Wednesday, November 15, 2017

COMING SOON – NJ-NATP’S FAMOUS NJ STATE TAX SEMINAR!


New Jersey Chapter of NATP


The New Jersey chapter of NATP’s “Famous NJ State Tax Seminar” – and it is truly famous – is scheduled for Saturday, January 13, 2018 from 8:00 AM - 4:50 PM at the APA Hotel Woodbridge in Iselin.  Registration begins at 7:15 AM.  

As I say each year, this is a “must attend” for all tax professionals who prepare NJ state income, payroll and sales tax returns and reports.  I have attended almost every one since the first, missing only one or two because of excessive snowfall, and have never been disappointed.

The cost $225 for an NATP member and $275 for a non-member if your registration is received by January 6, 2018, and $245 or $300 thereafter.  A breakfast buffet (beginning at 7:15 AM), buffet luncheon, and coffee break is included in the price.

The day’s itinerary includes -

Overview of NJ Taxation – John Ficara, NJ Acting Director

NJ Tax Current Updates – Jacob Foy, NJ Division of Taxation
NJ Resident Credit – Robert Skala, NJ Division of Taxation
NJ Property Tax Relief - Alexis Reid, NJ Division of Taxation
NJ Inheritance Tax - Michael Rosen, Chief of Audit Activity
NJ Sales and Use Tax – Alexis Reid, NJ Division of Taxation
NY Taxation and Federal Updates – Kathryn Keane, EA

No time wasted on redundant ethics preaching!

Click here to print a registration form. 

FYI - click here to read my "review" of the January 2017 seminar.

TAFN















Tuesday, November 14, 2017

SIMPLER IS BETTER PART II – THE FLACH TAX PLAN



In light of the revelation of the dueling GOP tax Acts I have created my own Flach Tax Plan and a new, much simpler Form 1040.

My new simpler Form 1040 that follows was not created from an economic point of view – how much tax is collected – but from the point of view of simplicity and fairness.

I have actually incorporated some of the GOP proposals in my plan.  But it also contains some unique concepts –

* There is only one tax rate schedule for all taxpayers, regardless of filing status.  The Head of Household filing status is gone.  Married taxpayers can elect to file separately on one return or to file separately on separate returns – and a married person filing separately is treated exactly the same as a Single filer.  The method for calculating the tax liability of married couples filing a joint return does away with the marriage penalty.

* No deduction would be allowed for any business activity on any tax return for the depreciation of real estate or capital improvements thereto.

* The delivery of government social welfare and other program benefits are totally removed from the Tax Code.  There is no Earned Income Credit, refundable Child Tax Credit, deductions or credits for qualified post-secondary education expenses, or Premium Tax Credit on my new Form 1040.  I have not done away with these benefits; they are distributed via more “normal” methods.

* I replace IRA, HSA, MSA, ESA, and Section 529 accounts with an all-inclusive USA (Universal Savings Account).  All taxpayers, without exception, can contribute up to $10,000 per year. 

Distributions made before age 62 for education and medical expenses or to purchase a first home (only one first home per lifetime) would be considered to be qualified withdrawals.  There would be no penalty on non-qualified withdrawals after age 59½, but earnings would be taxed.  All withdrawals after age 62 would be considered to be qualified.  
I also replace all employer and self-employed retirement plans with a RSA (Retirement Savings Account).  Employers can elect to contribute up to 25% of wages annually, all employees can elect contribute up to $20,000 of wages annually.  There would be no requirements for either to contribute.  Self-employed taxpayers can contribute, and deduct, up to 20% of adjusted net self-employment income.

There would be “traditional” (for the USA fully deductible and no tax on earnings for qualitied withdrawals and for the RSA employee contributions would be “pre-tax” on the W-2) and ROTH (contributions non-deductible – qualified withdrawals totally tax free) options for both accounts.

* Contributions to an RSA by a self-employed taxpayer and the deduction for the health insurance premiums paid by a self-employed taxpayer would reduce the net earnings from self-employment that is subject to the self-employment tax.

