Monday, February 19, 2018

WHERE THE FAKAWI - #1

The floodgates have opened!

As always happens, prior to my annual 30+ year traditional visit to Monmouth County NJ for “house calls” as returns arrive I get them done and out promptly.  But once I return from my trip the “do be done” box begins to fill.  I now have 18 returns in that box, and 1 in the “red file” (to be done).

The season has gotten off to a good start – I am at least on par with last year’s work completion, and may be somewhat ahead.  I will have a better picture at the end of February.  No major client issues have arisen yet – and minimal returns have spent any time in the “red file” so far.  No weather or equipment issues either.

FYI, my phone has not been on during these past first weeks of the tax filing season.  So every day I have been “behind closed doors” – although I have been checking emails regularly throughout the day and responding promptly where appropriate.  To be perfectly honest I have enjoyed being able to work without interruptions.  I may put the phone, but not the answering machine, on going forward, but have not decided yet.  I have become spoiled.  In any case – the best way to contact me is always via email at rdftaxpro@yahoo.com – even on Wednesdays. 

Before I go - a holiday message.  On this President's Day let us remember past Presidents who had intelligence and competence and cared about America and its people, as we struggle to deal with the current one, who clearly does not.

OK – back to the 1040s!


TTFN  

Thursday, February 1, 2018

THE TWELVE DAYS OF TAX SEASON

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

--------------------

THE TWELVE DAYS OF TAX SEASON

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.

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 2018 Tax Filing Season – my 47th - 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 PRO and THE TAX PROFESSIONAL. 

Between now and April 17th 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 17th.

DO NOT EMAIL ME OR SUBMIT COMMENTS WITH SPECIFIC QUESTIONS ABOUT YOUR 2017 TAX RETURN!  ALL SUCH ITEMS WILL BE PROMPTLY DELETED UPON DISCOVERY!

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 2017 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!

TTFAW 












Wednesday, January 31, 2018

2017 STATE TAX FORM UPDATE

All state returns (that apply to me and my clients) are now finally up and available at the appropriate state tax agency website.

The 2017 NJ-1040 form was finally made available at the NJDOT website forms page at 11:00 AM on Monday.  As expected, there was no change to the physical format or layout of the form, except for the addition of Line 12c on Page 1 to indicate if the taxpayer and/or spouse or civil union partner is eligible to the Veteran Exemption (although the word exemption is misspelled “exeption”).

From NJDOT – items that will be accepted to document a claim for the new Veteran Exemption:

* DD-214 - Certificate of Release or Discharge from Active Duty

* DD-256 - Discharge Certificate

* WD AGO 53 - Enlisted Record and Report of Separation Honorable Discharge

* WD AGO 53-98 - Military Record and Report of Separation Certificate of Service

* WD AGO 55 - Honorable Discharge from the Army of the United States

* NA Form 13038 - Certificate of Military Service

* NAVCG 553 - Notice of Separation from U.S. Coast Guard

* NAVMC 78PD - U.S. Marine Corps Report of Separation

* NAVPERS 553 - Certificate of Separation/Discharge from U.S. Navy

* County Veteran ID Card - Veteran identification card issued by any of the New Jersey counties

* Federal Veteran ID Card - Veteran identification card issued under the Veterans Identification Card Act

Just a reminder – regardless of when you submit your 2017 NJ-1040 to the state, refunds will not begin to be issued until March 1st.

As for the New York State resident (IT-201) and non-resident (IT-203) returns - the only change to the physical format or layout of the forms appears to be the addition of a Line 60o (IT-201) or 57o (IT-203) to add a new voluntary contribution option for the Veterans’ Home Assistance Fund”, and the addition of a line 79a (IT-201) and 69a (IT-203) to allow taxpayers to allocate via direct deposit all or a portion of their refund to NYS Section 529 college savings accounts via the new Form IT-195.

The NYS standard deduction and tax rate schedules have been adjusted as per the annual COLA.  There have been a fee changes and additions to obscure state credits, but nothing that would affect any of my clients.

