WHO SPEAKS FOR THE TAX PROFESSIONAL?

One of the questions discussed at the recent NATP Focus Group in which I participated was “What other services or benefits would you want to receive from NATP membership?”.

 

As an afterthought to the discussion I was reminded that the tax preparation industry is the only industry without a formal and effective national lobby.  Tax professionals need a united and effective voice in Washington.

 

This fact first hit me during the winter 2013 National Association of Tax Professionals’ annual year-end tax update seminar known as “The Essential 1040”.  Included in the discussion of the Affordable Care Act, a.k.a. “Obamacare,” was a preview of the complex calculations for the penalty that an individual or family without “adequate” health insurance coverage must pay as part of their tax liability beginning with the 2014 tax return.  As I listened to the seminar leader explain this new mess being forced upon us, our industry’s lack of an effective lobby occurred to me.  

 

One thing I would want NATP to do is act as an “advocate” for the tax professional, regardless of designation, credential, or lack thereof.  I do realize that Larry Gray represents NATP and its members before the IRS, Congress, and other government agencies, presenting our point of view on issues of importance to the industry.  While good, this is not sufficient.  Instead of merely saying “tax professionals would not like this to happen” we need a voice to shout “we’re not gonna take it!”. Perhaps this is not the job of NATP.  But a tax professional lobby is definitely needed.

 

Creating a new lobbying organization from scratch would be a difficult and time-consuming task.  As an alternative I have suggested a “Tax Professional Advocacy Council” that includes official representatives of all the current legitimate national tax preparation membership organizations.

 

Here is a copy of a letter I sent to the Board of Directors of the National Association of Tax Professionals, the National Society of Tax Professionals, the National Association of Enrolled Agents, the National Society of Accountants, and the Latino Tax Professionals Association a few years ago –

 

“Dear Board of Directors:

 

I have been a paid tax preparer since February of 1972.  

 

I strongly believe, as do many of my fellow tax professionals, that the tax preparation industry needs a strong and unified voice, a lobby, in Washington to represent the interests of tax preparers before the Internal Revenue Service and Congress.

 

As Congress continues to, in my opinion erroneously, use the Tax Code to administer and distribute federal social welfare and other benefit programs, and the IRS, in response, forces more excessive due-diligence requirements upon us, requiring us to be social workers as well as tax preparers, we should not just ‘grin and bear it’, but fight back.

 

While the IRS, and occasionally Congress, does, from time to time, consult with the tax preparation community on proposed regulations and legislation, I see this as merely a ‘professional courtesy’ that does not carry much weight in the final decision-making process.

 

Although most national tax professional membership organizations have some form of ‘government liaison’ and/or ‘political action’ functions, the limited memberships of the individual organizations are not large enough to provide sufficient ‘weight’ to any lobbying attempts.

 

Just about every other profession has a lobby in Washington. So why not the tax preparation profession,

 

The creation of a new independent organization of tax preparers, or of PTIN-holders, would be difficult, time consuming, and expensive.  My alternative is to create a Tax Professional Advocacy Council that includes official representatives of the National Association of Tax Professionals (NATP), the National Association of Enrolled Agents (NAEA), the National Society of Accountants (NSA), the National Society of Tax Professionals (NSTP), and the Latino Tax Professionals Association (LTPA), and any other legitimate national tax preparer membership organization.  This Council would speak with one voice for the combined memberships of all the organizations.

 

While it has been suggested by some tax professionals that the AICPA be included in the Council make-up, I hesitate to do so.  The AICPA has its own agenda, which is very often contrary to the interests of non-CPA tax preparers.  There are CPA tax preparers in the memberships of NATP, NSTP, LTPA, and probably NAEA, so CPA preparers will be properly represented.

 

One example of the need for a national tax preparation industry lobby is the excessive “due diligence” requirements for claiming an Earned Income Tax Credit.  As mentioned above, we must now become social workers and conduct “background checks” to determine whether an individual qualifies for federal welfare benefits.  We have enough to do just to get a client to provide us with all the financial information necessary to properly prepare their 1040.  We should not be forced to take on this added unnecessary and time-wasting responsibility.

 

If there was a tax pro lobby this organization could have perhaps gone to the IRS and said that if the new due diligence requirements are put into place its XXX,XXX members will refuse to prepare tax returns that include an EITC. The organization could have then worked with the IRS to negotiate regulations that would be acceptable to both the government and the preparer community.