* Social Security and equivalent Railroad Retirement benefits would be taxed the same as regular employer pensions.  Employee contributions would be recovered by amortizing them over the taxpayer’s life using the, what else, “Simplified Method” to determine the taxable amount of the benefits received.  

* And perhaps most controversial - no charitable deduction would be allowed for contributions to a church or religious organization for religious activity.  Non-religious social and community action programs (soup kitchens, homeless and domestic violence victim shelters, youth centers, day care centers, etc) run by individual churches and religious groups would need to separately organize and request non-profit status to allow contributions to be deductible.  Permitting a deduction for contributions to churches and religious organizations for religious activity results in the government in effect subsidizing religious activity, which, in my opinion, is a violation of the separation of Church and State.

Click HERE to download my report A NEW FORM 1040: TAX REFORM PROPOSALS FROM A TAX PROFESSIONAL.

As always, your thoughts and comments on my new Form 1040 are welcomed.  And you are welcome to share the link with, or download and copy the report to distribute to, friends, family, co-workers, and colleagues.


TAFN





Monday, November 13, 2017

SIMPLER IS BETTER!


It is widely thought, within and without the industry, that continued and constantly added complexity in the US Tax Code is good for our business.  I remember that the Tax Reform Act of 1986 was referred to by many as “The Accountant’s Full Employment Act”.

I strongly disagree.  Complexity is bad for business.  While it may drive clients to use tax professionals, and certainly generates more billable hours, the real result is additional aggravation, agita and anxiety for tax professionals as well as the increased potential for error and preparer penalties.  It creates more work – but more unnecessary and wasteful work. 

There are only so many hours in the tax season.  I would much rather prepare more returns that are simple for lower fees, with less agita and error potential, than less returns that are complicated but generate higher fees.

I have said for years that I would make more money, experience less agita, make less errors, and substantially reduce the number of GD extensions needed each year if I did nothing but 1040As all day during the tax filing season.

I firmly believe my clients would not decide to do their own returns if the tax system was simplified; they would continue to come to me.  Most taxpayers who use a tax professional simply don’t want to be bothered with the task of preparing their tax return, and want to make sure they do not miss anything.  And even with a more simplified tax system there would still be a need to complete Schedules C, D, E, F, SE and related forms.

Less complication also reduces my cost – for paper and ink and for CPE.  The less complicated the tax return the less additional forms, schedules and worksheets it generates and the less continuing education I need to keep up-to-date and educated on the complexities. 

The current proposed tax law changes resulting from the belief by the Republicans in both houses of Congress that “pass-through” business income should be taxed at a lower rate on the 1040, a truly stupid idea to begin with, is a good example of unnecessary complexity. 

Much of the complexity forced upon tax professionals comes from the continued erroneous and inappropriate practice by the idiots of both parties in Congress of distributing government social welfare and other benefit programs via the Tax Code, and in the process making the IRS and tax preparers become social workers.  Not only the complexity of the tax law, but the added excessive due diligence requirements, wastes our time and resources. 

And another bad result – the additional work that should generate additional fees, especially when it comes to the Earned Income Credit, the refundable Child Tax Credit, and the Premium Tax Credit and penalties of the Obamacare individual mandate, applies to low income clients who can least afford the additional fees – and are more often than not charged less than appropriate additional fees, or no additional fees, by tax preparers,

Tax professionals should champion the cause of tax reform that produces true tax simplification. 

Check out my website A TAX PROFESSIONAL FOR TAX REFORM.

Your thoughts?


TAFN







Monday, November 6, 2017

A HOLIDAY SEASON TAX PRACTICE TIP


Many years ago, before I was “gifted” my mentor’s tax practice at the end of the last millennium, I had only about 100 of my own 1040 clients.  In December I would send each client on my list a tax-themed Christmas card, usually purchased from an accountant supply house, and, as I did with all my Christmas cards, included an annual “year-in-travel” newsletter.