The "What's New for 2017" section of the NY state income tax instruction booklets says "A recent law change amended and expanded the definition of NYS source income", but does not explain just how.  When I found out just what the state is talking about I will post it here in a subsequent post.

The biggest issue facing those who file New York State income tax returns going forward – both residents and non-residents – involves the changes made beginning in 2018 via the GOP Tax Act, specifically the “conformity” of the state return to the federal return and a NYS requirement that taxpayers who claim the federal Standard Deduction also claim the NYS Standard Deduction.

The current NYS Standard Deduction for a single filer is $8,000, compared to the $12,000 federal amount for 2018.  And for a married couple is it $16,050, compared to $24,000. 

While NYS does not allow a deduction for state and local income tax or sales tax, it does permit a full deduction for real estate taxes, now limited to $10,000 on the federal return.  Many NJ residents filing a NYS non-resident return and NYS residents pay more than $10,000 in real estate taxes.  And the loss of Miscellaneous Expenses subject to the 2% of AGI exclusion reduces both federal, and conforming NYS, itemized deductions.

It has been suggested that if NYS continues to conform to the new federal rules beginning in 2018 taxpayers who file NYS returns could see a $1.5 billion increase in state tax.

New York is not alone in having to fact this problem.  If the 41 states with an income tax almost all of them at least partially base taxable income on the federal return.  New Jersey and Pennsylvania are exceptions – they do not follow the federal return and have minimal allowable deductions. 

TTFN










Monday, January 29, 2018

THEY LIKE ME, THEY REALLY LIKE ME!

I did some “horn tootin’” at my other blog – THE TAX PROFESSIONAL – this morning.  So let me continue the shameful tootin’ of my own horn here.  Sorry to be so “Trump-like” – although, unlike Trump, I actually have something to toot about here.

I was just notified that I was honored to be selected as #24 on the list of “Top 25 Must-Read Accounting Blogs” at ACCOUNTING DEGREE REVIEW.

In compiling the list, the editors “looked for accounting-related blogs that are active, regularly updated throughout the year with knowledgeable, useful, well-written, and engaging content.”

I am certainly in good company on the list.

FYI – the fact that I am #24 does not imply any ranking.  The blogs are presented simply in alphabetical order by title.

Here is what they have said about THE WANDERING TAX PRO -

A wonderfully eccentric, 40-year accounting veteran, Robert Flach takes a down-to-earth approach with The Wandering Tax Pro blog. Writing in an informal, instantly-recognizable voice, Flach takes on current events, politics, and money with a sharp sense of humor and a 'mad as hell' fearlessness. Posts from 2017 have run heavy on the politics, with well-informed consideration (and occasional take-downs) of government shenanigans, especially with tax reform. His up-front title, ‘Like Frankenstein, The Tax Code Must Be Destroyed’, pretty much says it all.”

I am truly honored by the selection and thank the site for the inclusion.





















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

This will be the last BUZZ installment until after the end of my tax-season hiatus.  I will return with more BUZZ after April 17.

* The word from Michael Cohn at ACCOUNTING TODAY – “IRS to openfiling season Monday {today – rdf} with some extra warnings”.

The IRS may begin tax season today, but I do not begin my tax season until February 1st.  Don’t forget to return here on February 1st for the annual posting of THE TWELVE DAYS OF TAX SEASON!


The IRS extended impacted taxpayers’ deadlines that fell (or will fall) between December 4, 2017 and April 29, 2018 to April 30, 2018. This includes the Form 1040 deadline of April 17th (it will be April 30th for impacted taxpayers). This impacts individuals and businesses who are in Los Angeles, San Diego, Santa Barbara, and Ventura Counties who were impacted by the disasters.”

* If you haven’t already found a tax professional to prepare your 2017 returns yet you can begin your search at my website FIND A TAX PROFESSIONAL.

* More proof that politicians are idiots in “More States Considering Dubious SALT Charitable Contribution Workaround” from Jared Walczak of the TAX FOUNDATION.

