Friday, June 23, 2017


Will there be tax reform legislation passed in 2017 (the actual question is, with the current nut job loser in the White House, will there be any legislation successfully passed in 2017)?  You betcha, according to Paul Ryan.
Speaking to the National Association of Manufacturers the other day Ryan said, “I’m here to tell you – we are going to get this done in 2017.”  According to Ryan the end of calendar year 2017 would be a realistic timeline, but he hoped to get it done sooner.
Ryan did not provide any real details (similar to the scribblings on a cocktail napkin idiot Trump released as his “tax plan”), but he did call for eliminating the dreaded Alternative Minimum Tax (AMT), the federal Estate Tax and “special interest carveouts and deductions”, doubling the Standard Deduction, lower and fewer tax rates, and making any reforms permanent – all good things.
My only concern with eliminating the federal Estate Tax has always been how this will affect the current step-up in basis of inherited assets.  Taxpayers have a hard enough time remembering what they paid for stock purchased three years ago – knowing what their deceased parents paid for stock purchased in the 1960s will be impossible.
Ryan also continued to put forth the ridiculous idea that taxpayers could file a tax return the size of a postcard.  This would only be possible if the taxpayer was single, had only W-2 income, and could not itemize – similar to the current Form 1040EZ filer.  Providing a postcard option would discourage taxpayers from taking full advantage of available tax deductions and credits.
Tax reform legislation will probably not be introduced until the fall – so it is possible that it could be passed by the end of the year (assuming, of course, that idiot Trump, if he is still in office, does not fuck it up).  But even if reform is enacted by year-end, tax law changes would most probably not take effect until at least calendar year 2018.
I truly hope that real and substantive tax reform is enacted this year – but, to be honest, I am not holding my breath.

FYI, the CCH Headline News email newsletter tells us "IRS Supports Tax Reform that Simplifies Tax Code, Koskinen Says".
Click here to check out a compilation of my recommendations for tax reform.  Let me know what you think of my ideas.
A tax-related bill, supported by both Republicans and Democrats, has actually passed in the House - “The Mobile Workforce State Income Tax Simplification Act of 2017”. 
According to the bill’s summary -
This bill prohibits the wages or other remuneration earned by an employee who performs employment duties in more than one state from being subject to income tax in any state other than: (1) the state of the employee's residence, and (2) the state within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the wages or other remuneration is earned.”  
So if you lived and worked in New Jersey, but spent 23 days working at the branch office in Kansas and 15 days working at the branch office in New York, you would not have to pay state income tax to Kansas or New York on your wages for those days.  But if you spent 35 days in Kansas you would.
This law would not apply to professional athletes and headline entertainers.  They would still have to pay income tax to each state in which they appear during the year, regardless of the actual number of days physically in the state.
This involves the issue of “nexus”, which affects both individuals and businesses.
When it comes to both individual and business state income tax nexus it is my belief that it should be totally eliminated.  An individual should only be taxed by the state in which he or she lives or the non-resident state where his or her job or business is physically located (i.e. live in NJ and work in NYC).  And a corporation or other business should only pay state income tax on net income to the state in which it is organized and physically located.
State income tax nexus rules, and they differ from state to state, are truly a PITA and waste lots of time and money for employers and businesses.
Individual states benefit from nexus laws by receiving income from non-residents, but residents who must pay income tax to other states receive a credit on the resident state return for taxes paid to other states.  So I expect the actual net cash benefit to the states is really not substantial (to be fair, I have not actually investigated nexus tax statistics).  


Tuesday, June 20, 2017


Before I get to taxes - please join me in my campaign to enact a TRAVEL BAN on Trump by writing to your representatives in Washington.  Read, share, and send my OPEN LETTER TO THE MEMBERS OF CONGRESS.


* Tony Nitti of FORBES.COM provides some excellent and important tax information for couples who are considering marriage in “It's Wedding Season: Here Are Five Tax Reasons Not To Say 'I Do'” –

There is a nuance within the current body of tax law called the ‘marriage penalty’, and it is a very real, very painful thing. So be warned, if your big day is planned for this summer, you'll be paying for it next April.”

Tony only touches on the tax consequences of being married.

The post also gives some hints for wedding guests to look for to predict if the couple will be divorced within three years.

