Tax Guru – Ker$tetter Letter

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2018 Federal Inflation Adjustments

Posted by taxguru on October 25, 2017

Every year, some parts of the tax code, such as the beginning and ending points for the various personal income tax brackets, are adjusted for the change in the government’s official Consumer Price Index (CPI) as of August 31.  This is supposed to prevent “bracket creep,” where people whose income is just keeping pace with inflation are pushed into the higher percentage brackets.

Not all tax related amounts in the Tax Code adjust automatically for inflation.  There are scores of tax related figures in the Tax Code that do not ever get adjusted and have been the same for several decades, waiting for an official Act of Congress to be adjusted for the effects of inflation.

As has been the tradition, tax publishers are the first to do the calculations and release the inflation adjustments for the next year.  IRS will release their official inflation adjustments for 2018 in the next month or so, assuming those IRS employees are still around in IRS HQ.

The first such report with 2018 adjusted amounts that I have come across is this 16 page pdf from Thomson Reuters.

Projected 2018 Inflation-Adjusted Tax Brackets and Other Key Figures

As I have done in previous years, I will post links to other such reports, as I learn about them.

Update 10/25/2017:  IRS has announced their official inflation adjustment figures in the following two news releases.

IRS Announces 2018 Pension Plan Limitations; 401(k) Contribution Limit Increases to $18,500 for 2018

In 2018, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Unchanged

One key adjustment that I didn’t mention earlier is the fact that, after several years at $14,000, the annual Gift Tax exclusion will rise to $15,000 per donor per donee for 2018.  This exemption is only increased in $1,000 increments, so it normally takes a few years of cumulative inflation before it’s enough to trigger the $1,000 increase.

Posted in inflation | Comments Off on 2018 Federal Inflation Adjustments

Filing Extension for Calif WildFire Victims

Posted by taxguru on October 13, 2017

This has been a terrible past few months for huge disasters.

As I expected, IRS has just announced that they are giving the victims of the current California wildfires the same extended due date as they earlier provided for hurricane victims, January 31, 2018 for their 2016 tax returns, which would otherwise have been due in by this coming Monday, October 16.

IRS Gives Tax Relief to Victims of California Wildfires; Extension Filers Have Until Jan. 31 to File

As this announcement explains, this special extension applies to individuals and businesses located in the fire area, as well as those who reside outside the fire zone, who have been helping to fight the inferno and assist in the relief efforts.

As with any disaster of this magnitude, the Tax Code allows the unreimbursed loss to be deducted on either the current year’s (2017) tax returns or on the previous year’s (2016).  I explained more about how this process works in my post on Hurricane Harvey tax breaks


Update 10/13/2017
: As is their normal practice, the California FTB has announced their agreement to honor the IRS’s extended 2016 filing deadlines (until 1/31/18)  for those who have been affected by the current wildfires, as well as the recent hurricanes.

California Taxpayers Impacted by Wildfires Receive More Time to File, Pay

Posted in disaster, extensions | Comments Off on Filing Extension for Calif WildFire Victims

Is this some kind of joke?

Posted by taxguru on October 5, 2017

Unfortunately not.

IRS awards multimillion-dollar fraud-prevention contract to Equifax

IRS top brass continue to dig themselves even deeper down the untrustworthiness hole they have been in for the past few years.  This really boosts our confidence in giving IRS all of our personal financial and other information; not.  What could go wrong?  Unfortunately, when taxpayers’ private info falls into the wrong hands due to these idiots, there’s nothing we can do about it.  IRS, as well as all government employees, can’t be sued for stupidity.    

 

I also considered some other headlines for this hard to believe news.

The Blind leading the blind

Dumb and Dumber

Stupid is as stupid does

Posted in IRS | Comments Off on Is this some kind of joke?

More State Tax Refugees on the Way to Florida

Posted by taxguru on September 30, 2017

Just as with the Dim-Wits in power in the PRC, who believe the only answer to budget deficits is to soak their “evil rich” citizens even more, the Rulers in Illinois have the same formula for their financial shortcomings. 

It always warms my heart when I see stories such as this one, where State taxpayers finally reach their breaking point over being fiscally raped by their rulers and actually move to a lower tax state, which is frequently our new home state of Florida.