Jared correctly points out “what you really need to know” - 

·         Charitable contributions to government are only deductible, per IRS guidance, if the contribution “is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park).” By contrast, these contributions primarily serve a private purpose (reducing federal tax liability through recharacterization), as they do not yield any increased revenue for the state.

·         When claiming the charitable deduction, the taxpayer must exclude contributions from which one benefits. For instance, if one purchases a $250 ticket to a benefit dinner, and the fair market value of the dinner is $50, then $200 can be deducted—not $250. In this instance, the taxpayer receives a benefit equal to the entire value of the contribution in lieu of taxes (the corresponding tax credit), wiping out any deductible share.

·         Case law and IRS regulations generally require charitable intent for a contribution to be deductible, meaning that the individual does not receive a substantial benefit from the contribution. The sole purpose of the proposed contributions in lieu of taxes proposal is financial gain. (the U.S. v. American Bar Endowment, Hernandez v. Commissioner, Singer Co. v. U.S.)

·         The IRS has broad authority to classify a payment or charge as a tax based upon its real nature. If it looks like a tax and acts like a tax, the IRS and the courts could simply say that it is a tax.”

* Before I begin my tax filing season blog post hiatus at THE TAX PROFESSIONAL I do a bit of “Horn Tootin’”.   

THE FINAL WORD

What is the true “State of the Union”?

A dangerous, deplorable and despicable ignorant and incompetent mentally unstable malignant narcissist, who continues to destroy the credibility, integrity and stature of the White House domestically and internationally on a daily basis, is the President.

America will NEVER be great again until Donald T Rump, and all Republicans who publicly support and defend him, are removed from office.


TTFN










Wednesday, January 24, 2018

JUST SO YOU KNOW

Just so there is no doubt about my opinion of the current President of the United States, let me be crystal clear.

Donald T Rump is a deplorable and despicable human being.  He is a worthless piece of shit.

He is an ignorant, incompetent, and delusional mentally unstable narcissist and sociopath who is totally unfit to serve as President.

His every thought, word, “tweet”, and action is motivated and controlled by his extremely excessive narcissism and delusions of infallibility, and his desire for personal financial gain - and absolutely nothing else.

He has no “political” agenda, nor any political beliefs or convictions.  His only agenda is, and has always been, (1) feed ego and (2) line pockets, in that order.  His one and only true belief is “Trump is great and Trump is good”. 

As a candidate and as President he has rarely, if ever, made a completely truthful statement to anyone about anything.  It is impossible to believe a word that comes out of his mouth.

Trump has never shown any respect for anyone or anything, and, despite the office he holds, he does not deserve any respect from anyone.

I will constantly and consistently vocally and aggressively oppose and denounce Donald T Rump the man via any venue available to me until he is removed from office. 

I do not oppose and denounce Trump because he is an alleged Republican or conservative – he is neither.  My opposition is not political – it is patriotism.  I join millions of Americans – Democrats, Republicans, and Independents, liberals, moderates, and conservatives – who oppose and denounce Trump and call for his immediate removal from office.

Got it?

TTFN











Tuesday, January 23, 2018

A LITTLE THIS-A, A LITTLE THAT-A


I have always said that H+R et al “charge gourmet restaurant prices for fast food service”.  Basically, I am observing that Henry and Richard, and the others, ain’t cheap, or even reasonable, and the fees are certainly not commensurate with the service.  But comparing the service at tax preparation chains to that received at fast food chains is not fair – nor true.

Prior to being diagnosed with diabetes I was a frequent patron of McDonald’s, Burger King and Wendy’s.  For the most part, I found the service provided by these chains to be most definitely “appropriate”.  And, again for the most part, I most certainly received value for my money. 

Those who use tax preparation chains will NOT be able to say the same thing when describing their experience.

And I must point out that nobody at McDonalds, Burger King or Wendy’s tried to force me to buy fries or onion rings that I neither wanted nor needed.

