Wednesday, October 18, 2017

MEET AND GREET - JOE KRISTAN




Today we meet Joe Kristan of Eide Bailly LLP, formerly of Roth and Company PC, from Iowa.  For many years Joe wrote the popular and well-respected tax blog THE ROTH AND COMPANY TAX UPDATE BLOG, known for its daily BUZZ-like tax blog Roundup.  Many, myself included, were truly sorry to see the end of this blog.
 
Many years ago, I asked Joe why he blogs for an article I wrote for the NATP TAXPRO JOURNAL.   Here is what he said -
 
I blog because I enjoy it, and because I think it is good for me professionally.  I have long started my day reading the tax news, so it wasn't a big leap to start commenting about it.  I think it helps keep me sharp, and it helps me stay current on the ideas and issues out there.  And, of course, there's the glamour, fan adulation and women.  Well, ok, none of those things, but there should be.”
 
Joe is correct – there should be!
 
He still provides a daily roundup of important tax-related blog posts via Twitter. 
 
1. First question – why taxes?
 
Interesting work, pays better than meat cutting, and is much easier on the hands.
 
2. How did you get started in “the business”?
 
When an undergraduate History major in my sophomore year, word filtered back of my fellow liberal arts majors finding bleak job prospects (@1979-80). I looked in the newspaper (yes, I’m that old) and saw lots of jobs for accountants. I took an accounting course, did well, and the rest followed.
 
3. How did you learn how to prepare tax returns?
 
By doing tax returns.
 
4. What is your area of special interest?
 
Professionally – closely-held businesses and their owners. My avocation is tax policy, particularly “incentive” tax credits.
 
5. What's the best tax advice that anyone ever gave you?
 
If it sounds too good to be true, it probably is.
 
6. If you had the opportunity to rewrite the US Tax Code what deductions, credits, etc would you keep and what deductions, credits, etc would you do away with?
 
You’d need a bigger blog. If we keep something like the current system, I’d do away with every tax credit I can think of, other than for taxes paid and foreign taxes. I would get rid of any non-economic business deduction (sec. 199, for example). I would get rid of all itemized deductions except charity, gambling losses and hobby losses (I would still limit the loss deductions as now), and move those above the line.
 
7. Do you think the government, specifically the IRS, should license and regulate all tax preparers?
 
No.
 
8. Other than THE WANDERING TAX PRO or THE TAX PROFESSIONAL, what's your favorite tax related blogs or web sites?
 
I like so many, but Russ Fox’s blog is a great, practical tax pro blog.
 
9. If you weren't working in the tax profession, what would your dream job be?
 
Prosperous mandolinist. Well, you said “dream.”
 
10. What is your favorite –
 
TV show - Ummm… baseball games, I guess
Movie – “The incredibles”
Broadway musical – “The Music Man”
 
JK has always been vocal in his opposition to regulating tax preparers.  We debated the issue in our blogs back when the IRS first proposed the RTRP regime and he truly won me over.
 
A good choice in Russ Fox’s TAXABLE TALK blog.
 
Interesting, and surprising, choices for dream job and favorite movie.  As for musical, the original production of THE MUSIC MAN, with Robert Preston and Barbara Cook, was the first Broadway musical I saw at age 5.  And the revival was the first musical I saw in the new millennium.
 
Thanks to Joe for participating.
 
Before I go, do you have any questions you would like me to add to my list?
 
TAFN
 
 
 
 
 
 
 
 

Monday, October 16, 2017

THIS JUST IN!

 
In case you haven’t heard, according to the Social Security Administration (highlights are mine) -
 
Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018, the Social Security Administration announced today.”
 
And -
 
. . . the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700 from $127,200.”
 
Click here for a Fact Sheet on the 2018 changes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

AFSP - BOON OR BUST?




According to the “Return Preparer Office Federal Tax Return Preparer Statistics” page at www.irs.gov, as of September 1, 2017 there were a total of 722,662 “individuals with current Preparer Tax Identification Numbers (PTINs) for 2017).  When you subtract out the Enrolled Actuaries and Enrolled Retirement Plan Agents that leaves 721,549 actual tax return preparers.  This number consists of 296,082 “enrolled” PTIN-holders – Enrolled Agents, CPAs and attorneys – leaving 425,467 “unenrolled” or “un-credentialed” preparers.  Of these 54,485, or less than 13%, have elected to participate in the IRS’s Annual Filing Season Program (AFSP).
 