Fed-up Illinois homeowners consider moving: ‘It’s not just the property taxes on my home; it’s all of them’

The main problem with the growing population of tax refugees down here is the increased traffic congestion, especially when it comes to Hurricane evacuations.

Posted in StateTaxes | Comments Off on More State Tax Refugees on the Way to Florida

Trump’s Marxist Tax Reform Proposals

Posted by taxguru on September 30, 2017

As I mentioned earlier in the year regarding Trump’s plans to reform the tax code, I don’t intend to waste much time studying or discussing their specifics until it looks like there is a good chance that they will get some traction in Congress, where real tax laws are supposed to be written.  

However, listening to Rush Limbaugh’s discussion of the Trump tax reform ideas, I have to agree with Rush that this sounds more like a DemonRat plan than one true capitalists can support. 

Soaking the “evil rich” with even higher tax rates is counter-productive to boosting the economy and sounds more like a proposal from a Marxist president, like bHo or Billary Clinton. 

Trump is obviously doing this as a way of currying favor from the media and taking the wind out of any Dim claim that he will personally benefit from his proposed changes in the tax code.  However, he is now alienating those of us who believe in smaller, less costly government. 

The relevant transcript from Rush’s show on Friday:

Trump’s Pitching His Tax Cut Like a Democrat

Posted in TaxReform, Trump | Comments Off on Trump’s Marxist Tax Reform Proposals

IRS Hurricane Delays

Posted by taxguru on September 28, 2017

IRS has released the following summary of the delayed filing dates for taxpayers and preparers who are/were located in the areas hit by Hurricanes Harvey, Irma and Maria.

IRS Offers Help to Hurricane Victims: A Recap of Key Tax Relief Provisions Available Following Harvey, Irma and Maria

Hopefully, Maria will be the last big storm of the year to require such measures.

Posted in disaster, IRS | Comments Off on IRS Hurricane Delays

IRS Extends Deadlines for Irma Victims

Posted by taxguru on September 12, 2017

All last week, as we all prepared for the oncoming wrath of Hurricane Irma, I was confident that everyone in Florida could expect the same kind of official extensions of time from IRS to file tax returns that had their first extension expiring in the next few months. 

While this was mainly 2016 1040s, even more pressing are the extensions for pass-through entities, such as LLCs, Partnerships, Trusts and S-Corps, which have extended deadlines of September 15, 2017 for their 2016 tax returns.  In the “old days” filing any of these tax returns late wasn’t a big deal because late penalties were only based on the amount of taxes due, and as pass-through entities, they had no taxes and thus no late penalties.  However this was changed a number of years ago and nowadays IRS is very aggressive in assessing late filing penalties of hundreds of dollars per month per K-1.  These frequently grow into thousands of dollars.

Since Sept 15 is fast approaching, for the past few days, I have been checking the IRS news page for an announcement similar to the one they had for Hurricane Harvey, giving all those affected by Irma more time to file their 2016 tax returns.  Until just a short while ago, the only Irma affected territory mentioned as having filing relief were parts of the U.S. Virgin Islands.

IRS has just released this news release, announcing the expansion of the list of areas that have been granted official deadline extensions due to Hurricane Irma disruptions.

As of right now (2:50 pm on 9/12/17) The IRS’s list of affected Florida areas only includes 16 counties.  Since the evacuation order, preparation and the actual storm included all 67 counties here in Florida, IRS will need to expand that list.  According to the IRS description, it’s a function of what they are told by FEMA.  While not all 67 counties were hit as hard as some others, most were affected by the storm.  Even people who didn’t have any actual storm damage, but heeded the Governor’s pleas to get the hell out of Florida, are going to need a lot of time to get back to their normal lives after returning to their homes.  

I can only assume that the IRS’s official list of affected Florida counties will grow over the next few days or weeks.  Rather than list 60 to 65 county names, they may just take the simpler route and include the entire State of Florida.

[Update 9/14/2017] – I noticed a few more Florida counties being added yesterday to the IRS’s list.  As of just before Noon today, their list of affected counties is up to 37, including Citrus, where we are located.  As more hurricane damage is discovered and reported up the chain of command (FEMA, et al), this list will continue to grow.

