Friday, July 9, 2021



Once again, the issue of tax preparer regulation is in the news.  According to ACCOUNTING TODAY “Congress introduces tax preparer regulation bill”.

I do not oppose requiring PTIN-holders to complete a minimum number of CPE hours in federal income taxation to maintain their PTIN.  In fact, I support this.  It is vital that every sincere and competent paid Form 1040 tax preparer take CPE in income taxation each year to keep up-to-date on tax law changes.  I have taken on average at least 16 hours of CPE in federal income taxation each year consistently for decades. 

I do oppose requiring all paid tax preparers to take a government-administered competency test, either one time or annually, to maintain their PTIN and continue to be allowed to prepare tax returns.  I would only support a one-time initial competency test if there was a grandfathering exemption for paid tax preparers who have been consistently preparing 1040s for a fee for at least 5 years. 

After 50 tax seasons of preparing 1040s without incident I have no intention of taking a test now to prove I know what I have been doing for the past 50 seasons.

What I would like to see is a new voluntary tax preparation credential, either a part of the current IRS Enrolled Agent system or, preferably, created and administered by an independent organization.  See my editorials “What the IRS Should Do About the RTRP” and “Its Time for Independent Certification for Tax Preparers”.

So, what do you think?


Friday, June 25, 2021



As we all know, thanks to the GOP Tax Act taxpayers can only deduct mortgage interest paid on debt used to “buy, build or substantially improve” a personal if they itemize on Schedule A.  Home equity interest is no longer deductible.
In addition –
* The home being bought, built or improved must be used as the security for the loan.
* If the homeowner defaults on the loan the home will be taken to “satisfy” the debt.
* The loan must be recorded with the appropriate agency under state law, usually at the county level.
We can no longer simply put the amount of mortgage interest reported in Box 1 of a Form 1098 on Line 8 of Schedule A.
Thankfully, also due to the GOP Tax Act, most of our clients are no longer able to itemize.  But for those who do the mortgage interest deduction is often the deciding factor.
It is clearly the responsibility of the taxpayer to keep separate track of acquisition debt and home equity debt, going back to the original purchase of the mortgage.  The bank or mortgage company will not do it, and it is not our responsibility.  But I do not know of a single taxpayer who actually does this.
I am interested in hearing how my fellow tax preparers deal with this issue.  What do you ask of your clients when it comes to mortgage interest?  And what documentation do you require from them to determine deductible mortgage interest?
I would also like to know if any of you have dealt with an IRS audit of mortgage interest.
You can respond via a comment to this post or via email to with THE TAX PROFESSIONAL BLOG in the Subject Line.
FYI, I have created a guide for DEDUCTING MORTGAGE INTEREST, with forms and specific instructions for keeping separate track of mortgage debt, to give to clients.  I am offering reprint rights to this guide that you can personalize and give to your clients for only $14.95 ($11.25 for members of the National Association of Tax Professionals – provide your membership number with your order) , sent as a word document email attachment (the signed reprint rights agreement will be sent via postal mail).  The guide also discusses in detail who can deduct mortgage interest, refinancing and points.
If you want to see the guide before ordering reprint rights, I will send you a copy of the public version, as a pdf email attachment, for only $2.00, which can be deducted from the cost of the reprint edition if you decide to order.
Send your check or money order for $14.95 or $11.25 or $2.00, payable to TAXES AND ACCOUNTING, INC, and your email address to –
I am looking forward to your responses.

Friday, June 18, 2021



+ The 2021 IRS Nationwide Forum is virtual again this year.  It will be held July 20 – August 19.  A printable version of the webinar schedule is available by clicking the link in the first paragraph under the heading “Webinar Schedule Now Available!”.

+ In case you haven’t heard this yet - “IRS offers tool to register for monthly child tax credit”.

+ Russ Fox EA shared his thoughts on “The 2021 Tax Season (Part 1)” at TAXABLE TALK.  For Russ, Part 1 is the part of the season that ended on May 15th.

If you have not already seen my review of the 2021 tax filing season go here.