So, this relatively new program has not been very successful.  I have always believed that participation in the AFSP does not provide any real value to tax professionals, and it appears I am not alone in my belief.
 
There are so many things wrong with the AFSP.  For example -.
 
1. The program does not provide those who meet the requirements with an identifiable credential or designation, with accompanying initials that the recipient can use in advertising and promotion to identify their competence and currency in 1040 preparation. Those who pass the test and take the CPE are merely placed on a list of IRS “approved” preparers and given a plaque to hang in their office.
 
2. The program does not call for an initial competency test. Instead, participants must pass an annual “comprehension test” upon completion of the required six-hour “federal tax filing season refresher course.”
 
3. The public database, if it will actually be used by taxpayers seeking professionals (I doubt it will be), is large and confusing if it is merely an alphabetic listing of all “record of completion” preparers mixed in with others of “recognized credentials,” some which nothing to do with 1040 preparation (CPAs and attorneys), and “higher levels of qualification and practice rights.”  To be done correctly, the database should contain all PTIN-holders, since all individuals who have a valid PTIN are truly "approved preparers," listed alphabetically by category of designation. 
 
4. The new program should not be allowed to deny unenrolled tax preparers who chose not to participate the right to represent their clients before the service during an examination of a return that they have prepared and signed. All tax preparers with a valid PTIN must have the right to defend and explain, or assist their clients in defending and explaining, the tax returns they have personally prepared during the audit process.
 
So my question for fellow tax professionals this issue is –
 
Have you received any new clients from participating in the Annual Filing Season Program?
 
In the past when I asked this question at another venue all the answers I received were “no”.  Having a “record of completion” did not in any way help the practice of those who replied.
 
I also want to hear your thoughts and comments on the AFSP in general.  Email me at rdftaxpro@yahoo.com with THE TAX PROFESSIONAL QUESTION.

THE LAST WORD -

FYI - I have created a new Classified Advertising Page on my THE TAX PROFESSIONAL website.  Check it out.
 
TAFN
 
 
 
 

Wednesday, October 11, 2017

MEET AND GREET




A new regular feature of THE TAX PROFESSIONAL blog will be an interview with a prominent tax professional, always asking the same 10 questions (some of which I have “borrowed” from TaxGirl Kelly Phillips Erb’s “Getting to Know You” similar interview blog post series).
 
I am kicking off this feature with Gerard Cannito CPA, CFP of Denver NC, President of the Board of Directors of the National Association of Tax Professionals.
 
1. First question – why taxes?
 
I first fell in love with taxes when I was a teenager helping my father with his sales tax calculations when NJ first started the sales tax. He had a small luncheonette and I had to tally the daily guest tickets to do the calculations
 
2. How did you get started in “the business”?
 
My first job was as a junior accountant in a small local CPA firm near the college I was attending in 1975.
 
3. How did you learn how to prepare tax returns?
 
I had not taken my college tax courses at the time I got my first job with the CPA firm, so they sent me to the H&R tax school to learn taxes.
 
 4. What is your area of special interest?
 
Over the years, I would have to say that my area of special interest is in construction accounting and taxes.
 
 5.What's the best tax advice that anyone ever gave you?
 
When I was in my first year working I asked the senior partner at lunchtime if he wanted to go out to lunch and his reply was, “Lunch is for wimps!” Advice still practiced today, although I do sneak out, once in a while.
 
6. If you had the opportunity to rewrite the US Tax Code what deductions, credits, etc would you keep and what deductions, credits, etc would you do away with?
 
There are so many areas needing attention but if I must pick one I would say to eliminate the Inheritance & Gift Tax regulations. Taxpayers should not be penalized at death for the good job they did paying incomes taxes and preserving their wealth while alive.
 
7. Do you think the government, specifically the IRS, should license and regulate all tax preparers?
 
Yes, I believe there should be some sort of regulation. The manner and form is difficult considering the diverse population of tax preparers doing taxes today, CPAs, EAs, CFPS, uncredentialed, etc…
 
8. Other than THE WANDERING TAX PRO or THE TAX PROFESSIONAL, what's your favorite tax related blogs or web sites?
 
www.natptax.com is my first go to when I need information.
 
9. If you weren't working in the tax profession, what would your dream job be?
 
My dream job was and is that of a jet fighter pilot. Somehow life got in the way.
 