[Update 9/15/2017] – The list of affected Florida counties is now up to 46.  Just 21 more to include the entire state.

[Update 9/16/2017] – The IRS list of affected Florida counties has now been changed to “This represents all 67 counties of Florida.”

[Update 9/20/2017] – IRS has just declared that Georgia taxpayers and preparers are also eligible for the special 1/31/18 extended filing deadline due to Hurricane Irma.

Posted in disaster, extensions, IRS | Comments Off on IRS Extends Deadlines for Irma Victims

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Posted by taxguru on August 30, 2017

Is the IRS Scandal About to Break Wide Open? – Let’s not hold our breath waiting for our GOP rulers to do anything to punish, or even stop, the DemonRat criminals operating at high places in the government.

 

The Big 3 Tax Cut Lies That Democrats Keep Telling – Just a few of the many lies promulgated by the enemedia, DemonRats, and RINOs in order to justify stealing huge percentages of money from the producers in this country via the Marxist “progressive” tax rate system.

Posted in Uncategorized | Comments Off on .

Some Hurricane Harvey Tax Breaks

Posted by taxguru on August 29, 2017

There are a few silver linings to the still ongoing disaster in the Houston area as related to income taxes.

Filing Delay
As is always the case with huge unexpected disruptive events, IRS has officially extended tax filing and payment deadlines for people and businesses who are in the affected areas.  In this recent press release, IRS has extended the tax return filing and tax payment deadlines until January 31, 2018 for those who had tax returns due or extensions expiring in September and October 2017.  This includes millions of people who filed extensions for their 2016 1040s. 

IRS Gives Tax Relief to Victims of Hurricane Harvey; Parts of Texas Now Eligible; Extension Filers Have Until Jan. 31 to File

Deducting Unreimbursed Casualty Losses
Not mentioned in this IRS announcement is the fact that victims of Hurricane Harvey also have a choice about when to deduct their losses from this disaster.  Presidentially Declared Disaster Areas (PDDA) have a special tax break that “lesser” disasters don’t.  

Trump declares Hurricane Harvey federal disaster in Texas

Normal tax policy is to declare income received and expenses paid on the tax returns for that particular year.  If there were a fire or a small neighborhood flood in August 2017, those who were affected would have to wait to deduct their unreimbursed loses on their 2017 tax returns, which they would be filing with IRS in 2018.

In order to allow PDDA affected taxpayers to recoup some of their losses sooner, via tax reductions, they have the option to claim the casualty loss deduction on the normal year’s tax return (2017 for Harvey) or on the previous year’s return (2016 for Harvey).  You can see more details on this on the IRS website.

Tax Relief: Presidentially Declared Disaster Areas

Deciding on which tax return to claim the PDDA loss is, like many tax planning choices, based on when it will save you the most money.  As of today (8/29/17), we are only aware of one of our clients who has been personally hit by Hurricane Harvey, with an early estimated loss of around a million dollars.  We will most definitely be discussing the feasibility of deducting this loss on his 2016 1040, which also happened to be a year in which he had to report several millions of capital gains. 

Having spent several years in California, I do have quite a bit of experience in working with this issue with such disasters as earthquakes, as well as how to properly document and claim the losses on tax returns to avoid any IRS questions.  This includes attaching photographs of the home, before the disaster and after, as well as copies of contractor invoices for reconstruction costs.  The larger the deduction, the more documentation you need to attach to your tax return.  You don’t want to have to suffer through a disaster that’s often much worse than a hurricane, an IRS Audit.  

You can download a handy PDF reference on deducting casualty and theft losses here.  Courtesy of my favorite tax reference source, TheTaxBook.

Posted in casualty, disaster | Comments Off on Some Hurricane Harvey Tax Breaks

Will IRS criminals ever be prosecuted?

Posted by taxguru on August 19, 2017

I’m not holding my breath expecting Lois Lerner and her band of scofflaws to ever be punished for assisting the bHo Regime in using the IRS to attack and persecute political opponents.  However, it’s still great to see that some folks are not yet ready to let the story drop. 

Lay it on the line’: Judge in tea party case orders IRS to disclose employee names, reasons

Posted in Uncategorized | Comments Off on Will IRS criminals ever be prosecuted?