Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for April, 2001

Posted by taxguru on April 22, 2001

More Time

Although the extension (Form 4868) many of you just filed with IRS moves the due date of your 2000 1040 to August 15, you may need or want even more time. To get an additional two months, until October 15, you need to send IRS Form 2688 by midnight on August 15. In case anyone wants to get a head start on that process, I have posted Form 2688 here on my site.

Besides the very real reason of needing more time to get all of your information together for your tax prep, some people file the 2688 in order to give them more time to fund their 2000 Keoghs and SEP-IRAs. Some also extend the due date because of the fact that later filed tax returns are less likely to be selected by IRS for audit.

Unlike the 4868, which required no signature and was automatic, the 2688 has to be signed by either you or your tax rep and a reason has to be included. The standard reason that has always been accepted by IRS is still useful. “We have been unable to assemble all of the information we require to prepare a complete & accurate tax return by August 15.”

KMK

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Posted by taxguru on April 22, 2001

Fun Stuff

Catching up on some postings that aren’t as essential as dealing with clients’ tax matters.

My favorite humor writer has long been Dave Barry. He had two recent columns that are closely related to my area of expertise that I wanted to share: his tax tips and his investment tips. I read Dave Barry’s weekly column on the Sunday online edition of the Arkansas Democrat. Since their links expire every day, I copied these columns to my site for posterity.

Right around every April 15, David Letterman has some local New York tax practitioners on to provide the Top Ten tax tips. Since I am not local, I have been overlooked again as one of the presenters. I have the latest Top Ten Tax Tips plus some of the extras from the Late Show website here on my site.

One of the funniest parody sites on the web is The Onion. Here, they show how we tax pros celebrate April 15 in Times Square.

KMK

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Posted by taxguru on April 20, 2001

NPR Interview

On Tuesday, April 17, we received a call from National Public Radio in Washington DC, asking if I would be willing to be interviewed on the subject of filing tax returns late. Having just finished preparing almost 100 extensions, and being a long time advocate of filing tax returns later than April 15, I thought that would be the subject.

When I actually did the interview later that day with Megan Williams, a producer of the Morning Edition show, it turned out she wanted to discuss how to avoid late filing & payment penalties. IRS representatives had told her that they could be waived for reasonable cause, but they had no examples of what those reasonable causes could be. I gave her several examples of excuses that had worked for my clients in the past.

Not being a morning person, I wasn’t about to listen to the show during its 5 am to 9 am broadcast. Luckily, I found it on the NPR website. They have a nice website, where you can listen to entire shows, or just parts. You can find my interview, in RealPlayer format here. They did a very nice job of editing a much longer discussion into small soundbites. If you don’t have RealPlayer, I have posted an MP3 version of this two minute piece on my website here.

KMK

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Posted by taxguru on April 16, 2001

Why Rich Liberals Don’t Want Tax Cuts

Long on my list of articles I have been meaning to write is my theory why some people who would benefit greatly from a tax cut, such as high-paid celebrities and athletes, are not speaking out in favor of it. While I am catching up from just surviving my 26th Tax Season, I found this article on that very subject by one of my favorite online writers, Jonah Goldberg of National Review. He echoes many of my thoughts and will have to do until I can add my insight from the perspective of a professional tax advisor.

KMK

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Top Ten Ways To Make Doing Your Taxes More Fun

Posted by taxguru on April 13, 2001

From the 4/13/01 Late Show With David Letterman

10. Do ’em naked

9. Instead of restaurant receipt, send them leftovers from the meal in question

8. Frequent use of the word “eleventeen”

7. Claim a deduction, do a shot!

6. In “For Office Use Only” area write “Approved. Send refund immediately.”

5. Apply a long-term capital gain rate of 20% to a mutual fund, do a shot!

4. Sneeze on forms

3. Instead of using dated definition of income, use the proposed revised definition under section 643(B) in which conforming amendments are made to regulations affecting ordinary trusts, pooled income funds, charitable remainder trusts, trusts that qualify for the gift and estate tax marital deduction, and trusts that are exempt from generation-skipping transfer taxes — that always puts a smile on my face

2. Deduct $100 in medical expenses for all the paper cuts you suffered because tax form is 75 damn pages long!

1. Audit yourself, if you know what I mean.


Extras – From Late Show Web-Site
:

Drive your IRS agent crazy by carrying out every number to the 26th decimal point

You know how people draw little lines through “7’s”, so they won’t confuse them with “1’s”? Well, leave them out and sit back and enjoy as chaos reins!

Save postage by wrapping your return around a rock and throwing it through the IRS’s window

Send back unopened form with words “not interested” across envelope
Instead of black ink, go nuts and use blue ink

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Posted by taxguru on April 11, 2001

Filing Extensions

As usual, we have been swamped preparing extension forms for 2000 tax returns. More than two-thirds of the tax returns I prepare are extended. You can find the 4868 on the IRS website, or here from my site.

Most states don’t require their own form if you file one with IRS and don’t owe any state tax; but check with your state to be sure. An excellent portal to all of the state tax sites is Sister States.

KMK

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Posted by taxguru on April 9, 2001

Warning About Payments To IRS & State Tax Agencies

This time of year, around April 15, is a very confusing time for taxpayers and tax agencies alike. It is the due date for the final 2000 tax payment and is also the due date for the first estimated tax payment for 2001. A very common problem that I have been seeing quite often is the misapplication of those payments to the wrong year by the IRS & State.

I don’t profess to be able to make it idiot-proof; but I do have some real life tips to minimize the risk of this problem. These apply to both IRS and State tax agencies.

Even if you are sending your check in with the appropriate form (4868 or 1040-ES), don’t think that will explain to IRS what the money is for. When the payment is received by the IRS service center, the checks are separated from the accompanying forms. If the checks don’t identify where the money is to be applied all by themselves, IRS will just guess, and as hard as it may be to believe, they often guess wrong.

On the front of your check, you need to write your Social Security numbers because IRS only sees you as a number, not a name. You also need to write the year the payment is for (2000 or 2001). It is also important to use the proper word to describe your payment. If it is for 2000, write “FINAL 2000” if it is with your actual 1040 or “2000 EXTENSION” if it is with your 4868. If you are making a payment towards your 2001 taxes, write “2001 Estimate.”

If you write “2000 ESTIMATE” IRS will be confused and will most likely apply the money to your 2001 taxes because they focus more on the word “Estimate” than the year. I saw this very problem on several occasions from this time last year; many of which we are still trying to unravel.

This has been made more difficult by the unwillingness of banks to return cancelled checks to their customers, as I described here. To date, First Federal Bank in Harrison, Arkansas has refused to budge from their new policy of not returning checks or even providing copies of the backs of the checks.

KMK

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