Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

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Facing Off With IRS Auditor

Posted by taxguru on May 27, 2017

The third season of the TV version of Fargo has been very amusing.  This scene from a recent episode, where a cash bank withdrawal of a tiny bit over $10,000 brings in a pushy IRS auditor, is funny in the way that the villain’s henchman handles the auditor.

 

The henchman cites "Section 41(c) of the U.S. Tax Code" as dealing with the taxpayer’s right to have licensed  representation.  That citation sounded strange to me, so I looked it up in the actual Internal Revenue Code that is included in my main tax reference, TheTaxBook’s WebLibrary.  Section 41 actually deals with  Credit for increasing research activities.  There are paragraphs (a) and (b) under Section 41, but no (c).

Posted in Fargo, IRS, video | Comments Off on Facing Off With IRS Auditor

Let’s avoid premature celebration for what is still just a proposal

Posted by taxguru on April 27, 2017

I am being asked to analyze the recently announced Trump tax reform proposals. However, at this early stage in the legislative process, it is far too premature to assume that these proposals will ever become real tax laws. 

There are some very good ideas in the Trump tax reform proposal; but they are already under vicious attack by the DemonRats and RINOs, who are revising actual history and spreading outright lies about the effect of tax rate reductions. Opinions as to whether Trump will be able to get his proposal through the legislative process are all over the board. 

As I have already told some people, if it starts to appear that the Trump proposal garners enough support in Congress to have a good chance of passing, I will most definitely spend some time analyzing it.   

Over the past 40+ years in the tax profession, I have seen far too many pie in the sky tax reform proposals that too many people wasted time taking seriously.  Back in the 1980s, I even commissioned a poster to illustrate the metamorphosis appetizing sounding tax reform proposals go through as they work their way through Congress.  It’s no different than our body’s digestive process.  Scrumptious apple pie ends up looking and smelling completely differently.  You can still see a small version of that poster here on my main website.

 

Posted in TaxReform | Comments Off on Let’s avoid premature celebration for what is still just a proposal

Colbert Spoofs H&R Block

Posted by taxguru on April 6, 2017

I’m not much of a Stephen Colbert fan.  However, this recent skit, where he pretends to be a Block tax preparer, does have some funny moments.

The Block skit starts at 1:42

 

 

Posted in colbert, hrblock, video | Comments Off on Colbert Spoofs H&R Block

IRS Reputation Still Sullied

Posted by taxguru on April 6, 2017

Can the top brass at IRS pull the agency’s reputation for corruption out of the hole they dug themselves into?  Punishing the lawbreakers we already know about would surely be a good start.  The fact that Lois Lerner and John Koskinen have yet to suffer any repercussions from their flagrant violations of the law makes it difficult to trust the Service’s desire to rehabilitate the taxpayers’ trust in them.

Bribery: New Documents Show IRS Targeting Scandal Was More Expansive

GOP calls for IRS Commissioner Koskinen to be fired

Posted in Crooks, IRS | Comments Off on IRS Reputation Still Sullied

IRS unable to harass as many people as normal…

Posted by taxguru on March 6, 2017

Most people would consider this to be good news:

Chances for a tax audit have rarely been this low

No mention yet of when we should expect the telethon for the poor underfunded and understaffed IRS.

 

From Jimmy Kimmel via NewsMax:

The tax deadline is about five weeks away. And this year, because of all the budget cuts at the IRS, the odds of getting audited are lower than they’ve been in 13 years. Last year, only 0.7 percent were audited, down by 16 percent. This year, it’s expected to be lower than that. In other words, there has never been a better time to claim your Chihuahua as a dependent.

Posted in irs audits | Comments Off on IRS unable to harass as many people as normal…

TaxMan Parody

Posted by taxguru on February 23, 2017

Over the past decades, I have posted dozens of different versions of George Harrison’s classic song, TaxMan.  Some of them can be found on my ScreenCast page.

While those are all different artists singing the song in their own styles, I just came across a different variation.  Weird Al Yankovic recently posted a new parody of TaxMan, called Pac-Man.  While Weird Al’s words no longer relate to the dreaded taxes that we have to pay, the music is still the same as it was on the Beatles’ Revolver album.  I defy anyone to listen to this and not also hear the original lyrics in their head.   

Posted in Music, TaxMan | Comments Off on TaxMan Parody

Let’s not forget the IRS crimes under Obama

Posted by taxguru on February 21, 2017

Now that there is a new occupant in the White House, there is a tendency not to want to dwell on the misdeeds of the previous tenants, such as the many criminal acts of the Clinton Organized Crime Family.  To consider those unpunished acts as water under the bridge and not worth pursuing at this time sends a dangerous message to the public and undermines our faith in the fairness of the laws we are all supposed to obey and live under.