+ One more benefit of membership in the National Association of Tax Professionals (NATP) – “Free post-tax season webinars for all tax pros”.

+ While written for those who are considering becoming a professional tax preparer, this book offers good advice and information, and food for thought, for existing tax pros – SO YOU WANT TO BE A TAX PREPARER.   

Click here for a review of this book.  

If you have some BUZZ you want to share with fellow tax pros email me at with the link.  Be sure top put THE TAX PROFESSIONAL BLOG in the Subject Line.


Friday, June 11, 2021


 The tax filing season – my 50th – is over, so I’m baaaaaaack!

+ Speaking of my milestone, I reminisce about my “50 Years of Preparing 1040s” in a series of posts at THE WANDERING TAX PRO.  Check out -

My First 1040

How It All Began

The Great Unwashed

+ My post on “The Great Unwashed” deals with clients.  Kelly Phillips Erb discusses clients in a blast from the past“ from her TAXGIRL blog – “Don't Be That Client: 8 Clients That Drive Tax Pros Crazy”. 

+ Getting back to THE WANDERING TAX PRO – have you seen my annual “That Was The Tax Season That Was 2021” review of the tax filing season yet?  Why not? 

+ And before we leave TWTP – I discuss the benefits of filing separate returns in “Joint Vs Separate – That Is The Question.” 

+ This legislation certainly makes sense to me.  The Tax Deadline Simplification Act would amend the Internal Revenue Code of 1986 to have estimated income tax installments paid on a truly quarterly basis.

+ The NATP BLOG provides us with a “Summary of the American Families Plan and other recent proposals”.

+ Kay Bell, the yellow rose of taxes, explained “Biden's first federal budget covers campaign & tax promises” at DON’T MESS WITH TAXES.


Thursday, February 25, 2021


I recently embarked on my 50th tax filing season.  I have been a paid preparer of 1040s since February of 1972.  

Most people remember their first love. I remember with fondness the first Form 1040 I prepared – which for me is really the same thing.  

