Sunday, December 25, 2011

Friday, December 23, 2011


+ A question from the IRS - “What California city do you suggest for an IRS Nationwide Tax Forum?”.  I suggested San Francisco.  (oops - once I took the survey the link was no good - sorry)

+ Did you know that “Unclaimed Employee Paychecks Must be Returned to Your State”?  Dr Jean Murry tells us so at ABOUT.COM-US BUSINESS LAW/TAXES.

“If you are sitting on unclaimed paychecks, as an employer you are legally bound by state law to return any uncashed paychecks to the state where the person last worked. You can be fined or penalized if you don't return the check, even if the person can't be found.”

So pass this info along to your payroll clients. 

And this is another reason to advise your clients to do an “Unclaimed Property” search.

+ CCH has published a special report on “2011-Tax Year In Review”.

2011 had been predicted to be a quiet year in federal tax news – as it landed between major tax legislation in 2010 and expected tax reform in 2012 – but the year brought many signifi cant tax developments from the Obama Administration, Congress, the Treasury Department, the IRS, and the courts.”

+ The JOURNAL OF ACCOUNTANCY announces that “IRS PTIN Application System to Go Down for Maintenance”.

The IRS announced on its website that it will not be accepting new applications for preparer tax identification numbers (PTINs) from 5 p.m. EST Friday, Dec. 23, until approximately 6 a.m. EST on Monday, Jan. 9. The IRS PTIN system will be available for renewals during that time.”

+ The New York Department of Taxation and Finance has released the Personal Income Tax: Withholding Rates for 2012.  Click here.

+ For those of you who are interested you can click here to download the 600+ page “Back in Black” report from Oklahoma Republican Tom Coburn.

Merry Christmas to all – except the idiots in Congress!


Wednesday, December 21, 2011


While I freely admit that my mind tends to wander during the required 2 hour “ethics” sermon we must sit through at least once each year during continuing education sessions, I do listen in on the discussion every now and then.  Hearing all the rules and requirements enacted in the name of privacy and security it is obvious that regulation has gone overboard.  Much of what the instructor discusses is, to be perfectly honest, totally ridiculous.

Say I was talking to a friend, who was also a client, in a public place and another client, let’s call him George, who my friend coincidently also knows, happened along, saying hello to us in passing.  If my friend asked me, “How do you know George,” I would normally think nothing of replying, “I have been doing his taxes for years”.

But by doing so, I am told, I would be seriously violating “privacy” rules! 

Obviously I am not allowed to discuss the details of George’s Form 1040, or any other financial or personal information I was told in confidence in the course of preparing his return, with my friend.  But not being able to simply mention that he is also a client is pure nonsense.

And, while it is not my responsibility as a tax preparer to personally verify every single on a client’s 1040, the IRS basically wants me to do so when it comes to the Earned Income Credit.  A tax preparer can be substantially penalized for not going through extra hoops when it comes to this credit – even if the credit itself turns out to be legitimate and the amount claimed correct.

As I wrote in an earlier post in a series on my obligations as a tax preparer -

Although I am not obligated or required to personally verify all numbers entered on the 1040 (or 1040A), I am required to do what is called ‘due diligence’ when it comes to information provided by the client. What this means is that I must –

• evaluate information received from clients,

• apply a consistency and reasonableness standard to the information, and

• ask additional questions if the information appears incorrect, inconsistent or incomplete.

Obviously, if a client says or indicates something that does not make sense, or does not seem reasonable, I must ask questions.
But if what a client tells me, or indicates on a worksheet, appears to me to be reasonable considering the individual facts and circumstances than I do not need to go any further.

When it comes to the Earned Income Credit I am required to be a bit more ‘due’ in my ‘diligence’. As a side comment, I do not think it is fair for the IRS to require tax preparers to determine if an individual is eligible for federal welfare (which, after all, is what the EIC is).”

I am a tax preparer – not a Social Worker!  The Earned Income Credit has no place being in the Tax Code in the first place.

If I had not been doing this for 40 years now without incident, and I was considering a career as a paid preparer, I seriously think I would be scared away from the profession by all of this. 

I am in a very unique situation.  I do not accept, or want, any new 1040 clients – period.  I am actually looking to “thin the herd”. 

