Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Tax Changes Under the Trump Administration?

Posted by taxguru on November 9, 2016

Now that Hitlery is out of the equation, we don’t have to waste time and energy worrying about the trillions of dollars in new taxes she was promising-threatening.  We can now focus on the what changes we might be seeing over the next few years under President Trump, along with the GOP controlled Congress. 

A good start at analyzing the changes we can expect is the following news release from TaxCoach, one of the most useful resources for any tax pros who are interested in keeping up on the most state of the art tax savings techniques for their clients.

Trump Won…Now What?

On January 20, Donald Trump will take the oath of office as the 45th President of the United States. He’ll have the full support of a Republican House and Senate, meaning an end to the gridlock of the past six years. What effect will his inauguration have on your taxes?

Trump has proposed a conventionally Republican suite of changes: lower rates, new deductions for families, and incentives to repatriate foreign earnings. At the same time, he has proposed to limit certain breaks and cap overall itemized deduction.

However, these are just the latest of several proposals Trump floated during the campaign. Trump appears to be less focused on policy details than on broad themes, so we shouldn’t be surprised if he lets Congressional Republicans take the lead on tax planning policy.

 

Individual Taxes

• Cut brackets to three: 12-25-33%

• Boost standard deduction to $15,000 ($30,000 for joint filers)

• New deduction for individual health insurance premiums

• New deduction for child care costs and “dependent care savings accounts”

• Limit itemized deductions other than mortgage interest and charitable gifts

• Cap itemized deductions at $100,000 ($200,000 for joint filers)

• Tax “carried interest” as ordinary income

• Repeal Alternative Minimum Tax

• Repeal “Obamacare” taxes

Estate Taxes

• Repeal Gift & Estate Tax

• Repeal stepped-up basis on gains over $10 million

Corporate Taxes

• Eliminate deferral of tax on foreign business income

• Impose 10% repatriation tax on accumulated profits of foreign subsidiaries

Repeal most business tax incentives (except R&D).

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Einstein’s Tax Dilemma

Posted by taxguru on November 5, 2016

The old worn-out cliché that something isn’t Rocket Science does have a connection to the realm of taxes with the famous quote from Albert Einstein (the famous physicist and not the actor who was born with the same name, but changed it to Albert Brooks). IRS even includes this on its page of humorous tax quotes.

The hardest thing in the world to understand is the income tax.”

For a very interesting look at the history of this quote from one of the planet’s most intelligent residents, check out this article from a website I just discovered courtesy of Mr. Google, QuoteInvestigator.com

In this article, author Garson O’Toole explains the history of this famous Einstein quote. It actually came from a 1963 letter to Time magazine from Einstein’s tax advisor-preparer, Leo Mattersdorf of New York City.  It adds a bit more depth and context to the quote we are all familiar with. 

…the professor turned to me and with his inimitable chuckle said: “The hardest thing in the world to understand is income taxes.” I replied: “There is one thing more difficult, and that is your theory of relativity.” “Oh, no,” he replied, ”that is easy.” To which Mrs. Einstein commented, “Yes, for you.”

I encourage anyone who is interested in learning more about Einstein’s feelings about taxes to read the full article.

 

I am discussing this as an introduction to some pictures we took a few days ago, while visiting the Madame Tussauds Wax Museum in Orlando.  Unlike other wax museums I have visited in San Francisco and Branson, the statues are not chained off, but are open and accessible for picture taking.  Sherry took these pics with her iPhone. 

1KerEinstein1KerEinstein2

At first, I thought some of the statues, including this one, might be shorter than the people actually were.  However, checking online, the records indicate that Einstein was around 5’7”, so this does look realistic.

 

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Catching the Scammers

Posted by taxguru on October 27, 2016

There has been a lot of press coverage about the scumbags who call or write to people, impersonating IRS agents and demanding payments of fictitious tax debts.  We have received plenty of those communications, as have some of our clients.   So far, nobody that we know has fallen victim to these sleazebags.  However, it appears that many people have forked over some serious amounts of money to those a-holes.

When I receive a scam email from an IRS imposter, I forward the entire email, including any attachments, to the IRS’s special email address, phishing@irs.gov.  Some times I receive an acknowledgement back from IRS, and some times, nothing back.  What we never receive back are details of how well they are doing at tracking down, stopping and prosecuting those criminals. 