 

The organization could, with a strong and unified voice, testify before Congressional committees, or meet with appropriate Congresspersons, to explain how potential legislation would adversely affect tax preparers, and make sure that the tax preparation community is heard on specific tax issues. 

 

Each membership organization participating could add $5 - $10 to its annual dues to fund the operations of the Council, and can also offer members the opportunity to contribute additional funds to the Council.  Perhaps the organization would establish a permanent office in Washington DC with minimal staff.

 

I believe that, as a side benefit, the existence of such a lobby would be a help to the individual organizations in attracting new members.  Joining a participating organization would add the voice of currently “unaffiliated” tax preparers to the lobbying efforts.

 

I ask that the {name of organization} work with the other national tax professional membership organizations I have identified above to form a Tax Professional Advocacy Council to provide a voice in Washington for the tax preparer.  A similar letter is being sent to the Board of Directors of each of the other organizations.

 

I look forward to hearing your thoughts, and any plans to act, on my proposal.”

 

The only response I received came from the National Society of Tax Professionals (NSTP) via a letter from the organization’s then President Bill Horn.  Bill’s response included –

 

“We do agree that our industry needs a united voice to be heard in front of Congress.

 

We believe that the Office of National Public Liaison serves this function – and they are a very vocal and outspoken group of tax practitioner representatives that form this group.

 

The IRS National Public Liaison committee meets ten times a year.  Representatives from the National Society of Tax Professionals along with members of other national organizations such as the American Institute of CPAs, National Association of Enrolled Agents, National Society of Accountants, and other tax organizations make up the 20-member committee.”

 

This is not what I had in mind; it is certainly not the answer. An independent organization is needed.  Tax preparer membership groups may be represented on this internal IRS committee, but I am not aware that they have not been effective in “protecting” the interests of tax professionals.  

 

None of the other organizations provided even the courtesy of an acknowledgement.

 

So fellow tax professionals, what do you think about my proposal?

 

TAFN

 

 

 

 

 

THE NATP TAX FORUM IN ATLANTIC CITY

 

Aren’t you lucky – you get 2 posts here at TTP this week!

 

I have just finished the 2-day National Association of Tax Professionals’ Tax Forum at Harrah’s on the Marina in Atlantic City.

 

NATP created its Tax Forum, I believe, because of the change of location of the Northeast IRS Nationwide Tax Forum a few years ago from New York City (or occasionally Atlantic City) to the National Harbor in Maryland.  The Northeast event had been one of most highly attended of the offerings, and the new National Harbor venue is expensive and inconvenient for many northeast tax pros.

 

While the individual educational sessions are up to NATP’s usual standards, certainly at least equal to the IRS sessions, the one aspect of the IRS Tax Forum that NATP obviously could not duplicate was the unique IRS perspective on the topics discussed, and the presence of a high-level IRS keynote speaker.  I do miss the IRS Forum and wish it would return to the NY metropolitan area.

 

This NATP Tax Forum did, however, offer case consultations with a representative of the Taxpayer Advocate Service, something that is popular at and had been unique to the IRS Forums.

 

The complaints I had about the IRS Forum also apply to NATP’s offering –

 

* the sessions are all limited to a standard length - here each offering is I hour and 40 minutes – often either too long or too short for an adequate presentation of the particular topic (a similar complaint about the NATP National Conference sessions), and

 

* there are no tables in the “classrooms” – making taking notes difficult.

 

In hindsight my attendance at this year’s NATP Forum was not “cost effective”.  The out of pocket was much more than the value of what I actually received (not the fault of NATP).  I booked very early in the year, to take advantage of a discount, before the schedule of offerings were announced.  I will certainly wait until the schedule is announced before deciding to attend next year. 

 

One main reason for the lack of value is unique to this year.  As with the National Conference (though not as much) the value of the event depends on the extent of “new developments” in the area of tax law, IRS regulations, and Tax Court decisions – with an emphasis on new tax law.  While it was anticipated that there would be tax reform legislation passed in 2017, there was absolutely no new tax laws passed (actually not much, if any, new legislation passed on anything) yet.  There still may be new tax law passed before the year-end, though, unfortunately, more likely than not just token legislation, which will make the annual NATP year-end update workshops more valuable. 

 

The speakers had to really stretch to fill a 2-hour session on updates and developments at the National Conference, and nothing much of consequence has happened since August.