I certainly believe that you can teach an old dog new tricks – but some new tricks come with too much agita that they are not worth learning.  It is easier for me to say, “I will never have a client that this would apply to”, or, “If this applies to a client I will just send him/her elsewhere” then to put up with the added agita.

There have been times during the last few years when I have seriously considered retiring in December of 2013, so I would not have to put up with all the new aggravation, including the new paid preparer regulation regime (which I do, for the most part, support).  42 years would be a good run.  And waiting till the end of 2013 would give me time to look into more opportunities for income from writing on taxes and other topics, so I would still be able to eat.

But what about my 300+ clients?  It would be very easy to say good-bye to some – but a great many have relied on me for so many years that it would be difficult to tell them I could no longer prepare their returns.  Hey, if I won the lottery it would be one thing.  But not to voluntarily just walk away.

So I guess I will hang in there until the idiots in Congress or the IRS go too far.  Maybe, as I hope and pray, the current Tax Code will be totally shredded and a more simpler one written in the next two years.


Tuesday, December 20, 2011


At one point during the first day of the recent NATP year-end tax update workshops someone asked – “What would happen under a flat tax?”

In response an audience member called out, “We would all be out of business!”

This is not true!  I have said it before and I will say it again – a simpler tax return will not in any way hurt my business.  Nor should it substantially affect your tax practices.

I would make more money, have fewer expenses, and experience much less agita, if I spent 12 hours each day of the tax season doing nothing but 1040As!

The main reason most of my clients use a paid tax preparer, regardless of the complexity of their returns, is for convenience.  They just don’t want to be bothered keeping up with tax law and preparing the return themselves.  

And let’s face it – regardless of who is in the White House we will never have a true, pure “flat tax”.  We will never see the ridiculous, but frequently proposed, “post card tax return”.  There will always be some “tax expenditures” in the Code – even if, hopefully, only a very few.  Even my tax reform proposals include some.

And even with a pure flat tax you still need to determine “income”.  There will always be a need for some form of Schedules C, D, E and F, and therefore there will always be a need for a paid tax preparer.

I am curious to hear what my fellow tax pros think.

While I have your attention I just want to mention something else that we learned during the first session - 

This is apparently the last year that NATP will be offering the TAXPRO Symposium package in its current format.  Beginning next year the package will be three days only – the first day will cover the topic of “Representation”, and days two and three will be the normal “  and “ offerings.  Personally I have no interest in Representation, so it will be only two days of workshops for me in the winter of 2012.  I will be attending the Annual Conference in Baltimore in July – so I will accumulate many. many more than the newly required 15 hours of CPE.  


Monday, December 19, 2011


I recently attended three of the four days of NATP’s annual TAXPRO Symposium in Atlantic City (see my TWTP posts).

While it had nothing to do with the topic of discussion, during the first session we were told that many current Enrolled Agents, although exempt from the competency test component of the new tax preparer regulation regime, will be taking the test.  Our symposium instructor is one such EA.

Why?  Because they want to be able to acquire the initials RTRP. 

The reason is the continued public confusion with the Enrolled Agent designation.  Our instructor gave an example -

A taxpayer looking to engage a paid preparer asks why he should choose her.  She explains, “Because I am an EA.”  The next question is, “What is an EA”, to which she answers, “An Enrolled Agent.”  The prospective client then says, “Oh, so you work for the IRS.”

Next the taxpayer shopping for a preparer asks a previously unenrolled tax pro the same initial question.  The answer given is, “Because I am an RTRP.”  When asked what an RTRP is the answer comes back, “A Registered Tax Return Preparer.”  Who do you think the taxpayer will select.

The question I ask is whether an EA, upon passing the test, will be granted the RTRP designation by the IRS.

One prominent veteran tax professional, an Enrolled Agent, told me -

CPAs, Attorneys and EAs can become RTRPs but they must test and pass and meet other qualifications.  I want the initials to first, preserve what the EA credential means and second to get the advertising that RTRPs will get.  I believe with 400,000 RTRPs of the future with only 50,000 EAs that RTRPs will be the designation for return preparers.”

It sounds like a good idea.  I believe that CPAs and attorneys should also be allowed to have the credentials RTRP to identify their tax knowledge and currency – but not by voluntarily taking the test.  CPAs and attorneys who want to prepare 1040s should be required to take the test and maintain the CPE in federal taxation. 