Every so often, a story pops up in the press about the progress against the scammers, such as this in USA Today.

Feds charge 56 in fraud scheme that siphoned $300M from 15,000 victims

With the ease of setting up these kinds of scams, it would be foolish to let our guard down just because these particular gangs have been caught.  For every internet criminal who is nabbed, dozens more pop up to take his/her place.

It is interesting to scroll through the actual indictment of these crooks.  Most of the people named are in India, so who knows how many of them the USA can actually catch and prosecute.  There are a fair number of names with USA locations, including several from here in Florida. Hopefully, they are not donors to Hitlery, the Clinton Crime Family Foundation, or the DemonRat Party so they can be prosecuted and severely punished.  

 

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IRS’s 2017 Inflation Adjustments

Posted by taxguru on October 26, 2016

As anyone who follows the tax systems in this country knows, they consist of a crazy quilt of thousands of different provisions.  Some of the provisions have dollar amounts that are never changed without an official Act of Congress.  As a result, many of these have been in the system at the same amounts for decades and have not kept up with inflation.

One of the biggest such unchanged figures is the $250,000 per person tax free exclusion of gain from sales of primary residences, under Section 121. This has been the exemption amount when this provision took effect on May 7, 1997 and is still that exact same amount today.  While that amount does cover the gains that most people have when they sell their homes, especially in “fly-over” parts of this country, it is far from adequate to cover the gains sellers in expensive areas have, such as on the coasts.

Other provisions of our tax systems have been written with annual inflation adjustments in order to keep up with the cost of living.  The most important area is with the “progressive” (aka “soak the rich”) tax rate structure that we have that assesses much higher percentages on taxpayers who earn more money than others.  Before our rulers in DC added annual inflation adjustments to where these tax brackets begin and end, many people were victims of what was called “Bracket Creep.”  Their income was growing at the pace of inflation, but they were finding themselves pushed into the higher percentage brackets.  With annual inflation adjustments of the brackets, taxpayers whose income only rises at the same rate as the CPI should stay in the same marginal brackets.

Interestingly, the inflation adjustments for tax rates only apply to individual taxpayers.  The tax rate structure for C corporations has been pretty much the same for decades and does not change until our all powerful rulers in DC so decree.

This is a longer than normal introduction to the IRS’s official calculation and announcement of the inflation adjusted amounts for 2017.  These are very handy for tax planning purposes. 

Some States also have similar kinds of inflation adjustments for their state level taxes, but they are normally announced much later than IRS’s timetable.  For example, the California Franchise Tax Board just announced its 2016 inflation adjustments on Sept 7, 2016.

IRS Summary of 2017 Changes:

In 2017, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Are Unchanged

IRS Details of Changes: 

Revenue Procedure 2016-55  (30 page PDF)

 

Annual Gifting Exclusion:

The amount that is exempt from Gift Tax reporting is not adjusted every year.  It is only adjusted when the cumulative CPI change since the most recent change is close to $1,000 so the amount can always be an even multiple of thousands and not some odd looking number.  Since I constantly receive questions about gifting, I want to point out that the 2016 inflation has been so low that the annual exclusion will remain at the same $14,000 per donor per donee amount for 2017 as it has been since 2013.

 

 

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Late Filing 2015 1040s Without Penalties

Posted by taxguru on October 17, 2016

Today, October 17, is the expiration of the automatic six month extensions that were filed with IRS and the States back in April.  While most people have been able to get their tax returns in by now, many have not.  For those folks, it’s not as serious a situation as it may seem, as I explained earlier today in this email exchange with a client.   

From the client:

Subject: Extension for personal taxes

We are still dealing with S’s medical issues and have not been able to finish getting all the information together for our personal taxes. Would you be able to file another extension for us?

Thanks much,

 

My Reply:

IRS no longer has a form to request additional time to file after the first six month extension expires. 

Late penalties are based on the amount of taxes due with the return.  Nothing due, no penalty.

If you do end up owing money, IRS & DFA will waive the late penalties for Reasonable Cause.  The most common Reasonable Cause that is acceptable justification for late filing is health problems of the taxpayers and/or their family.  As cold-hearted as their reputation is, IRS is actually very compassionate when it comes to waiving late penalties due to health and medical situations.

