Monday, October 30, 2017


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?

Wednesday, October 25, 2017


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!

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-

Monday, October 23, 2017


Here is an interesting topic for discussion.
I have said in my e-book SO YOU WANT TO BE A TAX PREPARER –
“The US Tax Code is a convoluted mucking fess.  Special tax situations require specialized basic education and training and continuing professional education.  It is my belief that you choose tax situations that you will not do.
Besides the need for additional specialized initial and ongoing education and training, many special tax situations come with additional work, such as more stringent “due diligence” requirements, additional exposure to liability for error and preparer penalties, and additional potential for just plain agita and aggravation.
I would seriously consider not accepting, for example, tax returns with a claim for the Earned Income Tax Credit, or returns with foreign source income that require additional FBAR reports and filings.   
And, to be perfectly honest, looking back over my 45 years in the business, if I were to start all over again I think I would limit my practice to 1040s.  Period.  No 1065s.  No 1120s.  No 1041s.  No 990s.  Just 1040s.  Why?  Again, to limit my need for ongoing CPE to 1040 issues only, and to limit my exposure to agita and liability.  I have found that there is more potential for problems with business entity returns than with 1040s.”
Do any of you currently limit your practice to 1040s only?  Do you wish you had?
Do you refuse returns with EIC and other specific tax situations? Do any of you wish that you had? 
Is limiting areas of practice impossible for a tax preparer just starting out? 
What do you think?

Wednesday, October 18, 2017


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?
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?

Monday, October 16, 2017


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.


According to the “Return Preparer Office Federal Tax Return Preparer Statistics” page at, 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 with THE TAX PROFESSIONAL QUESTION.


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

Wednesday, October 11, 2017


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? 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.

Monday, October 9, 2017


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?
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.