EAs are a different issue.  They have already passed a much more comprehensive test and must maintain more CPE in federal taxation than RTRPs.  I can see that EAs who have voluntarily taken the test to be granted the RTRP designation, and now “advertise” as Jane Q Taxpayer, EA, RTRP, could hurt the credibility of the “plain” EA. 

Perhaps the IRS should automatically issue all EAs (but NOT CPAs or attorneys) the additional designation of RTRP because they have, in effect, already qualified by means of the EA Exam and maintain at least the minimum 15 hours of annual CPE in federal taxation.  Or the EA designation could be changed to ERTRP (Enrolled Registered Tax Return Preparer), or ETRP (Enrolled Tax Return Preparer).

What do my EA readers think?

While we were on the subject, the instructor also told us that Prometric, the outside firm hired by the IRS to conduct the competency tests, is an extremely intimidating proctor.  We were told to equate Prometric with the TSA. 

There will be metal detectors and pat downs, we will not be able to take anything into the test with us, if we have to leave the room to use the jake during the test we will be personally escorted to and from by a Prometric employee.  While it was mentioned that the test would be somewhat “open book” there will be no print copy of Publication 17 to be found in the test room – one must search an online version of the Pub.

This is just one more reason why I will wait until the spring of 2013 to sit for the test.  Maybe the testing will cause the IRS enough agita by then they will rethink their position on grandfathering.


Friday, December 9, 2011


Just thought I’d let you know that I received my PTIN confirmation from the IRS in the mail – stating, “We’ve accepted your 2012 renewal for your Preparer Tax Identification Number (PTIN).”  So I guess I am good for another year.

+ The JOURNAL OF ACCOUNTANCY has a detailed article on “Advising Clients in Same-Sex Relationships”.

+ Have you seen Prometric’s “IRS Registered Tax Return Preparer Sample Test” yet?

+ I recently did a piece at on 10 tax breaks that are scheduled to expire in 2011, concentrating on items that appear on the 1040 (not yet up).

Charles Rubin (of the RUBIN ON TAX blog) has compiled a list of 35 “Items Slated to Be Eliminated or Materially Reduced After 2011 (Not Comprehensive)” that includes many obscure business tax benefits.

+ John Ams offers some advice to “previously unenrolled” tax preparers in “The IRS Preparer Competency Exam –Now What?” in his blog at NSA MemberConnect.

+ The 2011 IRS Publication 17 (Your Federal Income Tax for Individuals) is now available to download.

+ And the IRS has issued a new Fact Sheet on “Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.”.

+ MISSOURI TAX GUY Bruce McFarland discusses in detail “Mileage Tracking with BizMile Tracker”.

If you receive an audit notice from the IRS, you will need to produce the relevant documentary proof to validate the deductions being audited.

BizMile Tracker is your answer. This online program is the best mileage log assist I have seen.”

In case you are skeptical Bruce points out Bruce’s motivation in writing the post –

This post is unsolicited and I will not or have not been compensated in any way for any information I have shared here. I use this product and I believe in this product.”

FYI – I am off to Atlantic City for the annual year-end tax update workshops offered by NATP.  This year I will also be taking the association’s Taxpro Symposium classes in Social Security and Railroad Retirement Benefits and Beneficiary Reporting. 


Thursday, December 1, 2011


Below is information on a new education offering from the National Association of Tax Professionals.

If you are not already a member of NATP you should be!  To receive membership information email me at (with NATP Membership Info in the “subject line”).

“You've mastered the basics. You're ready for a challenge. NATP's Tax Intermediate Training is exactly what you need! We're offering a package of intermediate level self-study courses to help you expand your knowledge of services you offer your clients. Plus, you can earn up to 40 CPE credits* while you learn.

This self-study course is intended for tax professionals who've mastered preparing 1040 tax returns and are looking to expand their knowledge to include other areas of taxation including: businesses, estates, gifts & trusts and more advanced individual tax issues. NATP has bundled the key courses and is offering them to you at hundreds of dollars less than it would cost to take them individually.

All materials are available electronically, including textbooks which can be printed at your convenience if you choose. The following modules are included in this special program (click on the modules below for descriptions, objectives and CPE information):

This course costs $250 for members and $400 for nonmembers.”