 

Another reason is unique to me.  I am winding down my practice – I no longer accept any new clients and am actively working to “thin the herd”.  I no longer need to learn specific areas of tax law with which I am not adequately experienced or knowledgeable because I may get a client in the future to whom these areas might apply.  I know my clients and what will apply to them.  If a unique new situation suddenly applies to a client I will either tell them to go elsewhere or consult NATP’s Research Department for instruction on the situation.

 

And, (1) having been a tax pro for 45 years and attending NATP and other organization conferences and workshops for 30+ years, how many times do you need a session on depreciation – and (2) I have absolutely no desire, or need, to sit through redundant ethics preaching.

 

There was, however, one unique event that made my attendance worthwhile.  I was honored to be chosen to participate in a “Focus Group” on NATP membership value and benefits.  It was good to be able to provide direct feedback to NATP and interesting to hear the thoughts and comments of fellow tax pros, a couple who were acquaintances of mine from the New Jersey chapter of NATP.

 

This was the first year that NATP held an event at “the Marina”.  Last year, and past years’ year-end updates, were held at Bally’s on the Boardwalk. 

 

Harrah’s was a large and extensive resort.  As I told the NATP staff-person when I was signing in – I will certainly get my exercise at this event (long walk to the conference center).  Three years ago I would have complained about this – but no longer. 

 

The room was clean and comfortable, with an ocean view, and relatively reasonably priced.  I had good experiences at the in-house restaurants – with the exception of seeing the total on the bill I received at the end of the meal.  The food, in terms of quality and quantity, and service was excellent, albeit very expensive. 

 

The problem with being at the Marina is that you are for all intents and purposes a “prisoner” of the resort – the other hotel/casinos are not next door or even conveniently nearby.  And if you want more than a sandwich or pizza for dinner you need to spend $70+ - $100+ per person, as I did, for a complete dinner (on the 3^rd night I limited dinner to soup and sandwich to try to balance the excessive spending of the first 2 nights).  And the line at the $40+ buffet was humungous (I will no longer wait on line to give someone my money).

 

Because the event was Monday and Tuesday there were no shows or variety of evening entertainment options at Harrah’s, and, again, it was truly difficult getting to other venues.  I do not gamble – I no longer even do my token $20 at the slots – so after dinner there is nothing to do except watch tv, and the channel availability is truly limited (I have found that the “cheaper” and less “glamorous” a lodging option the more channels there are on the in-room tv).

 

Thankfully there was free wi-fi in the room, so I could keep up with emails and news and do some writing.

 

I would prefer in the future the NATP Forum returns to Bally’s, or even Caesars, on the Boardwalk, where less expensive dining options, and things to do, were available both in-house and conveniently nearby.  If NATP returns to Harrah’s next year I will not attend.

 

There is usually a “Part Two” to a review of CPE events, where I discuss tax items of interest that I learned or was reminded of at the education sessions.  Not this time.  I literally took only one note at the 5 sessions I attended.

 

TAFN

 

 

 

 

 

 

 

ONLINE RESOURCES FOR TAX PREPARERS

Here, in alphabetical order, are some websites you MAY find useful in your practice.  You may already be aware of several of these sites and are currently using them.  

 

Of course the most useful sites of all will be www.irs.gov and state tax department sites (see below for a source of links to state tax department sites).

 

http://www.accountingtoday.com and http://www.taxprotoday.com

 

The latest in accounting and tax regulations, legislation, technology and insight.

 

www.accountantsworld.com 

    

Sign up for the ACCOUNTANTS WORLD DAILY HEADLINE NEWS email newsletter, which provides links to articles and blog posts on timely tax, accounting and audit, technology, financial planning, and small business topics. Click on “Sign Up for the Daily Headline Newsletter”.  This portal has lots of other resources and information for accountants.

 

https://aoprals.state.gov/web920/per_diem.asp     

 

This address will take you to the State Department per diem rates for Lodging and Meals and Incidental Expenses for international travel.  Use these amounts if you travel overseas for business.

 

http://att.sbc.com/gen/investor-relations?pid=5677 

 

With the “divestiture” of ATT in 1984, and all the splits, both positive and reverse, spin-offs and mergers that have followed, determining the cost basis of ATT stock sold, as well as the basis of the various spin-off companies’ shares, is a real project.  Go here for Tax Basis Worksheets for each individual event in the history of ATT.