Many families include in their Christmas card a newsletter talking about what the family has been up to during the year, often with emphasis on their kids’ achievements.  My uncle, a confirmed bachelor, was a world traveler and would each year compose a Christmas newsletter that outlined his many travels that year.  We occasionally travelled together.  I followed in his footsteps, both in travelling (I am, after all, known as the “wandering” tax pro) and in writing an annual Christmas letter highlighting my travels for the year.

As my travels used to include attending both the NATP Annual Conference and the NSTP National Convention each year at various cities throughout the US, many of which I would not have visited were it not for the tax CPE, these trips were reported in my letter, as were trips to Atlantic City and other locations for year-end tax update classes.  I found this a subtle but effective way of reminding my clients of my extensive continuing professional education throughout the year to keep up with the ever-changing 1040.

When I took over my mentor’s practice my client list expanded from 100 to well over 300.  It became too expensive to send each client a Christmas card.  But I continued to send out the Christmas travel letter as part of my annual January informational mailing to clients.

Over the years I have had more favorable comments on this annual Christmas travel letter than any other mailing sent to clients.  Many clients, to this day, tell me they look forward to reading it each year.

Do you have a unique idea that has worked in your tax practice?  Email me at rdftaxpro@yahoo.com with TAX PRACTICE TIP in the “subject line”.

TAFN


I have been preparing 1040s since 1972. Over the years I have developed a collection of forms, schedules and worksheets that have proven very helpful in my practice. 

Some of my forms are given to clients to help them provide me with the information I need to properly prepare their returns. Some are used as “memos” to the client’s copy and my office file copy to back-up items reported on the returns. Others are used as attachments to the returns.

I offer this compilation to you for only $7.95!

Click below for more information-









Wednesday, November 1, 2017

WATCH THE IRS NATIONWIDE TAX FORUM SESSIONS FOR FREE!




Still waiting for responses to my Meet and Greet interview form – so here is a special Wednesday post.

Back when the Northeast presentation of the IRS Nationwide Tax Forums was held in New York City (and before that Atlantic City) I would attend each year.  I stopped when the location was moved to the National Harbor in Maryland.

The IRS Forums were, at least initially, very reasonably priced.  Perhaps more important to me, you learned the IRS perspective on many relevant tax topics and issues.  The “keynote” presentation was usually by a top-ranking IRS official.  And you got to hear from instructors who were not only IRS employees, including usually Nina Olsen, but also actual tax professionals from NATP, NSTP, and other tax preparer membership organizations.

While the NATP “replacement” of the Forum in more conveniently located Atlantic City provides good education, it lacks the IRS perspective.

My major complaints with the IRS Forums were (1) the sessions were limited to 50 minutes, clearly not long enough to properly cover some topics, and (2) there were no tables in the rooms, so it was difficult to take notes.  The same criticisms apply to the NATP Forum, although the individual sessions were this year 1 hour 40 minutes – 2 50-minute CPE hours each. 
If you, like me, did not attend any of the 2017 IRS Nationwide Tax Forums you may “audit” some of the individual sessions online - watch a video of the session with of the presentation and the power point slides without receiving CPE credit - for free. 

If you want CPE credit you must pay $49.00 per session.

I was interested in these sessions -  

This seminar will focus on issues surrounding rental real estate, including conversion to and from personal use, tax deferred exchanges (IRC 1031), involuntary conversions (IRC 1033), and interest tracing requirement (IRC 163). In addition, this presentation discusses the IRC 280A tax considerations for property that is rented and used personally, including the use of a principal residence in the shared economy.

By the end of this presentation, you will be able to:

Determine the meaning of "Interest Tracing"
Identify when deferred deductions are applicable
Differentiate between personal and business property
Identify deferred gains opportunities
List and Identify foreign real estate property expenses that are deductible

This seminar will focus on numerous tax implications of renting a personal residence from vacation property to rooms with AirBNB. The presentation will also discuss related issues such as disposition, passive loss and personal residence exclusion along with a review of relevant court cases.