This also applies to the unpunished criminal acts by various IRS employees, such as Lois Lerner and  Commissioner John Koskinen, who used this all too powerful government agency to harass political opponents of the bHo Regime and then blatantly committed perjury when they testified about it before Congress. 

We the people, as lowly taxpayers and servants of our IRS masters, are required to reveal to them every tiny detail of our personal finances under the presumption of a level of fairness, privacy and confidentiality that we can’t reasonably expect any more, as long as we know that nobody at IRS has been punished for their crimes.  We do need to keep the pressure on our rulers in DC to continue to pursue real justice, including dismissal, prosecution and prison time for the lawbreakers inside the IRS so that we can trust that all too powerful agency. 

There are a lot of good, honest people working at IRS.  I would hope that they would do everything they can to help clean house of the miscreants who have given them such a bad reputation.  Firing the perjuring Commissioner would be a good place to start so that everyone could see that such crimes will no longer be tolerated. 

Here’s a good look at this issue from the American Spectator:

Who Will Hold the IRS Accountable?

Posted in Crooks, IRS | Comments Off on Let’s not forget the IRS crimes under Obama

No ObamaCare Penalty On 2016 1040s

Posted by taxguru on February 16, 2017

Trump has done what the Supreme Court refused to do and wiped out the penalty for not having health insurance.  It appears to be effective for the 2016 1040s that we are currently in the process of preparing.

Major Blow to Obamacare Mandate: IRS Won’t Reject Tax Returns That Don’t Answer Health Insurance Question

 

Unfortunately, this isn’t retroactive to previous years, so no refunds will be allowed for the penalties already paid in.  But, those amounts were much smaller than the penalty is scheduled to be for 2016 and future years. However, people who have not yet filed earlier year (2015 and back) returns can most likely now skip that penalty when they get around to filing them.

Update: IRS statement on this issue.

Posted in ObamaCare | Comments Off on No ObamaCare Penalty On 2016 1040s

Loose Lips…

Posted by taxguru on December 23, 2016

With holiday parties and adult beverages loosening people’s inhibitions, it’s a good time for another warning that if you have tax or other secrets that you don’t want the IRS to know about, keep your mouth shut.  Just as with people confessing to all kinds of nefarious acts on social media, there are also numerous cases where IRS agents catch people who feel safe bragging about their abilities to cheat on their taxes, while trying to impress people at parties.  There is a name for those folks; idiot blabbermouths.

IRSAgentAtParty(12-23-2016)

Posted in IRS | 1 Comment »

Gifting Confusion

Posted by taxguru on December 16, 2016

Q:

Subject: S Corp Gifting 

I stumbled into your web site back in 2007 when I was thinking of changing from a C Corp to an S Corp.
Very helpful information written for the non-accounting business owner.

My company (S Corp) has had a banner year and I am now facing a HUGH tax check payable to Uncle Sam.

Here is my question: Obliviously trying to lower my bottom line as much as I can before years end, can I
gift 2 of my best employees $100K each. Our company would pay the taxes for them but then they would
gift back to me $50K each making all of us happy and lowering my bottom line?

I love these guys and they have been employed here for over 35 years each. I have already given them
a bonus of $20K to employee #1 and $13K to employee #2 this Thanksgiving. They are both happy to
receive and willing to file form 709 on their taxes for a cut of the $100K. Can I do this?

Thank you for any help –

 

A:

I don’t want to seem harsh, but I’m getting the impression that you have been trying to navigate the tax waters on your own, without the assistance of professional tax advisors. Any tax pro would have been able to explain how misguided your proposed gifting plan is.

Your ideas regarding the use of gifting as a tax savings strategy are dangerously off-course. Here are just a few of the reasons why this idea is completely wrong for achieving your goal of reducing your 2016 taxable income.

Gifting is a strategy for reducing future Estate (aka Inheritance) taxes and does not produce any kind of current income tax deduction. You could give away everything you have and it would have zero effect on your current year income taxes.

Gifting can only be done by individuals, because only humans are subject to the Estate Tax. Corporations have potentially infinite lives, so they are not ever subject to the Estate Tax.

Gifts have to be no strings attached. Having the recipients gift you back half of the gift clouds what the transaction really is.

True gifts are tax free to the recipients and not deductible by the giver, unlike wages and bonuses, which are reported on W-2s and fully deductible by your business. If you were to gift any person more than $14,000 during a calendar year, you as the giver would need to file a Form 709 Gift Tax return and either pay Gift taxes or utilize part of your lifetime exclusion. The gift recipients do not file 709s. Only the givers do.

There are a number of simple ways that you can still actually reduce your 2016 taxable income. Since most of them will need to be done by 12/31/2016, you need to start working with a professional tax advisor ASAP.

Good luck.

Kerry

TaxCoach Software: Are you giving your clients what they really want?

Posted in Gifting | 1 Comment »