 

www.bigcharts.com 

 

You can use this site to find the price of any listed stock or mutual fund on any exchange for any given date.  If you inherit an investment, your cost basis is the fair market value of the investment on the date of death of the person from whom it was inherited.  This information is generally reported on the federal estate or state inheritance tax return.  However, when you sell the stock you inherited you do not always have ready access to this information.  You can calculate your basis by going to this site and, under “Historical Quotes”, enter the ticker symbol of the stock and the date of death, or the business day closest to the date of death, to get a price quote.  If you sell stock that you received as a gift, your basis is either what the donor paid for the stock or the fair market value at the time the gift was made.  You can also use this site to determine a cost basis for gifted property.

 

http://apps.finra.org/Calcs/1/RMD

 

You must begin to take annual required minimum distributions from a traditional IRA or employer pension account by April 1st of the year following the year in which you turn age 70½.  This address takes you to a calculator that will determine the amount of your required minimum distribution for the year.

 

http://news.cchgroup.com

 

Read the CCH TAX AND ACCOUNTING BLOG of the most important federal and state tax news stories.

 

http://pages.cchemail.com/email_preferences_profile_center

 

Go here to sign up for free email newsletters from CCH, including federal and state TAX NEWS HEADLINES.  

 

https://www.cchgroup.com/news-and-insights/federal-tax-legislation

 

CCH periodically publishes free TAX BRIEFINGS on federal tax legislation and developments.  Scroll down to listings under the books for sale.

 

www.choosetosave.org/calculators   

 

Over 100 calculators covering such areas as home purchase, mortgages and home equity loans, savings and retirement, automobile purchase and financing, credit cards, stocks, bonds and mutual funds, IRAs and insurance.

 

http://costbasis.com  

 

One of the biggest time wasters during the tax filing season is trying to determine the cost basis of stock sold by a client – especially stock that has split often since its original purchase, or was acquired via spin-off or merger.  This site will help you determine the tax basis of securities sold, and show how to account for those stock spinoffs, mergers, splits, split-offs, rights, and class action claim checks. I have so far used it to look up two stocks that had been acquired via merger, and found it very helpful in these two situations. Cost basis information, calculators, worksheets can also often be found in the Shareholder Services sections of company websites.

 

www.eftps.gov 

 

You can use the Electronic Federal Tax Payment System to pay any type of federal individual or business tax online.  For example, once you determine your federal estimated tax payments for the year you can go to this site and, after registering, instruct eftps to automatically withdraw each quarterly payment from your bank account on the individual due dates (April 15, June 15, Sept 15 and Jan 15) and never have to worry about forgetting to make a payment or making a payment late.   

 

www.gsa.gov/travel/plan-book/per-diem-rates  

 

If you travel for business, instead of deducting your actual expenses for meals and incidental expenses you can elect to deduct the federal per diem amount for the location of the travel.  Go here to find the federal per diem rates for Lodging and Meals and Incidental Expenses for domestic business travel.  

 

www.kbb.com 

 

The rules regarding claiming a deduction for donating a car to charity have drastically changed, but there are still situations where you will deduct the fair market value of the automobile.  Click on “My Car's Value" to find your “Blue Book Value”. 

 

http://www.homeworksolutions.com/nanny-payroll-tax/   

 

This is the website of HomeWork Solutions, nationally recognized experts in the field of household employment taxes providing assistance to domestic employers and their tax preparers.  I have no experience in dealing with this firm, and this entry is not an endorsement of their services.  However, this site is an excellent source of information and resources on household employment and the “Nanny Tax”.  It provides detailed answers to Frequently Asked Questions about the Nanny Taxes, downloadable tax forms, employment forms and free tip sheets and tools, and has a Nanny Tax Blog.

 

www.llc-made-easy.com     

 

The Limited Liability Company (LLC) is one of the most flexible entities for a business. You can protect personal assets from business losses and judgments just like a traditional C-corporation, with the pass-through taxation of a partnership.  This site has, or links to, just about everything you always wanted to know about forming, operating and ending a Limited Liability Company, but didn’t know who to ask.

 

www.paycheckcity.com 

 

An online collection of payroll tools, this site features a Paycheck Calculator to determine the federal and state withholding and net pay under various scenarios.  You can use this calculator to see how changing your withholding status and/or number of exemptions will affect your take home pay.  It also has other helpful calculators and resources..

 

http://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf

www.salvationarmysouth.org/valueguide.htm  

   

Here are some websites that provide guidelines for determining the value of non-cash (clothes, household items, appliances and furniture, etc.) contributions to charity.

 

www.savingforcollege.com

 

This site offers complete and up-to-date information on Section 529 college tuition savings plans for all states, with links to the websites of the individual state plans.

