A Super-Charged Roth IRA – Gail Buckner on Roth style 401(k) plans

Energy Tax Incentives Act of 2005 – Summary of new law from QuickFinders

Pennsylvania Tax Protester Convicted for Not Filing Returns – Another tax protesting scammer, Larken Rose, may soon be residing in the old gray bar hotel.  It’s about time.  This scoundrel has been spouting his garbage for several years. 

Senators Say Study Indicates IRS May Be Wasting Millions on Training – Big news – a government agency wasting taxpayer dollars? 

Fortunately, everyone understands that the Times is nothing but a propaganda outlet for the DemonRats. Doing the opposite of what they advise usually works out the best.

For the past several years, I have been beta testing the upcoming versions of QuickBooks as they got the program ready for its annual release. For the 2006 version, Intuit is opening the doors to even more testers, as they hope to uncover more problems before releasing the final version to the public. For the first time that I can recall, they are also offering a prize to one of the 5,000 testers. 

Warning: The file that needs to be downloaded is 387 MB; so only apply if you have a good broadband internet connection.  In previous years, those of us without broadband had a choice to receive a CD-ROM of the program.   That’s not available this year.  We just had DSL service installed a few weeks ago; so I am going to give this download a try later tonight after my online radio shows are over.  

 Following is the email I received from Intuit announcing this opportunity.  

Subject: QuickBooks Test Drive Offer To Your Clients

(This email is being sent to you because you are a valued QuickBooks ProAdvisor(R)).

Dear Kerry Kerstetter,

Recently Intuit sent out an offer to a group of QuickBooks users encouraging them to test-drive the next version of QuickBooks (codenamed “Denali”) with a prize drawing as an incentive for participation.

You may have seen this email, or had inquiries about it from your clients. We have received questions about it, and want to assure you that this is a legitimate request from Intuit.  We are truly offering one lucky winner the option to choose from the list of prizes below.  We would appreciate it if you would participate in this test and forward this request to your clients encouraging them to participate too.  The first 5,000 participants will be entered in the drawing for the winner’s choice of prize mentioned below. If you have any questions, please feel free to contact Chris Rabourn at 650-944-2635.

Below is the original email:

Dear Kerry Kerstetter,

Welcome to the Denali 5000! “Denali” is the codename for our next version of QuickBooks, and we are asking 5000 of our QuickBooks drivers to take Denali ONCE around the track!  By participating in this test, you will _help us make QuickBooks better, get a sneak peek at the next version of QuickBooks, and have a chance to win your choice of a 7-day trip to Hawaii for two, a 42″ plasma TV or $2,000 in cash!

To participate in this test, you will need to download and install the Beta version of QuickBooks, update a copy of your current QuickBooks data file, do a few activities and then complete a short survey.  You will then uninstall the Beta version and continue using your existing version of QuickBooks.  For most participants, this will take 30 to 60 minutes.  In case you experience any difficulty, we will have a team of support engineers available to help you.

If you are interested in helping us with this field test, please click on the link below to complete an online Non-Disclosure Agreement for pre-release software.  You will then have access to The Denali 5000 website where you can download the software. Because of the large file size, high speed internet access is required. The Denali 5000 is open to current QuickBooks for Windows users only. The online survey is the official entry form for the sweepstakes drawing, and only the first 5,000 users who complete the online survey are eligible for the sweepstakes drawing.

Please copy this link into your browser: http://beta.intuit.com/D5KSU/default.html

Thank you for helping us make QuickBooks a better product for you and the millions of other QuickBooks users!

— The QuickBooks “Denali” Team

A single prize will be given away to one Grand Prize Winner. The Grand Prize Winner will select one of the following three prizes: a 42″ Plasma Screen Television, or a trip for two to Hawaii, or a cash prize of two thousand dollars ($2,000). To see the contest rules, please copy this link into your browser: http://beta.intuit.com/D5K/content/readme.cfm

Q:

Subject: Sale of Primary Residence question

I’ve pulled some valuable information off your site, and I thank you.

One thing that is not clear to me ~ If I sell my primary home which I have owned and lived in just 15 months, (and never rented) ~ what taxes will I be subject to?

I would greatly appreciate your clarification.  I understand what happens after two years, but it’s rather gray in that 1-2 year span.

Thank you,

A:

 It all depends on why you are selling before you have been in the home for the full 24 months.

