New Image & Function For CPAs

Self Defense

For decades, I have been advising people that, even if you won’t owe any taxes, or if your income is below the mandatory filing requirement, it is still a good idea to file a tax return as a self defense measure. Whoever told this woman that she didn’t need to file a tax return to report a break-even real estate sale was dead wrong. If the advice was from a tax professional, there is a good malpractice case. If it was from an IRS employee, there’s nothing that can be done because they are not legally bound by their advice and it is well known that they are wrong around two-thirds of the time anyway. Anybody stupid enough to rely on IRS advice deserves what they get.

To refresh the point. When real estate and stocks are sold, IRS is provided with a 1099 form showing the gross sales price. Taxes are computed on the net profit or loss after subtracting the asset’s cost basis. IRS has no information on the cost basis. Providing that information to the IRS on an income tax return is the responsibility of the taxpayer. IRS computers, although 1960s generation dinosaurs, are very efficient at matching up gross income amounts from 1099s with the gross sales prices on 1040s. If a sale is not shown on a tax return, or if a tax return has not been filed, IRS assumes that this was unreported income and that the gross sales price also represents the net profit (cost basis = zero). A bill for taxes, interest and penalties is automatically generated, starting a chain reaction collection nightmare.

I have been accused of advocating filing tax returns where no tax was due just to generate revenue. Nothing could be further from the truth. I have never been at a loss for work and have always had far more projects than I could handle. It is simply to help clients avoid the kind of problem the lady in this story encountered when she failed to report the property sale. The truth of her story may be that she was either too lazy or too cheap to prepare a tax return for the year of that sale and she paid the price. Penny wise, pound foolish fits that situation.

KMK

Selective Impartiality

I find the fact that the AARP is protesting the use of their logo by GOP politicians more typical liberal hypocrisy. As a member of AARP for the past few years, I have read several of their publications in which they consistently endorse big tax and spend politicians and policies. Their political neutrality is a joke.

KMK

Financial Statements Do Tell A Story

Bubbles Can Be Anywhere

As big a fan of investing in real estate as I am, I am still fully aware that feeding frenzies can happen with real estate, driving up prices beyond common sense, just as happened with dot-com stocks. I have seen it happen before and know that it is currently occurring in parts of the country. Any investment should be evaluated with a cold emotionless calculator.

Don’t Ask Me

I just learned that the best online question & answer site, AskMe.com, is shutting down its consumer section. It came as a complete surprise to me. However, they have been nice enough to provide the shut down schedule. No more new questions or answers will be accepted after November 1. All of the previously posted stuff will be removed as of November 25.

You have over a month to check out the very useful info that is still up on the site, including the hundreds of answers that I have provided over the past two and a half years. The AskMe people say they will be providing a means for us experts to download our entire contents after November 10. If it works out, I will archive my content on one of my other websites.

KMK

Pot Calling…

If this isn’t hypocritical, I don’t know what is. It is castigating investment banks and their analysts for refusing to provide unflattering reports on their customers. This has been a very real conflict of interest. However, all forms of media, including newspapers, magazines, TV, and radio, have had the exact same kind of conflicts, where news coverage has been altered to please or avoid offending advertisers. To take this holier than thou attitude is ridiculous. Newspapers have been catering to advertiser whims since the beginning of newspapers.

Hired Guns

While the first reaction may be bad to the news that IRS is considering enlisting the services of outside debt collectors to bring in past due taxes, I see it a little differently. Unless the private companies are going to be deputized with IRS’s awesome powers, it will actually be better for taxpayers to deal with them than with the Gestapo-like IRS, who have been allowed to do anything to take money from people, including several things that are unconstitutional and illegal for anyone else to do.

KMK

Any Excuse Will Do

The pro income tax forces in Tennessee are still at it. Their latest attempt to enact a state income tax uses the classic “for the children” excuse. You can be sure that any new tax earmarked for something as specific as teacher payroll will find its way into being used for everything else. Government is consistently atrocious when it comes to using taxes and fees for their intended purposes. Trust funds and lock boxes mean nothing to our rulers, as they routinely dip into them for other uses. This happens all the way from the imaginary Social Security trust fund down to local dog catcher’s fees.

The only way to keep a tax from getting out of control is to prevent it from ever being enacted in the first place. Here’s hoping the anti-tax forces in Tennessee can keep up their fight. As always, they will be portrayed as evil enemies of children for daring to oppose an income tax that will be used to provide quality education.

KMK

Frontier House

I don’t often make recommendations on TV shows; but I just noticed that PBS is replaying their excellent Frontier House series, starting tonight. Three families have to adjust to living for three months in a recreation of 1883 Montana. The only real problem they had with the simulation of that time was a ban on hunting. The show was filmed on a nature reserve where hunting was not allowed; and that did put a very big crimp on the food the families were able to obtain. Any real life family in 1883 Montana would have been harvesting wildlife for many of their meals.

Sherry & I watched and enjoyed the entire series when it was on earlier this year. We could relate to it more than most people because of the fact that we had to go through many of the same adjustments when we moved from life in modern civilized society to a very rustic existence on an isolated ranch in the boonies of the Ozark Mountains. Luckily we still have access to food stores, or we would have to start eating some of the wild deer, turkeys and squirrels that are always around us.

Check out Frontier House to see how many things we take for granted in today’s world. It would be great for spoiled bratty kids to see for that same reason.

KMK