* Staying with FORBES.COM, TaxGirl Kelly Phillips Erb lists “11 Signs That It's Time To Find A New Tax Professional”.

Perhaps one of the most important reason to go elsewhere is her #4 – “Your tax pro won't sign your return”.

A point of information – whatever you do, do not turn to me to be your new tax pro.  Read my lips – I do not accept ANY new clients.

* Information on a new phone scam from NATP -

Beware of New Phone Scam: Targets EFTPS Users

The IRS is warning people to beware of a new scam linked to the Electronic Federal Tax Payment System (EFTPS), where fraudsters call to demand an immediate tax payment through a prepaid debit card. This scam is being reported across the country, so taxpayers should be alert to the details.

In the latest twist, the scammer claims to be from the IRS and tells the victim about two certified letters purportedly sent to the taxpayer in the mail but returned as undeliverable. The scam artist then threatens arrest if a payment is not made through a prepaid debit card. The scammer also tells the victim that the card is linked to the EFTPS system when, in fact, it is entirely controlled by the scammer. The victim is also warned not to contact their tax preparer, an attorney or their local IRS office until after the tax payment is made.

EFTPS is offered free by the U.S. Department of Treasury and does not require the purchase of a prepaid debit card. Since EFTPS is an automated system, taxpayers won’t receive a call from the IRS.”

* I am almost ready to “go to press” with my truly unique book of planning and preparation advice, information, and resources on NJ state income taxes - THE JOY OF AVOIDING NEW JERSEY TAXES.  There is still time to take advantage of the special 60% discount pre-publication offer if you order today!

* Donna Holm answers the question “When is it OK to throw out old tax documents?” at ACCOUNTING TODAY.

I discuss this topic in the May 2017 premiere issue of ROBERT D FLACH’S 1040 INSIGHTS.  In the item I state –

I firmly believe that you should keep the paper copy of your Form 1040, or 1040A, plus all supporting Schedules and Forms, and copies of all your Form W-2s, forever. 

* Also from ACCOUNTING TODAY, Michael Cohn tells us “Hatch asks for input on Senate Republicans' tax reform plan”.

I sent the committee my booklet A TAX PROFESSIONAL FOR TAX REFORM.


Write to your Congresspersons to show support for H.R. 2414, the Stop Waste And Misuse by the President (SWAMP) Act.   

The SWAMP Act was introduced by Representative Ted Lieu (D-CA) on May 11, 2017. If enacted, this legislation would compel President Trump to reimburse the Department of the Treasury for any costs associated with travel to a commercial entity, in which he has a financial interest, along with any associated protection costs by the U.S. Secret Service.


Monday, June 19, 2017


ü  Despite being in “the business” for 45 years, I usually learn one or two new things from the various monthly and quarterly print publications of the National Association of Tax Professionals.  The latest issue of TAXPRO MONTHLY provided the following –

Did you know that ‘CP’ stands for ‘Computer Paragraph’?  So CP2000 stands for Computer Paragraph 2000, an automated letter that is triggered by discrepancies on the tax return.” 

The form letter that you receive from the IRS indicating something may be wrong or missing on, or requesting additional information for, your 1040 (or 1040A) is identified by numbers, or numbers and letters, preceded by “CP”.  I actually never, until now, actually knew what the “CP” stood for.

The article in this issue about responding to a CP2000 reminded me of the importance of properly dealing with IRS and state tax agency letters, notices and statements.  If you receive a form letter or notice from the IRS or your state DO NOT IGNORE IT – the issue will not just go away!  And DO NOT PUT IT ASIDE TO DEAL WITH IN THE FUTURE.  Review it immediately.  If the return in question was prepared by a professional tax preparer SEND THE LETTER OR NOTICE TO YOUR TAX PREPARER IMMEDIATELY!

In my experience at least 2/3, if not 3/4, of all such notices are wrong – more with state notices than federal ones – but they definitely do need to be responded to promptly.

And, while the IRS or state wants you to respond promptly, do not expect a prompt response to your reply from the government.  In about 45 days after you rely to an IRS notice or letter you will receive a form letter from “Sam” saying that they need an additional 45 days to properly review and process your response.  45 days later you will receive a second letter telling you they need another 45 days.  When dealing with any government agency you need patience.