10. What is your favorite –
      tv show – THE HONEYMOONERS       
      movie – TOP GUN (I would have given Maverick a run for his money!)
      Broadway musical – MAME
 
So, we both started while in college in the 1970s, although I started as a college freshman in 1972.  I guess we both learned to prepare taxes the best way – preparing manual returns.
 
We differ a bit on the issue of licensing.  While I see the need for a voluntary tax credential other than EA, best case administered by an independent industry-based organization, but not formal licensure, GC supports some sort of actual regulation.
 
Good choice in MAME.  I saw the original on Broadway with Angela Lansbury and Bea Arthur as a youngster.  I do believe that Jerry Herman was from my home town of Jersey City NJ.
           
FYI, ACCOUNTING WEB published an interview with Gerald last year on the topic of “Top Challenges for Tax Professionals: Now and in the Future”.
 
Thanks to GC for being my first “meet and greet”.
 
Next up – President of the NJ chapter of NATP.
 
TAFN
 
 
 
 
 
 

Monday, October 9, 2017

IS SILENCE GOLDEN?


The final topic covered by the “Panel Discussion” at the August NATP National Conference in Washington DC – the last session on the last day – was that of “remaining silent” with respect to the question of full-year health insurance coverage on the Form 1040, or 1040A. 
 
As you know, in the past the IRS rejected returns during processing when the taxpayer didn’t provide information related to health coverage – i.e. they were “silent” and did not check the box to indicate that they had “full-year coverage”, did not identify an exemption, and did not calculate and include the penalty. However, during the tax filing season the IRS announced it would accept both electronically filed and paper filed 2016 returns that were silent with regard to health care coverage.  If you submitted a return that was silent regarding coverage and requested a refund the return was timely processed and the refund issued.
 
I have a problem with the “self-assessment” of IRS penalties. I especially oppose requiring a taxpayer to pay a preparer to assess them a penalty.  The client is getting no value or benefit for the fee paid to a tax professional to calculate a penalty.  If the IRS chooses to calculate and assess a penalty that is their right, but forcing a taxpayer to pay someone to do this upfront is wrong, and adding insult to injury.  I also believe the concept of protection from “self-incrimination” may be involved.
 
For example, I will never, under any circumstance, prepare a Form 2210 to calculate a penalty for underpayment of estimated tax as part of the filing of any tax return. If the IRS does calculate and assess a penalty I have no problem charging a taxpayer a fee to assist in reducing, removing, or abating it – because the client is getting real benefit and value for the fee paid in that situation.
 
I feel the same way about the “Shared Responsibility” penalty, especially considering –
 
• the IRS announcement that remaining silent about health coverage will not delay the processing of the tax return or the issuance of a requested refund,
 
• collection of the Shared Responsibility Penalty is not subject to criminal or civil penalties under the Tax Code, and interest does not accrue for failure to pay such assessments in a timely manner. The only way the IRS can collect an unpaid penalty is by offsetting a current or future refund, and
 
• Donald T Rump had signed an executive order directing the Secretary of Health and Human Services and other department and agency heads to exercise all available authority and discretion to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”
 
It is different with calculating the 10% for premature withdrawal from a pension account.  I believe this is in reality an additional tax and not a penalty assessment.  There is no additional form actually required for adding this to the tax liability calculation, and I do not charge any additional fee for simply multiplying the distribution by 10%.  I will charge a fee if I prepare a Form 5329 to reduce or eliminate the assessment.
 
The official NATP position, and that of some preparers, seems to be that it is unethical not to calculate the Shared Responsibility penalty when preparing the return, as we are allegedly not preparing a “complete and accurate” tax return.  I disagree.  Assessing the penalty has nothing to do with completely and accurately determining the client’s tax liability.  I believe it may perhaps be unethical to assess the penalty upfront.
 
I do believe that tax preparers must reconcile any Advance Premium Credit and calculate and report on the tax return any required payback.  This is an actual tax credit, and the reconciliation is truly part of completely and accurately determining the client’s tax liability.
 
So, my fellow tax pros, what do you have to say about this issue?
 
FYI 
 
The above item first appeared in the September 2017 issue of my e-newsletter ROBERT D FLACH’S THE TAX PRO.
 
I have decided to give up on this e-newsletter.  The response from tax professionals was not particularly overwhelming.  While I truly enjoy creating and writing email and print newsletters on tax topics I do not have the resources or knowledge to properly market or promote them.  And I am trying to simplify my life as I approach the beginning of my 65th year.
 