So, more appropriately, H&R et al “charge gourmet restaurant prices for service that is inferior to the service you get at a fast food chain.”

Of course, to be fair, I must always include in my assessment of tax preparation chains the following statement –

It may actually be possible that the best tax preparer, at the best price, for your particular situation is an H+R Block, or other chain, employee.  But this is only because of the individual education, experience, ability, temperament, and other factors that are specific to that individual preparer or perhaps that unique and specific franchisee.

Hey, it is better to be safe than sorry.  Bottom line - don’t use Henry and Richard or another chain to have your 2017 income tax returns prepared.  If you are looking to find a tax pro you can start here.

+ Hey fellow tax pros – did you see Monday’s post at THE TAX PROFESSIONAL?

+ This past Sunday was the first payroll I processed for a business client using the new tax withholding tables that were revised to reflect the changes of the GOP Tax Act.  I was curious to see if employees were actually getting any more money in their paychecks.

The gross payroll – total wages paid - for 20 employees for the 2-week pay period was up about $3,600 from the January 8th payroll, but the federal income tax withholding was $1,050 less.  So, there actually was more money in the paychecks.

However, the pay checks of the two highest paid employees, including the millionaire owner of the business, with the same gross income for the two payroll periods being compared, were increased by over $750 due to reduced federal income tax withholding.  Obviously, the increases in the paychecks of the lower paid employees were small.

I do worry, being cynical, that the withholding tables are a bit too “generous” to try to prove that serial liar Donald T Rump was telling the truth for once when he said workers would see increased paychecks thanks to the Act.  I expect that, while individual paychecks will be slightly higher, 2018 tax return refunds may be lower, or balances due higher, especially for employees who live in New Jersey, as the employees of the above client do.

I am not alone in my concerns.  In “Democrats raise concerns about IRS withholding tables” at TAXPRO TODAY Michael Cohn tells us (highlights are mine) -

The ranking Democrats on the tax-writing House Ways and Means Committee and Senate Finance Committee are worried the Internal Revenue Service might succumb to political pressure by releasing withholding tables this year that cause employers to withhold too little in federal taxes from their employees’ paychecks to make it appear the tax cuts are larger than they really are, with the result that taxpayers will end up owing more money on their taxes next year.”

+ Speaking of business clients and the GOP Tax Act, also this past week-end a business client, a family owned “regular” (non-S) corporation with 2 shareholders that usually has net taxable income of under $50,000, asked if its tax will be reduced under the new tax law.

When the lower corporate tax rate was originally discussed I had thought the entire rate scale would be reduced. I think I had read somewhere that those currently paying 15%, based on net taxable income, would pay 8% under “tax reform”. However, everything I have read says the income tax rate in the Act is a flat 21% tax rate on net taxable income for all “regular” (non-S) corporations.

So smaller closely held corporations, with net taxable income of $50,000 or less, who previously paid 15% in federal income tax will actually see a 6% tax increase, and, because the sliding scale of tax rates is gone, those with $75,000 or less in taxable income will see a 2+% increase.

Once again true small business gets screwed!

+ FYI - some guidance from the IRS on one of the changes in the GOP Tax Act.

The weekday daily “Checkpoint Newsstand” email newsletter tells us what it learned from the “Frequently Asked Questions” (FAQs) posted to the IRS website -

The FAQs clarify that a Roth IRA conversion made in 2017 may be recharacterized as a contribution to a traditional IRA if the recharacterization is made by Oct. 15, 2018. A Roth IRA conversion made on or after Jan. 1, 2018, cannot be recharacterized.”

+ The last word - As with any post, your appropriate comments, and not “praise” that is really only trying to promote your site or product, are always welcomed.  I also want to know if you find any tax law inaccuracies, or typos or other clerical FUs, in the post.


TTFN








Monday, January 22, 2018

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

* Over at GO BANKING RATES Michael Keenan gives us the “Average Tax Return and Tax Refund Schedule for 2017”.