So, you should focus on getting S well and then worry about your 2015 tax returns. 

Good luck.

Kerry 

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Hitlery’s Tax Hiking Plans

Posted by taxguru on October 12, 2016

It’s no secret that the Marxist candidate for President wants to continue the destruction of the private sector by converting more of it to government ownership.    

Tax Foundation has actually taken the time to do a detailed study of Hitlery’s plans for our tax systems. 

Details and Analysis of Hillary Clinton’s Tax Proposals, October 2016

Since it has been proven on countless occasions that everything out of Hitlery’s mouth is a lie, I doubt that the actual details will match these.  However, we can be assured that, if the Clinton Crime Family succeeds in retaking the White House, there will be a huge increase in the amount of money that will be stolen from those of us who try to make money honestly and given to those who agree to trade their votes for money from the criminals in DC. 

Even though tax policy and legislation are technically the responsibility of Congress, there is little doubt that the  GOP eunuchs in DC will be just as scared of opposing the first female president as they have been the last eight years with the first African-Indonesian pResident.

 

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One way to deal with IRS imposters…

Posted by taxguru on September 29, 2016

Sherry found this hilarious video of a guy turning the tables on a telephone scammer who can barely speak English and wants the victim to pay delinquent Federal taxes to IRS by purchasing Target gift cards. There are too many obvious signs that this call is a scam to even count; but some people still fall for these.

   

 

There is one very interesting twist to this phone call that I have never seen described in any other accounts of similar scam IRS calls.  After the intended victim reveals that  he is screwing with the scammer, the scammer basically claims to be a Pakistani terrorist follower of Osama Bin Laden.  Has our FBI looked into the possibility that the IRS imposters are funding Islamic terrorist organizations?

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What could go wrong here?

Posted by taxguru on September 26, 2016

New Private Debt Collection Program to Begin Next Spring; IRS to Contract with Four Agencies; Taxpayer Rights Protected

It’s not bad enough that people have had to deal with scammers posing as IRS personnel via threatening phone calls and emails.  Now IRS has enlisted the services of four private sector collection agencies to squeeze money out of delinquent tax(non)payers.  They tried this approach a few years ago and quietly dropped it as unsuccessful.  I have no idea why they expect better results this time.

How long do you think it will be before scammers will be impersonating these companies and trying to harass people into paying them for bogus tax debts?  I’m guessing those scumbags will be on the prowl within days from now.

The IRS promise to protect taxpayers from abuses by these outside collectors fails to instill any confidence after the agency’s continuing inability to protect us against criminal abuses by their own employees, such as Lois Lerner and John Koskinen. 

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IRS Commissioner tries to defend his perjury to Congress…

Posted by taxguru on September 21, 2016

The new euphemism for perjury is “faulty testimony.”

IRS boss Koskinen takes heat at impeachment hearing for faulty testimony

I’m sure he is thinking, “Everybody lies in DC.  Why should I be singled out for punishment?”

bHo-oncouch(2016-09-22)

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Trump’s Tax Issues That Would Affect Us

Posted by taxguru on September 19, 2016

It’s a normal part of political campaigns to focus attention on issues that really have no bearing on the big picture of who would be the better president.  The Hitlery campaign has been trying to make a big deal out of Trump’s refusal to reveal his personal income tax returns to the public.  While his excuse for not revealing them, an IRS audit, is bogus, I actually admire his stand as one more non-traditional campaign tactic that has thrown the DemonRats and their enemedia propagandists completely off balance. 

However, even if Trump were to cave in to the pressure to open his tax returns up for media scrutiny, what difference will those have on any of us in the real world?  Zip, zero, nada.  His opponents just want to find something on the returns that they can use to shame or embarrass Trump.  

What would actually affect our personal and business lives in the future are the changes that could be made to the tax system under a new presidential administration.  Tax Foundation has just published a very interesting in depth analysis of Trump’s plans to modify the Federal income tax system.

Details and Analysis of the Donald Trump Tax Reform Plan, September 2016

Again, since most politicians will say absolutely anything in order to win votes, there is no guarantee that campaign promises will become reality.  However, it does give us a taste of what a candidate’s economic platform may look like. 

Hitlery’s economic beliefs have always been well known, so there really isn’t any need for much new analysis.  We can just refer to her guiding philosophy.

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