Over the years I have tried in several venues to encourage and promote thought and discussion among tax pros on topics of interest that affect our profession.  I have not received the response to these attempts that I had hoped.  I would like to think that I have at least, on some occasions, caused fellow tax pros to think, if not share their thoughts with me in public discussion, about the issues I have raised.  I will continue with these attempts in hopes that I am doing some service for the profession.
 
I will keep writing this THE TAX PROFESSIONAL blog, and will in future posts include items that would have appeared in the newsletter.  For example, I will continue the MEET AND GREET series as blog posts on Wednesdays.  This coming Wednesday I will post the discussion with NATP President Gerard Cannito that appeared in the September issue of THE TAX PRO. 
 
TAFN
 
 
 
 

Wednesday, October 4, 2017

MY FIRST LIVE WEBINAR




I just completed my first National Association of Tax Professionals (NATP) live webinar – which was my first live webinar of any kind from any source.  I prefer, and in the past have always received, my continuing professional education from live seminars (or personal reading).  The title of the webinar was “Reporting PTPs (Publicly Traded Partnerships)”.
 
As background, I hate investment limited partnerships and their corresponding K-1s.  As I mentioned in Monday’s post here at TTP, in my opinion the biggest PITA related to the preparation of 1040s today, the item that provides tax preparers with the most agita and aggravation, is the Form K-1 from a limited partnership investment.  This is mainly because of the items included in “Other Income” and “Other Deductions” that are identified in the supplemental statements and schedules, many involving obscure Tax Code section references. And because they always arrive months late.
 
To repeat what I said Monday, I firmly believe –
 
* brokers earn an increased or enhanced commission for selling these GDMF things,
 
* there are many mutual funds available that offer similar, or better, investment returns and benefits than these GDMF things, and
 
* in many cases any earnings and tax benefits from these GDMF things are wiped out by the additional costs involved with 1040 preparation.
 
I no longer accept any new clients, but if I did I would refuse to accept any who had these investments.  Thankfully I have gotten all but one my existing clients who had these K-1s to totally divest themselves of them.  Unfortunately, the one remaining client is the only client that I cannot tell “good-bye”, so I am forced to deal with the GDMF things.
 
I posted about this on the Facebook group for the NJ chapter of NATP, stating that I wished NATP would offer a workshop to explain in detail the obscure “Other Income” and “Other Deduction” items, with an emphasis on how to report these numbers on the 1040.  I was told on the group that NATP was offering the webinar on PTPs that I just completed.
 
My problems with K-1s is not limited to those issued by PTPs, but most PTP K-1s have these pesky “Other Income” and “Other Deduction” items.  So I had hoped that this webinar would provide some help.
 
While I have no complaints with the webinar as an education offering – the instructor was informed and clear in her presentation and the information provided was not unimportant – for my purpose it was a total waste of time and money.  In the 2 hours (actually 100 minutes) it did not discuss any of the “Other Income” or “Other Expense” items that cause all the problems and agita.  It was more a basic overview of PTP K-1s and introductory in nature.
 
As a procedural comment – while I guess the frequent “Check for Understanding” polls may be necessary for NATP to judge if a real person is actually listening, these breaks were, for me, a total waste of time, taking away 10+ minutes of the 100 minute total time allotment from actual education.
 
This points up one of my complaints about NATP Conference and Forum sessions – 2 hours is often totally inadequate to properly cover a topic.  To correctly deal with PTPs, or limited partnership investments in general – at least 4 hours are required – with most of the first half on the basics and a full 2 hours (again unfortunately only 100 minutes) or more on the “special issues” of these K-1s.  I think a half day of this topic should be included in a future “Beyond the 1040” workshop (offered by NATP at year-end in conjunction with the annual year-end update class).
 
What the webinar did was reinforce my belief that this type of investment is more agita for the preparer and more costly to the client than it is worth and should be avoided like the plague.  These investments are most definitely NOT for middle-class and upper middle-class casual investors.  My advice to fellow tax pros, whether new to the business or more experienced, is, unless you want to specialize in this area, to “just say no” to clients with these K-1s.
 
With the extreme complexity of K-1 issues, the talk of doing away with all industry-specific business tax loopholes that is part of the cocktail-napkin scribblings known as the “framework” for tax reform is most important.  I want Congress to do away with ALL the weird specialized items of “other” income and deductions and have the K-1s report ONE line item – Box 1 - that reflects ALL non-rental business income or loss.
 