ü  As a point of information, all my writings about federal tax planning and preparation, here at TWTP or in any of my electronic or print publications, applies to a taxpayer who lives in a “non-community property state”, which most states are. 

The specific rules and regulations that apply to community property states are, to be honest, somewhat FU-ed.  In my 45 years as a paid preparer I have never had to deal with community property state issues, and certainly never will going forward.  So I have never had the need, or desire, to research community property state rules and regulations.

FYI, the current community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.  Alaska is an opt-in community property state that gives both parties the option to make their property community property.  So if you live in one of these states you may need to check on some of what I discuss here at TWTP with a local tax professional.

ü  A recent discussion with a client and friend had me do some research to verify what I had believed to be true regarding the tax basis of jointly-held investments for a surviving spouse.

What I had believed to be true was indeed true –

If investments are jointly owned by a married couple in a non-community property state (important) – stock, bonds, and mutual fund shares held in a joint brokerage account, or real estate jointly owned - and one spouse passes, the deceased spouse’s half of the investments will receive an automatic “step-up” in basis to the federal estate tax value, even if no federal estate tax return is filed or no estate tax is due.  This is generally the market value of the investment on the date of death of the deceased spouse, but could also be the market value 6 months from the date of death if this alternate valuation is elected on a federal return.    

My discussion with the friend and client, a stock broker, also verified what I suspected.  If a beneficiary sells a stock that he or she inherited, the cost basis reported on the Form 1099B issued by the brokerage, whether or not the sale involves a “covered” investment, will not necessarily report the correct tax basis of the investment – the “date of death” value – even if the deceased and the beneficiary had the same broker.  It may – but only if the individual broker has made the proper adjustment to the cost basis in the internal brokerage reporting system.

So it is very important for your tax professional, or you if you are self-preparing, to independently verify the correct cost basis for inherited investments sold to determine if any adjustments are needed to the Form 1099B numbers.


Tuesday, June 13, 2017


* VERY IMPORTANT!  Please read, and share, my “Open Letter to the Leaders of the Republican Party” in the June “issue” of THE LIBERTY TIMES.
An excellent bottom line –
When it comes to running a business, it’s imperative to open a business checking account and make your bookkeeping process as clean as possible. This helps you secure business loans and run your business professionally.”
* It is the only book of its kind (that I know of) in existence!  THE JOY OF AVOIDING NJ TAXES discusses in detail NJ state income tax return preparation and tax planning strategies.  It is a “must buy” for NJ taxpayers and tax pros who prepare NJ state income tax returns.  Click here to check out the special “pre-publication” offer.  
* Jean Murray gives us “Employer's Guide: Paying Employee Moving Expenses” at THE BALANCE.
* Jim Blankenship discusses two options for tax-deferred savings for college in “IRA or 529?” as GETTING YOUR FINANCIAL DUCKS IN A ROW.
* Jason Dinesen explains “Home Office Deductions and the 'Exclusive Use' Rule”.  A truly important rule indeed.
One of the basic truths for any taxpayer wanting to claim a deduction for business use of the home is, the office area must be used 100% for business purposes. And 100% business use means 100%.”
It has been said that the Russia investigation has distracted nut job loser Trump from concentrating on his “agenda”.
Just what is Trump’s “agenda” as President?  It is the same agenda he has had all of his life –
1. Feed ego.
2. Line pockets.