If you have a qualifying reason, then you would be entitled to exclude approximately $156,250 of profit ($250,000 / 24 X 15).  Any profit above that would be taxed as long term capital gain.

If you don’t have a qualifying reason for moving out so soon, all of your profit will be subject to taxation as long term capital gain.

What you do with the sales proceeds will have absolutely no effect on this issue.

You can see more on this on my website. 

As always, you need to consult with a tax pro who can crunch your actual numbers to see how much, if any, tax you will have to pay on this sale.

Good luck.

Kerry Kerstetter

Tax Reform: Now or Never

Q:

Subject: Amended returns causing an Audit

Hello Kerry,

Fellow CPA here from CA.  Earlier in the year you mentioned anecdotal evidence of increased audits for amended returns.  I searched through the last few months of posts and didn’t see any more information.  Is there any new news? 

I have a new client that would benefit to the tune of $2-3k if I amend a prior self-prepared 1040, but I want him to be aware of the potential risks…..

A:

In other words, is the coast clear yet? 

Honestly, I don’t know if it is because I haven’t prepared any amended tax returns since this IRS program came to light.  This has cost a number of clients several thousands of dollars in lost refunds; but we figured that was better than having to undergo the time consuming process of a full blown IRS audit.  It is quite a dilemma. 

I have yet to hear from IRS personnel that this policy has been dropped; but I will make some low key inquiries on this when I next speak with them. 

We would all be very interested in hearing from other practitioners around the country as to their recent experiences with amended returns with refunds over $5,000.  Hopefully some will write in and let us know if their clients were able to actually receive those refunds without an audit.  Any feedback would be appreciated and quite helpful for those of us who want to know if the water is safe from the IRS sharks.

Kerry Kerstetter

 

Follow-Up:

Kerry,

Thanks for the quick reply.

I know that another CPA in our office had a client file a 2003 1040X with a large (>$10k) refund earlier this year; it has now turned into an audit case. 

However, extrapolating from that incident may not be 100% legitimate. From what I understand, there were plenty of unusual items on both the original and amended return that could’ve triggered/flagged for an audit without the added help of the amendment

My Reply:

Although that may be a coincidence, it doesn’t sound like it.  If that audit was started after the 1040X was filed, and a notice was received from the Service Center that it was being sent to the local field office, it sounds exactly like what happened with my two clients.  The auditors then go nuts on their fishing expedition, trying to find enough things that were not even changed on the 1040X in order to convert that refund into a tax due.

Hopefully, we will receive some input from other tax pros, which I will post on my blog.

Kerry

 

Ohio CPA Dana Stahl has picked up the torch to get to the bottom of the IRS’s “Tax Gap” figures:

Subject: IRS Tax Talk

Mr Guru – I’ve been participating in an IRS “Tax Talk” today.  One presenter mentioned that “Tax Gap” study from a couple of months ago, where IRS determined there is an over $300 billion tax gap in taxes that should be collected vs taxes actually collected.  The presenter stated IRS examined over 46,000 1040’s from 2001 & then came up with their findings.  I asked the presenter if there was someplace that I could look at this study in more detail.  I didn’t go into our theory that these type of studies with their conclusions are merely WAGs.  It will be interesting to see if there is actually a way to review these studies & their conclusions.  I’ll let you know.

…the presenter asked me to email her my question and then she would “get back to me”.  I’ll be waiting anxiously!

DS, CPA

I wrote back:

Dana:

I would be very interested in seeing what documentation they provide you.  I doubt that it will be much more reliable than what I found several years ago when I spent a lot of time trying to track down the actual data behind one of those IRS press releases about the tax gap.  I followed the chain of command all the way into IRS headquarters in DC, where they finally admitted that they made the numbers up.

How studying a certain number of tax returns to determine the tax gap makes sense is something I don’t understand, since the main component of the mysterious tax gap is supposed to be people who don’t even file tax returns. 

They don’t even have the decency to admit that they really have no way of knowing the size of the underground economy because such measurements are by definition impossible to make; so they persist with the pretense of knowing exactly how large the tax gap amounts are, with the implication that they could zero out that gap if they were only given enough money and power.

As always, it’s nothing more than a propaganda ploy that IRS uses to convince our rulers and the public to give them more money and power.  It’s just one more (of many) indications of the lack of true journalistic skills nowadays that the mainstream media just continue to report the IRS’s tax gap numbers as gospel without the least bit of investigation into their source, as you and I are doing.

Thanks for keeping me in the loop on this.

Kerry