As far as this new-to-me venue is concerned, I would sign up for another live, or taped, online webinar in the future, if I was assured the topic would be relevant or helpful to me.  But I still prefer live workshops.
 
If any of youse guys out there know of a CPE offering that actually deals with the specifics of the obscure “Other Income” and “Other Deduction” items please let me know.
 
TAFN
 
 

Monday, October 2, 2017

A LITTLE THIS-A, A LITTLE THAT-A

+ I dedicate all my writing – blogging, articles, reports, and books – to my friend and mentor James P Gill, who want to his final audit in August of 2001.  He had basically handed his practice over to me a couple of years earlier at age 75. 
 
We had worked together for almost 30 years.  He taught me all I know about taxes, and much of what I know about life.
 
James P Gill was my uncle’s tax preparer.  He would hire students from St Peter’s College, which I attended, during the tax filing season as apprentice tax preparers. During his annual visit, always on Lincoln’s Birthday (then an actual legal federal holiday), my uncle happened to mention to Jim that I had taken my first accounting course and that I was helping him with the books for the non-profit organization he ran.  Jim told my uncle to send me in to see him – and the rest is history!
 
On my first visit to Jim’s storefront office near Journal Square in Jersey City he took me to a desk in the outer office.  He gave me a copy of a client’s previous year’s tax return and a briefcase full of papers that constituted the current year’s tax “stuff” and told me to “jump in and swim”.
 
Prior to meeting Jim Gill I had no experience with or education in any aspect of income taxes. I had never even done my own simple return. I had not yet taken the college tax course.  If I had a question about a tax return I would ask Jim, who would either take the time to explain the answer or tell me where to find the answer in his CCH tax library.
 
Jim, I know I'm who I am today because I knew you.  Who can say if I've been changed for the better?  But because I knew you I have been changed for good!
 
+ Tax pros who prepare NJ state tax returns – mark your calendar.  The New Jersey chapter of NATP’s annual “Famous State Tax Seminar” will be held on Saturday, January 13, 2018 at, where else, the APA Hotel Woodbridge in Iselin NJ (why it isn’t the APA Hotel Iselin I do not know).  This is a “must-attend” seminar for anyone who prepares NJ state individual or corporate income tax, inheritance and estate tax, sales tax, and payroll tax returns. 
 
It usually also includes a New York State tax update (unlike the state tax update webinar tax pros who prepare NYS returns must sit through, this NYS update will be for the current tax year – for 2017 returns – and not the previous tax year).
 
The NJ chapter is also offering a full-day “round-table discussion” on “Practice Management” at the same hotel on Tuesday, December 17th.
 
Both events include a buffet breakfast and buffet lunch.  For more information on NJ-NATP educational events click here.
 
+ Have you seen the premiere issue of my new FREE monthly e-newsletter for tax preparers – THE TAX PRO – yet?  Why not?  Click here.
 
Please share it with your colleagues and co-workers – it’s FREE!
 
And let me know your thoughts and comments on the contents of the issue.
 
+ In my opinion the biggest PITA related to the preparation of 1040s today, the item that provides tax preparers with the most agita and aggravation, is the Form K-1 from a limited partnership investment.
 
This is mainly because of the items included in “Other Income” and “Other Deductions” that are identified in the supplemental statements and schedules, many involving obscure Tax Code section references.  And because they always arrive months late.
 
I hate K-1s.  I do not “hate” Donald T Rump – I strongly oppose and denounce him and believe he is a despicable and deplorable human being, but I do not “hate” him.  I truly do “hate” K-1s.
 
I firmly believe –
 
ü brokers earn an increased or enhanced commission for selling these GDMF things,
 
ü there are many mutual funds available that offer similar, or better, investment returns and benefits than these GDMF things, and
 
ü in many cases any earnings and tax benefits from these GDMF things are wiped out by the additional costs involved with 1040 preparation. 
 
This is another area where I would like to see tax reform – do away with all the weird specialized items of “other” income and deductions and have the K-1s report ONE line item – Box 1 - that reflects ALL non-rental business income or loss.
 
+ The IRS has apparently decided to suspend its Automated Substitute for Return (ASFR) program.  The IRS has concluded that the money raised by the ASFR program has not offset the costs of the program.
 
Personally, I think this is a bad idea.  As fellow tax blogger Russ Fox put it – “it likely forced noncompliant individuals in to compliance—and that’s the goal of the IRS (current compliance).”  That was certainly true a couple of times in my practice.
 
TAFN