My first 1040 was the 1971 model (I can actually tell you the name of the taxpayer).  This was back when a deduction was really worth something and everyone itemized. As we used to tell clients, "Uncle Sam will reimburse you for up to half of our fee!"  
On my first day on the job, never having prepared a tax return before, not even my own, my boss took me to a desk and 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”.  He told me to “jump in and swim”.  I learned how to prepare income tax returns the very best way possible – by manually preparing income tax returns.  
Back then -
* a savvy tax preparer could "pull a rabbit out of a hat" and save a client literally thousands of dollars in federal income tax with "Income Averaging" or "10-Year Averaging" (and in doing so be assured a client for life),
* credit card interest, auto loan interest and personal loan interest, as well as our tax preparation fees, were fully deductible,
* "Employee Business Expenses" were allowed as an adjustment to income,
*there was no such thing as an Adjusted Gross Income exclusion or threshold or the "phase-out" of a deduction or credit,
* we had never heard of a PIG, PAL, ACRS, MACRS,or MAGI, at least in the context of tax returns,
* and one-half of long-term capital gain just disappeared from the tax return.
For 1971 the starting tax rate was 14% and the top rate was 70%. There was a "Minimum Tax", not yet alternative, and a "Maximum Tax" (the maximum tax on "earned income" was 50%). While we did prepare a few maximum tax forms, I do not recall ever preparing a minimum tax form. The Alternative Minimum Tax did not begin to affect my clients until the 2nd half of the 1990s.  And there was the previously mentioned Income Averaging and 10-Year Averaging.
On Page 1 of the 1971 Form 1040 one would indicate name, address and Social Security numbers of the filer(s). In the case of a return for a married couple the names were listed as “Richard and Mary Taxpayer” on one line instead of a separate line for the name of each spouse. The filing status was checked and exemptions were claimed. The taxpayer and spouse could each claim an additional exemption for being 65 or over and blind. The names, but not Social Security numbers, of dependent children were listed, with no indication of whether they “lived with you” or “did not live with you”. The names, but again not Social Security numbers, of “other” dependents were listed on Page 2 of the 1040.
Income was reported on Lines 12 through 18 on Page 1, with lines for wages, dividends (no designation of “qualified”), interest (taxable only – no reporting of tax-exempt interest), and “income other than wages, dividends and interest”, the sub-total, total “adjustments to income” and Adjusted Gross Income. The line for dividends included (a) for gross dividends and (b) for an exclusion amount. If gross dividends and/or total interest exceeded $100 one would have to complete and attach Schedule B.
The net tax liability was reported on Lines 19 through 23. Federal Income Tax withheld, Estimated Tax Payments, and “Other payments” were deducted and a balance due or refund was indicated.  Line 31 of the Form 1040, and not Schedule B, was where the taxpayer was asked about foreign accounts.
Part I of Page 2 of the 1040 was where other dependents were listed, along with relationship, months live in taxpayer’s home, did dependent have income of $675 or more, amount taxpayer furnished toward support, and amount furnished by all others, including the dependent.
Specific items of income, adjustments to income, credits, other taxes, other payments, and the actual Tax Computation were reported on Lines 34 through 64 in Parts II through VII.
Social Security, Railroad Retirement, and Unemployment benefits were totally exempt from federal income tax. One could use the “3-year” rule for recovering employee contributions to determine the taxable portion of pensions and annuities. This was calculated on Part I of Schedule E.
Adjustments to income included –
·         Sick pay,
·         Moving expense.
·         Employee business expense, and
·         Payments as a self-employed person to a retirement plan, etc.
The only credits indicated on the 1040 were –
·         Retirement income credit,
·         Investment credit, and
·         Foreign tax credit.
The personal exemption amount was $675. Tax could be calculated by “using Tax Rate Schedule X, Y or Z, or if applicable, the alternative tax from Schedule D, income averaging from Schedule G, or maximum tax from Form 4726”. Other taxes included a line for “Minimum tax”, not yet alternative.
On Schedule A –
·         Medical and dental expenses were reduced by 3% of Adjusted Gross Income (this was the only item on the Form 1040 that was reduced based on AGI).
·         Taxes included state and local gasoline tax (from gas tax tables), general sales tax (from sales tax tables) and (not or) state and local income tax, with an additional deduction allowed for sales tax paid on “major purchases”.
·         Contributions were deductible pretty much as they are now, except there was no strict requirement for documentation.
·         Interest expense included not only home mortgage interest (fully deductible – not limited to interest on “acquisition debt” and no principle restrictions) but also interest on installment purchases, credit cards, and other “personal” interest.
·         Miscellaneous deductions were not reduced by a % of AGI; certain employee business expense, as mentioned earlier, were deductible as an “above-the-line” adjustment to income.
Schedule D allowed for a 50% deduction for net long-term capital gain – only half of such gains were included in AGI. So, if net long-term capital gain (or net combined long-term and short-term gain if smaller) was $10,000, only $5,000 was reported as income on Page 2 of Form 1040. The maximum net capital loss deduction was $1,000.
The 1971 standard deduction was $1,050 for both a single person and a married couple. The standard deduction was originally 10% of AGI up to a maximum of $1,000. It wasn’t until 1975 that the standard deduction for married was more than that for single.
There were no computers in those days. During my first few years we did not even have a copy machine in the office. Returns were prepared by hand on 3-page carbonized forms purchased from Accountant's Supply House.  As most of you know, I still prepare all of my federal income tax returns manually.
As I started out in the tax preparation business the matching of 1099s to 1040s had just begun. I remember a client who came into the office during my first or second year with a humungous print-out from the IRS listing by source all the interest and dividends that he had failed to report on his previous year's 1040.
During my early years you were not required to list the Social Security number for dependents claimed on your return. One year a married client, let's call him John and his wife Mary, left his "stuff" off at the office, which included a handwritten sheet listing, among other deductions, "dependents" John, Mary, Paul and George. The college student who prepared the return that year (not me) listed 4 dependents - John, Mary, Paul and George. The client received the refund requested on the return without question.
The next year John came in and stayed while I prepared the return. I asked if he was still claiming his four kids, John, Mary, Paul and George, and he told me that he only had two children - Paul and George! The John and Mary he had listed on the sheet the previous year was apparently he and his wife. It appears that the student who had prepared the earlier return had forgotten our first, and most important, rule of tax preparation - always review the prior year's return when preparing the current 1040.
At the IRS Tax Forum several years back, it was reported that in the first year you were required to list a Social Security number for all of your dependents about 5 Million dependents mysteriously disappeared from tax returns.
Of course, in the "good old days" we never filed an extension. We finished all the returns on April 15th - even if we had to stay in the office until the wee hours of the morning, with the client present, to do so!  I often made an 11:30 PM run to the Jersey City main Post Office on April 15th
So, you can see there have been a lot of changes to tax law, and tax preparation, since my first 1040.  And there will be more changes going forward.  It appears the only constant in tax law is change.  Today’s tax law is certainly much more complicated and convoluted than the 1917 US Tax Code.
One thing has not changed.  The basic challenge for the tax professional is still the same today as it was in 1971– getting all the necessary information from the client to properly prepare the return. 
In my opinion some 1971 tax law is better than 2020 tax law and some 2020 tax law is better than 1971 tax law.  But that is a topic for another post. 


