apply to any of my clients and probably most of you.

As an aside, just so you know, beginning with 2019 New York will not follow the changes to alimony enacted by the GOP Tax Act.  All alimony received is included in taxable income and all alimony paid is deducted from taxable income for calculating the NY state tax liability, regardless of when the divorce or separation decree or agreement was issued or amended.


Tuesday, January 29, 2019


Here is the last BUZZ installment before my annual tax season hiatus.

A reminder – don’t forget to return here on February 1st for the annual posting of THE TWELVE DAYS OF TAX SEASON.

* Trump’s government shutdown is over but the WASHINGTON EXAMINER reported “Government watchdog warns IRS could take a year to recover from shutdown”. -

The National Taxpayer Advocate, a government watchdog office that monitors the IRS, told House staffers that it would be 12 to 18 months before the agency resumes normal operations, sources told the Washington Post.

The IRS will return from the shutdown behind schedule for training IRS employees and to 5 million letters from taxpayers that have so far gone unanswered, the Post reported. The tax agency also needs to hire thousands of employees for the tax filing season, House aides said.”

As you can see from the chart in the post requesting direct deposit of your federal refund will put the money in your pocket 4 days sooner.

And be advised, according to the IRS “the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or debit cards starting February 27, 2019, if these taxpayers chose direct deposit and there are no other issues with their tax return.”  So, if you mail out your Form 1040 claiming either the Earned Income Credit or an Additional Child Tax Credit (the refundable portion of the credit) today you probably won’t get your refund until the beginning of March.

Using a Donor Advised Fund to “bunch” charitable deductions is a good idea – and one of the tax planning techniques to use in response to the changes made by the Tax Cuts and Jobs Act that I discuss in my book THE GOP TAX ACT AND THE NEW 1040.

*  Did you buy your first home in 2018, or planning to do so in 2019.  Check out another of my books - TAX GUIDE FOR NEW HOMEOWNERS.

* William Perez tells you everything you need to know about LLCs in “Small Business LLC Taxes & LLC Tax Returns [+ Free Checklist]” at FIT SMALL BUSINESS.  


It is proven again and again every day that everyone involved in the Trump campaign, including Trump himself, has lied to everyone.  Many have been indicted – and I expect more indictments are coming.

And Trump continues to lie to everyone about everything every day as President, as do his “stooges”.

The fact that the Republican Party has totally ignored these proven facts, and refuses to denounce and disavow Trump, is a clear sign that the Grand Old Party has abandoned all of its former principles and has lost all integrity, credibility and legitimacy.

Patriotic Americans must vow to never again vote for a candidate of the Republican Party.

A new, truly conservative-based party, one that will oppose and denounce Trump and all he represents, must be created to take the place of the dead Republican Party.

Let us all pray that by the end of the tax filing season, when I return to posting here at TWTP, Trump has resigned, is removed from office, or proceedings have begun to remove him from office.