Tuesday, June 6, 2017


* VERY IMPORTANT!  Please read, and share, my “Open Letter to the Leaders of the Republican Party” in the June “issue” of THE LIBERTY TIMES.
* Kay Bell, the yellow rose of taxes, tells us “Private tax bill collectors already breaking rules says TIGTA” at DON’T MESS WITH TAXES.
No surprise here.  As Kay starts her post –
Most of us suspected it would happen. We just didn't think it would happen so soon.
‘It’ is apparent disregard by some private debt collectors of the rules established in connection with the collection agencies' latest congressionally mandated foray into federal tax collection.”
Forcing the IRS to use private collection agencies is, as it was in the past, a stupid idea.
There is no doubt, certainly for me, that Kay’s bottom line prophesy will be proven true -
Based on prior experiences and early reports of the 2107 program, it's likely to be a third lose-lose for taxpayers and the IRS.”
* Kay Bell also explains “529 college saving plan perks and pitfalls” in an earlier post.
I like the 529 Plan.  However, as Kay correctly points out - “There is no tax deduction at the federal level for these contributions.”  However you may be able to get a state tax deduction.
* And I finish a Kay Bell “trifecta” with “4 summer tax matters to consider in June”.
* Here is one more example where the “Tax Court says taxpayers can’t blame DIY programs” provided by Roger Russell at ACCOUNTING TODAY.
The court in this case showed real wisdom when assessing an additional penalty for the taxpayer’s FUs -
Although Bulakites claimed that his tax software made him do it, the court reasoned that, ‘Tax preparation software is only as good as the information one inputs into it’.”
How many times must I say this – No software package is a substitute for knowledge of the Tax Code, and no tax software package is a substitute for a competent, experienced tax professional.
* Jason Dinesen reposts a “blast from the past” with important information for taxpayers with rental properties at DINESEN TAX TIMES – “From the Archives: Rental Properties and Basis Allocation”.
* Speaking of a “blast from the past”, Jim Blankenship recently tweeted a 2012 post from GETTING YOUR FINANCIAL DUCKS IN A ROW on “5 Facts You Need to Know About Your Retirement Plan” that is still relevant today.
* And in a new post Jim talks about “Higher Education Expenses Paid From an IRA”.
I touched on the same topic in my post “Don’t Touch That 401(k)!”.
* Kelly Phillips Erb, FORBES.COM’s TaxGirl, tells us “States Offer Sales Tax Holidays For 2017 Beginning In Summer”.
The post provides alphabetical lists of the states that will and may be offering sales tax holidays this summer and the specific items to which the “holiday” applies.
* Also from FORBES.COM, Tony Nitti gives us a primer on “When It Comes To Tax Time, Who Is A Dependent?
* A recent “tweet” from the IRS Taxpayer Advocate –
Do you have suggestions about tax reform? Share them with TAS on the Tax Toolkit. 
Click here to send Nina your tax reform suggestions.  I sent her mine a year or so ago.
* Over at INVESTMENT NEWS Greg Iacurci discusses “The appeal and pitfalls of holding unconventional assets in retirement accounts”.
I have a client who holds rental real estate in his traditional IRA.  Greg is correct when he tells us “While non-traditional asset classes held in individual retirement accounts may have return and portfolio diversification benefits, there are ‘unique complexities’."
Part 1 –
Denouncing and opposing nut job Trump, and calling for his removal from office, is NOT political.
I do not denounce and oppose Trump because he is Republican and I am a Democrat.  I voted for Romney in the 2012 Presidential election.
I do not denounce and oppose Trump because he is conservative and I am a liberal.  I am conservative on some issues and liberal on others.  During the campaign I urged those who could not in good conscience vote for Hillary Clinton to support the Libertarian Party candidate Gary Johnson.
I denounce and oppose Trump because he is a dangerous, delusional, ignorant, mentally unstable malignant narcissist.  He must be removed from office before he does any more damage to America and the world.
Denouncing and opposing nut job Trump, and calling for his removal from office, is not political - it is patriotism!
I will continue to speak out against Trump, my patriotic duty, here and in social media until he is removed from office.
Part 2 –
An excellent assessment of the current White House from a New York Times editorial by Nicholas Kristof titled “On a Portland Train, the Battlefield of American Values” -
"Today’s White House seems to stand for nothing loftier than crony capitalism and the scapegoating of refugees, Muslims and immigrants. To me, Trump ‘values ‘ primarily narcissism, nepotism and nihilism.
And this is infectious: Cass Sunstein of Harvard cites psychology research indicating that Trump has made it more acceptable for Americans to embrace xenophobia. I wrote last year that “Donald Trump is making America meaner,” prompting bigotry in rural Oregon where I grew up, and around the country.
What the three men in Oregon understood, but the White House doesn’t, is that in a healthy society, Islamophobia doesn’t disparage just Muslims, racism doesn’t demean blacks alone, misogyny hurts more than women, xenophobia insults more than immigrants. Rather, we are all diminished, so we all have a stake in confronting bigotry."