Monday, February 1, 2021



And so, the 2021 “tax season” officially begins.  This will be my 50th season.

Now – what you have been waiting a year for - 


On the first day of tax season my client gave to me a Closing Statement for the purchase of a home.

On the second day of tax season my client gave to me 2 Economic Impact Payment notices.

On the third day of tax season my client gave to me 3 mortgage statements (without, of course, any analysis of how much of the mortgage interest reported represents interest on acquisition debt).

On the fourth day of tax season my client gave to me 4 W-2s.

On the fifth day of tax season my client gave to me 5 Salvation Army receipts.

On the sixth day of tax season my client gave to me 6 1099-DIVs.

On the seventh day of tax season my client gave to me 7 cancelled checks.

On the eighth day of tax season my client gave to me 8 useless items.

On the ninth day of tax season my client gave to me 9 medical bills.

On the tenth day of tax season my client gave to me 10 stock sale confirms.

On the eleventh day of tax season my client gave to me 11 employee business expenses (despite being no longer deductible).

On the twelfth day of tax season my client got from me a finished tax return, 11 employee business expenses, 10 stock sale confirms, 9 medical bills, 8 useless items, 7 cancelled checks, 6 1099-DIVs, 5 Salvation Army receipts, 4 W-2s, 3 mortgage statements, 2 Economic Impact Payment notices, and a Closing Statement for the purchase of a home.

And, of course, on the thirteenth day of tax season the client gave to me a corrected Consolidated 1099 from Wells Fargo Advisors!


Monday, January 18, 2021


I am always seeing fancy looking organizers on home improvement shows and in the aisles at STAPLES.  It appears that some are rather expensive.

I get all my business and personal organizers absolutely free!

I have found that the various containers that food and household products come in are perfect organizers for holding different sized paper and binder clips, various sizes of sticky pads and smaller lined paper pads, stamps, pens and pencils, erasers, and other office and household supplies.

For one, there is the plastic containers that many “tv dinners” come in (the aluminum ones are no good).  And the brown container that holds three crème-filled cupcakes in a package.  They provide multiple sections for organizing clips.

The green, blue, and black containers that hold the Swiffer wet pads, or the generic alternative, come in several sizes and have many uses in the kitchen, bedroom, and office.

The round plastic containers that contain potato or macaroni salad from the supermarket or sandwich shops like “Blimpie” are also good for holding small supplies.

I even make use of the metal Altoids containers.

Not only am I saving money, but I am recycling as well!


Last week’s post on the NJ-NATP state tax seminar mentioned New Jersey’s new “BAIT” deduction and credit. 

I discussed my thoughts on this new “scam” (my opinion) in “’Bait’ and Switch” at THE WANDERING TAX PRO.