 

https://www.taxadmin.org/state-tax-agencies     

 

Go here for direct access to the state tax agencies and state tax forms for the 50 states, the District of Columbia, and US Territories.

 

http://wanderingtaxpro.blogspot.com 

http://dinesentax.com/blog 

http://dontmesswithtaxes.typepad.com

http://www.forbes.com/sites/kellyphillipserb

http://www.forbes.com/sites/peterjreilly 

 

These are weblogs, or “blogs” that deal with federal, and sometimes state, tax issues.  The Wandering Tax Pro blog, which I write, provides up-to-the-minute advice, information, resources and commentary on federal and New Jersey state income taxes and the NJ property tax rebate and refund programs, and updates on federal and state tax legislation, IRS and NJ Division of Taxation rulings and regulations, and federal and state tax court decisions.  

 

If you have any sites you have found helpful in your practice that you would like to add to this list, please email me at rdftaxpro@yahoo.com with “Tax Pro Online Resources” in the Subject Line. 

 

TAFN

 

 

 

 

 

 

 

 

WELCOME TO ROBERT D FLACH’S THE TAX PRO!

My new free monthly e-newsletter for tax professionals – ROBERT D FLACH’S THE TAX PRO – premieres today!

 

The first issue contains –

 

ü  TAXPRO BUZZ,

 

ü  A MEET AND GREET with NATP President Gerald Cannito, CPA,

 

ü  Discussions of the Mortgage Interest deduction and the idea of “remaining silent” on full-year health insurance coverage on the 2016 Form 1040, and

 

ü  Other “stuff” of interest to tax professionals.

 

You can click here to download the issue.

 

Your thoughts and comments on this newsletter are welcomed and solicited.

 

TAFN

 

 

 

A CONTROVERSIAL TAX REFORM IDEA

 

For years now I have been suggesting a unique, and I expect controversial, tax reform proposal that I have never seen discussed by anyone else anywhere else.

 

I would do away with the deduction for depreciation of real estate, including capital improvements to real estate, on individual and business income tax returns. The Tax Code should not permit a deduction for the depreciation of real property or capital improvements thereto on Schedule C, Schedule E, or Schedule F of Form 1040, Form 1041, Form 1065, Form 1120, or Form 1120-S.

 

According to the IRS, depreciation is “an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property”.

 

Let us look at depreciation from the point of view of the Income Statement of a business or rental activity. Basically, if you purchase an asset (i.e. equipment, a vehicle, or real estate) that will last more than one year you spread the cost of the asset over its “useful life”. You purchase a new computer. You certainly do not purchase a new computer each year – you expect that it will continue to provide service for several years. So you divide the cost of the computer over a period of years to reflect this fact, and to properly report the “economic reality” of the purchase.

 

If you deducted the full cost of the computer in the year of purchase this would distort the true cost of doing business. Since you generally purchase a new computer every five years, deducting the cost over a five year period “more better” represents the cost of operations. Thus depreciation is used to “recover the cost or other basis of certain property”.

 

Another way to look at depreciation is from the Balance Sheet perspective. When you purchase an asset that asset has value to you. You trade the asset of cash for the asset of a computer. If you sold your business the value of the computer would be included in the value of the business. As an asset ages its value drops. A two-year old computer does not have the same value in the market as a comparable brand new computer. Depreciation is used to reflect the drop in value of the asset. Thus depreciation is used to reflect the “wear and tear, deterioration, or obsolescence of the property.”

 

If we look at economic reality, a building has a life of much more than the 27.5 or 39 years over which depreciation is currently allowed. The building I lived in several years ago was 100 years old at the time, and is still going strong. And, for the most part, the value of real estate does not drop in value over the years. If properly maintained its value will generally increase. My parents purchased their first home for $13,000 and sold it many years later for $75,000 (and they were robbed).

 

Granted real estate values can go down due to market conditions. But this is the exception and not the rule.

 

For all intents and purposes, in most cases real estate does not “depreciate”. You do not replace a building every few years because it no longer provides the same service or function. And the value of real estate as a component of the value of a business does not drop as it ages. So why should we allow a tax deduction for the depreciation of real estate?

 

An added benefit - by doing away with the depreciation of real property taxpayers would no longer have to deal with the “recapture” depreciation when the property is sold, which would greatly simplify the process.

 

So what do you think?

 

BTW – the above is taken from my e-book “A Tax Professional for Tax Reform”.  Click here to download a copy.

 

TAFN