By the end of this presentation, you will be able to:

List examples of personal use
Determine allocation of deductible vs. non-deductible expenses
Identify deduction limitations
Determine the tax impact of disposed property
List aspects that determine the definition of dwelling

This seminar will discuss the major tax law changes for 2017, including how they affect tax forms and publications.

By the end of this presentation, you will be able to:

Identify expired tax provisions
Determine changes to qualifying widow(er) status
Identify new forms for oil and gas credits
List changes to forms for education credits
Identify new partnership audit rules

There were also sessions on IRS Notices, Dealing with IRS Appeals, and due-diligence topics.
In addition to watching the seminar recordings you can print out the transcript and Power Point slides for each presentation.

TAFN







Monday, October 30, 2017

2017 YEAR-END TAX PLANNING - WHAT DO WE TELL OUR CLIENTS?




Around this time of year, we tax professionals usually send out year-end tax planning letters to clients.  But year-end tax planning is different this year, with the possibility of tax “reform” legislation being passed before the end of 2017.  And more so, with the additional possibility, although I think remote, that tax law changes could be made retroactive to 2017 instead of taking effect beginning with tax year 2018.
 
What do we tell our clients?
 
The traditional year-end tax plan of accelerating deductions and postponing income is especially applicable this year considering that the “framework” for tax reform calls for reducing tax rates, eliminating itemized deductions and increasing the standard deduction.
 
2017 may be the last year taxpayers can deduct taxes, medical expenses, and miscellaneous investment and job-related expenses.  So, making additional payments in these areas – such as making the 4th Quarter estimated income tax payment in December 2017 instead of January 2018 and scheduling and paying for medical appointments, exams and treatment and paying job-related expenses before year end.  Of course, decisions should be made remembering the deductibility of medical and miscellaneous expenses is based on the 10% (now for everyone) and 2% of AGI exclusion. 
 
As we all know you can only deduct “itemizable” expenses if the total exceeds the applicable Standard Deduction.  While it appears that deductions for mortgage interest and charitable contributions will remain, the alleged “doubling” of the Standard Deduction could cause these expenses to provide no tax benefit in 2018 – so, if a taxpayer will be able to itemize for 2017 under current tax law, making an extra mortgage payment in December and making charitable contributions planned for 2018 in the last months of 2017 would be a good idea.
 
The “framework” does not give any indication if the current lower 0%, 15% and 20% tax rates for qualified dividends and long-term capital gains will remain in effect.  So, it is important for taxpayers to look at their investment activity for the year and their current portfolio and take maximum advantage of the lower capital gain rates, especially the 0% rate if applicable.  Taxpayers may want to consider selling stocks or mutual fund shares at a gain, and immediately buying them back, to lock in the lower tax rate on investment appreciation.  As we know, there is no “wash sale” limitations on sales that produce a net gain – only on transactions resulting in a tax loss.
 
And, as every year, we need to advise clients on year-end strategies concerning the sale of mutual fund shares related to the timing of year-end distributions and Net Asset Value changes, and college tuition and fee payments. 
 
FYI, the November issue of ROBERT D FLACH’S 1040 INSIGHTS includes my year-end planning recommendations.  A copy of this issue, sent as a pdf email attachment, is only $3.00.  Click here for details.
 
When the actual specific details of the framework’s “cocktail napkin scribblings” are finally released, sometime in November, we will have a better idea of what to recommend.  But we really cannot wait too long to send out the year-end planning letters and get our clients thinking about year-end moves. 
 
This year-end suspense regarding tax law has, unfortunately, become the norm in recent years.  Perhaps it would be a good idea to pass a law that requires tax legislation, other than emergency legislation relating to natural disasters and perhaps other unique situations, that would affect the following year (for example tax law affecting 2018 introduced in 2017) MUST be passed by August 31st or September 30th.  And one way to avoid late-year disaster-related tax legislation would be to make tax relief for “Presidentially-declared” natural disaster areas permanent.
 