Monday, June 5, 2017


Regular readers of TWTP, and followers at Twitter, know that in posts and tweets I always precede the word “extension” with “GD” (does NOT stand for “government deferred”), mentions of the Alternative Minimum Tax, or AMT, with the description “dreaded”, and references to Congress with “the idiots in”.
I have added a new item to my list.  I will now always precede a reference to the current idiot in the White House (I realize there are several, but you know who I mean) with the accurate description “nut job idiot”.


The US District Court for the District of Columbia, in response to class action lawsuit “Adam Steele et al v United States of America”, has ruled that the Internal Revenue Service can require paid tax preparers to register with the Service and receive a “Preparer Tax Identification Number”, or PTIN, but it cannot charge a fee for applying for or renewing a PTIN.
The Court had determined -
Although the IRS may require the use of PTINs, it may not charge fees for PTINs because this would be equivalent to imposing a regulatory licensing scheme and the IRS does not have such regulatory authority.”
The IRS relied on the Independent Offices Appropriations Act of 1952 in its justification of the fee, but according to the decision –
The Court is unaware of similar cases in which an agency has been allowed to charge fees under the IOAA for issuing some sort of identifier when that agency is not allowed to regulate those to whom the identifier is issued, and the government has not pointed to any.”
For as long as I have been preparing 1040s, since February of 1972, paid preparers have been required to sign the tax returns they prepare.
On the 1971 return the preparer signature attested that: “Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief it is true, correct, and complete.”
The sentence, “Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge,” was added to this statement sometime thereafter.
The 1977 return was the first that required, in addition to a signature, the preparer’s “identifying number”, later specifically referred to as the preparer’s Social Security number.  Beginning with the 1978 Form 1040, the preparer’s “Firm’s name (or yours if self-employed), address and ZIP code” and its corresponding Employer Identification Number had to also be entered on the return under a section called “Paid Preparer’s Information.”
In an attempt to avoid identity theft, the “Preparer Tax Identification Number”, was created as an alternative to listing one’s Social Security number on the return.  The 1999 Form 1040 was the first that asked for the preparer’s “SSN or PTIN”, and the first return on which I entered my PTIN, which is the same PTIN I use today.
Up through the 2009 return a PTIN was optional, and paid preparers could still use their Social Security number when signing a return.  And up through 2009 there was no fee for applying for a PTIN, and one never had to renew one’s PTIN.
Beginning with the 2010 return all paid preparers were required to register with the IRS and obtain a PTIN as part of the new IRS mandatory Registered Tax Return Preparer regulation regime.
And tax pros were required to pay an initial $64.25 to receive, or “refresh” an existing, PTIN.  PTINs were required to be renewed annually at a cost of $63.00.  The PTIN fee was established as a method of partially funding the mandatory RTRP program, and annual renewal was initiated so that the preparer could verify that they had taken the required hours of continuing professional education.  The IRS mandatory RTRP regulation regime was put to death by the court in Loving v. IRS, but the PTIN requirement, and fee, continued.
The PTIN fee for both new and renewing applicants was reduced to $50.00 in late 2015.  The $50.00 was composed of an actual $33.00 IRS fee and $17.00 for the outsourced agency that maintains the PTIN registry.     
I have never had any issue with the PTIN requirement.  The IRS does need to maintain a registry of tax return preparers, via the issuance of a PTIN, and the Court in both Loving v. IRS and Steele v. US allowed the IRS to continue to require that all paid preparers register with the service and receive a PTIN. 
My problem has been with the fee.  With the death of the mandatory RTRP program there was no more need to charge a fee for acquiring or maintaining a PTIN.  I am glad the Court correctly acknowledged this, and that the IRS did not have the authority to charge a fee.
The order pursuant to this decision, signed by Judge Royce C Lamberth, states (highlight is mine) –
It is further ORDERED that all fees that the defendant {USA – rdf} has charged to class members to issue and renew a PTIN . . .  are hereby declared unlawful, and the defendant is enjoined from charging those fees in the future.
It is further ORDERED that the defendant shall provide each class member with a full refund of all PTIN fees paid.”
Assuming the IRS loses its expected appeal I am looking forward to getting my check!