One important date to note –
  
Feb. 27, 2018: If you’re claiming the earned-income tax credit or need to apply for the child tax credit, you’ll have to wait longer. The IRS expects refunds for tax returns claiming those tax credits to be available starting Feb. 27, at the earliest. If you’re claiming either credit, that means the IRS holds back your entire refund — not just the portion connected to the specific tax credit.”

* Staying with that topic – JDSUPRA lists “Six Reasons to Get Your Tax Return Prepared Early”, all good ones.

* Ken Berry (not the actor – showing my age again) states the obvious in “2018 Tax Reform: Pass-Through Income Deduction More Complex Than Thought” at the CPA PRACTICE ADVISOR.   

* Last week’s “Ask The TaxGirl” at FORBES.COM dealt with “Claiming A Tax Refund When You Owe Tax”.

Some good stuff in KPE’s answer (highlights are mine) –

I am going to assume further that you filed your 2016 tax return early based on an estimate or last pay stub because you wanted your refund quickly.

Not only is that a bad idea, it's against the rules: The Internal Revenue Service (IRS) specifically bars tax preparers from e-filing your tax returns without receipt of forms W-2, W-2G and 1099-R. And while there are some tax preparers who will do anything for a dollar, I would advise you to find a tax professional who is willing to explain what can happen to you when you file without the right documentation.”

* And in another “Ask The Taxgirl” post KPE tackles “The $10,000 SALT Cap & Vacation Homes”.

Kelly says that property taxes paid on a personal use vacation home can be included in the $10,000 maximum deduction.

So, it appears you can deduct up to $10,000 in a combination of property taxes and state and local income or sales taxes on Schedule A for 2018 – 2025.  If the property taxes on your primary personal residence are $6,000, and you have a vacation property with property taxes of $3,000, you can deduct up to $1,000 of state and local income or sales taxes to come up with the maximum $10,000.

* Let us make it a TaxGirl “trifecta” with the good news that “Mike 'The Situation' Sorrentino Expected To Plead Guilty To Tax Charges”.  Thankfully the government is spared the cost of a trial.

No surprise about the tax evasion – and getting caught. All these reality tv "celebrities" (including the one in the White House) are merely self-absorbed and self-important idiots with limited intelligence.

* Did you know that if you owe too much money to your Uncle Sam the IRS can revoke your passport, or deny your passport application or renewal?   Also at FORBES.COM, Robert W Wood explains “How Overdue Taxes Can Jeopardize Passports”.

* The TAX FOUNDATION reports on the "Summary of the Latest Federal Income Tax Data, 2017 Update" - “data on individual income taxes for tax year 2015, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.”

Curious about whether the wealthy are paying their “fair share” of taxes?  The summary points out that (highlights are mine) -

The top 1 percent paid a greater share of individual income taxes (39.0 percent) than the bottom 90 percent combined (29.4 percent).”

And -

In 2015, the top 50 percent of all taxpayers paid 97.2 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.8 percent.”

THE FINAL WORDS

Part I -

The ridiculous Turbo Tax tv ads seem to be saying that taxpayers should not be afraid to use TT software to prepare their tax returns.

This is obviously not true.  Individuals who use a “box” to self-prepare their 1040 need to be afraid that the return was not prepared correctly and that the IRS will charge them penalties and interest when the errors are eventually discovered.

It is difficult to decide whose tv ads are more stupid – Turbo Tax or Henry and Richard.

Part II –

Trumpocracy: The Corruption of the American Republic” is a great new book by a respected Republican that “offers a persuasive and detailed account of how Trump is undermining American institutions, including the presidency itself.”

It is "a must-read for Americans who are in denial about the threat to democracy posed by a president absorbed in narcissism and recklessly indifferent to the institutions and norms of ethics and propriety that have sustained the great American experiment for 2½ centuries.

His attributions are meticulous, his footnotes are extensive, his willingness to call out deviations from his conservative brethren is commendable.

Therein lies the power and credibility of Frum’s conclusions. They are supported by verifiable facts, grounded in historical context, devoid of ideological hue.”


TTFN