So, what are your thoughts on this issue?
 
TAFN
 
 
 
 
 
 

Wednesday, October 25, 2017

TAXPRO BUZZ


 
I am waiting to receive more responses to my interview questionnaire – so no “Meet and Greet” today.
 
Instead, here is some Taxpro BUZZ of note -
 
+ The IRS and the SSA have recently released new COLA and inflation-adjusted numbers for 2018 under current tax law.  Click here to see my compilation of these new numbers.  Keep in mind possible tax reform legislation will change, and could even eliminate, some of the numbers in the compilation.
 
+ MY TAX COURSES ONLINE BLOG provides “a checklist of things you should take care of prior to tax season so that everything runs smoothly” in “Now is the time - Pre-Tax Season Checklist”.
 
While the post suggests participating in the AFSP under “Get your education and training”, I do not find this IRS program valuable.  But now is a great time to sign up for the NATP year-end update classes “The Essential 1040” and “Beyond the 1040”.  Click here for more information.
 
And also check with the appropriate state chapter of NATP or other tax preparer membership organizations for year-end state tax seminars and workshops.
 
The bottom line -
 
Tax season can be stressful but it's easy to mitigate this stress if you have a solid plan in place and follow this checklist. By preparing for tax season early, you can avoid technical and administrative snags and make January-April run as smoothly as possible.”
 
+ It appears that silence won’t be golden on 2017 tax returns.  Michael Cohn explains “IRS won’t accept returns next year without health coverage” at ACCOUNTING TODAY –
 
In an update Friday to the web page of its ACA Information Center for Tax Professionals, the IRS said will not accept the electronic tax return until the taxpayer indicates whether they had coverage, had an exemption or will make a shared responsibility payment. On top of that, the IRS said tax returns filed on paper that don’t address the health coverage requirements may be suspended pending the receipt of additional information and any refunds may be delayed.”
 
+ The TAX FOUNDATION has released its annual State Business Tax Climate Index, which “enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare”.
 
No surprise that my former home state of New Jersey is #50 in overall ranking – like Oliver Twist last on the list!  My relatively new home state of Pennsylvania ranks #26.
 
The 10 best states in this year’s Index are:
 
1. Wyoming
2. South Dakota
3. Alaska
4. Florida
5. Nevada
6. Montana
7. New Hampshire
8. Utah
9. Indiana
10. Oregon
 
The 10 lowest ranked, or worst, states in this year’s Index are:
 
41. Rhode Island
42. Louisiana
43. Maryland
44. Connecticut
45. Ohio
46. Minnesota
47. Vermont
48. California
49. New York
50. New Jersey
 
Where does your state rank?
 
+ My fellow tax blogger Russ Fox lists “The Five ‘Strangest’ Things Clients Told Us This Tax Season” at TAXABLE TALK.
 
During my 45 years in “the business” I have heard a lot of strange things from clients – about taxes and other topics.  And I expect you have, too.  I am sure you have all heard the same strange stuff told to Russ – and stuff even stranger. 
 
What are the strangest things you have heard from your clients over the y ears?
 
+ Whatever you may think of the IRS, its website if chock-a-block with helpful information.  I recently learned of this page – “Taxpayers Who are Victims of Domestic Abuse Should Know Their Rights”.
 
Guys (and dolls) – please tell your co-workers and colleagues about this blog.  Thanks!
 
TAFN

 
I have been preparing 1040s since 1972. Over the years I have developed a collection of forms, schedules and worksheets that have proven very helpful in my practice. 
 
Some of my forms are given to clients to help them provide me with the information I need to properly prepare their returns. Some are used as “memos” to the client’s copy and my office file copy to back-up items reported on the returns. Others are used as attachments to the returns.
 
I offer this compilation to you for only $7.95!
 
Click below for more information-